New tax regulations applicable to listed investment companies in the property market

24/01/2022

The recently published Law 11/2021, of 9th July, on measures to prevent and combat tax fraud, has introduced some modifications that affect the special regime applicable to Listed Investment Companies in the Property Market (hereinafter referred to as SOCIMI).

Background

A SOCIMI (“Sociedades Anónimas Cotizadas de Inversión Inmobiliaria”) is an anonymous listed company whose main purpose is to purchase, develop and rehabilitate real estate assets for leasing. Therefore, the SOCIMI is a legal structure designed to operate in the real estate sector and its operative is quite similar to a Real Estate Investment Trust (REIT).

The main tax advantages foreseen for SOCIMI are the following:

  • 0% taxation on CIT provided that some requirements are met.
  • A special 19% CIT rate on the full amount of dividends distributed to shareholders when their shareholding is equal to or greater than 5% and their applicable tax rate is less than 10% (unless it is another SOCIMI).
  • A 95% reduction on Transfer Tax for the acquisition of real estate properties.

Introduced modifications:

With effect for tax periods beginning on or after 1st January 2021, article 9.4 of Law 11/2009, of 26th October, which regulates listed investment companies in the property market, has been amended, introducing a special tax rate of 15% on profits obtained in the year that have not been distributed and that

  • derive from income that has not been taxed at the general CIT rate (currently 25%) and
  • do not derive from income of transfer of assets covered by the reinvestment period and that have met the 3-year permanence requirement of article 6.1 of Law 11/2009.

For these purposes, it should be remembered that SOCIMI are obliged to distribute the following profits:

  • 100% of profits from dividends or shares in profits distributed by other SOCIMI or companies with equivalent treatment.
  • 50% of the profits derived from the transfer of real estate and shares, after 3 years of use in the activity.  The undistributed remainder should be reinvested within 3 years (if not reinvested within 3 years, such income should be distributed).
  • 80% of the remaining profit.

This special tax of 15% will accrue on the day of the resolution of the shareholders’ meeting to apply the profit for the year and must be filed within two months of the accrual. It should be noted that, despite the fact that it is paid separately from the CIT, the amendment expressly provides that the tax is to be treated as a CIT liability.

Isabel Pi [email protected] from Auren Spain