Thursday, 5 November 2020
CORPORATION TAX SPECIAL REGIME OF PUBLIC LIMITED INVESTMENT COMPANIES LISTED ON THE PROPERTY MARKET (SOCIMI) (Act 11/2009, of 26 October, modified by Act 16/2012) This is an optative regime, that is also applicable for partners.The option must be adopted by the General Meeting of Shareholders and must be communicated to the Delegation of the Tax Agency corresponding to the company's tax domicile, before the last three months prior to the conclusion of the tax period.If this period is fulfilled, the tax regime will apply in any tax period which finishes later than the said communication and in any successive periods which may conclude before the waiver of the regime is notified. It is incompatible with any of the special regimes provided for in Title VII of the Revised Text of the Spanish Corporation Tax Act (TRLIS), except for: - Mergers, demergers, asset contributions and securities swaps. - International fiscal transparency - Financial lease. REQUIREMENTS TO BE FULFILLED CORPORATE PURPOSE: • It shall have as its principal corporate purpose: a) The acquisition and development of urban properties for lease. b) The holding of investments in the capital of other SOCIMIs or in other non-resident companies in Spanish territory which have the same corporate purpose as the former and are subject to a similar regime of distribution of profits. c) The holding of investments in the capital of other companies, resident or not in Spanish territory, whose main corporate purpose is the acquisition of urban properties for lease (they may not have holdings in the capital of other companies) and which are subject to the same regime of distribution of profits and investment.All of its capital must belong to other SOCIMIs or non-resident companies referred to in paragraph b) above. d) The holding of shares or investments in Collective Investment Institutions regulated in the Collective Investment Institutions Act nº 35/2003 of 4 November. • They may perform other accessory activities (which represent less than 20% of the company's incomes in each tax period). INVESTMENT: • They must invest at least: » 80% of the value of the assets in: - Urban real estate destined for lease, - land for developing real estate that will be destined for lease, provided that the development begins within three years following acquisition, - holdings in the capital or equity of other companies whose business purpose is real estate investment. » 80% of the incomes (excluding any deriving from the transfer of shares and properties subject to the fulfillment of the main corporate purpose, once the maintenance period has elapsed) must originate from: - the leasing of real estate in compliance with the main business purpose, to people or entities who do not form part of the group, regardless of their residence, and/or - dividends or profit shares from shares derived from compliance with the main business purpose. • Period of permanence or maintenance: » The properties which integrate the assets must remain leased for at least three years, including any time when they may have been offered for lease, with a maximum of one year. » Shares or holdings in the capital must remain in the assets for at least three years from their acquisition or, where applicable, from the beginning of the first tax period in which the tax regime is applied. OBLIGATION TO TRADE • Shares in a SOCIMI (Real Estate Investment Trust) must be admitted to trading in a regulated market or in a multilateral trading facility in Spain, or in any other member state of the European Union or the European Economic Area, or in a regulated market in any country or territory with which there is an effective exchange of tax information, which goes uninterrupted throughout the tax period. TRADE REQUIREMENTS • Minimum share capital of €5 million. • There may only be one class of shares. • When choosing the special tax regime established in this Act, the company must include 'SOCIMI, S.A.' or 'SOCIMI, Sociedad Anónima', in its business name. DISTRIBUTION OF INCOME. • They will be obliged to distribute as dividends, once the corresponding mercantile obligations have been fulfilled, the profit obtained in the fiscal year, as follows: » 100% of profits from dividends or shares in profits distributed by companies which have the main corporate purpose stated in this Act. » 50% of the profits deriving from the transfer of properties and shares or investments, subject to the fulfillment of their main corporate purpose, once the maintenance periods have elapsed. The rest of these profits must be reinvested in other subject properties or investments within three years of their transfer. » 80% of the rest of the profits obtained. • The dividend must be paid within the month following the date of the distribution agreement. • The legal reserve may not exceed 20% of the corporate capital. • The articles of incorporation may not establish any other reserve of a restricted nature different from the legal reserve. EXTERNAL FINANCING. • They do not have to fulfil any requirement with regard to the balance of external financing. OBLIGATION OF INFORMATION • In the annual accounts there must be a section on 'Information requirements derived from the condition as a SOCIMI, Act 11/2009', which must include the information indicated in article 11 of Act 11/2009. • Non-compliance with the reporting obligations in relation to each fiscal year constitutes a tax offence.This offence will be classified as serious and will be penalised in accordance with the said Article 11 of Act nº 11/2009. SPECIAL TAX REGIME APPLICABLE TO SOCIMIs 1. 1. Companies which opt for the application of the special tax regime provided for in Act nº 11/2009 will be regulated by the provisions of the Revised Text of the Spanish Corporation Tax Act (TRLIS), without prejudice to the special provisions laid down in that Act: - Tax rate in Corporation Tax:0%. - The following will not apply: • Offsetting of negative tax bases (Article 25 Revised Text of the Spanish Corporation Tax Act (TRLIS)), if they were generated when taxed at 0%. • Deductions and allowances provided for in Chapters II, III and IV of Title VI of the Revised Text of the Spanish Corporation Tax Act (TRLIS). - The company must reguralise its situation and pay taxes in accordance with the general regime and the general rate of Corporation Tax in the event of non-compliance with the 3-year permanence period (Article 3.3 of Act nº 11/2009) or of paying tax under a different Corporation Tax regime before the said three-year period is fulfilled. 2. 2. The company will be subject to a special Levy (it will have the consideration of Corporation Tax liability): - 19% on the entire amount of dividends or shares in profits distributed to partners when: • A share in the company's equity of 5% or more and • said dividends, in its partners' headquarters, are exempt or are taxed at a rate of less than 10%. - Not applicable:when the partner who receives the dividend is a company to which this act applies (SOCIMI). - Accrual:on the day of the agreement of distribution of profits. - Self-assessment and payment:within two months of the accrual date. 3. 3. The special levy will not be applicable when the dividends or shares in profits: - are received by non-resident companies referred to in Article 2.1.b) of this Act, with regard to those partners who: • have a stake of 5% or higher in their equity and • pay a tax rate of at least 10%. 4. 4. In any case, withholding will apply to dividends or shares in profits received by payers of IS, IRNR with or without Permanent Establishment (PE) and by payers of Personal Income Tax, to whom the tax regime of partners provided for in Article 10.1 of Act nº 11/2009 has been applied. SPECIAL TAX REGIME OF PARTNERS 1. Dividends distributed charged to profits or reserves with regard to which the SOCIMI regime has been applied will be treated as follows, when the recipient is a payer of: - IS and IRNR with PEThe deduction for avoiding internal double taxation (Article 30 Revised Text of the Spanish Corporation Tax Act (TRLIS)) will not apply. - Personal Income Tax:The exemption for dividends provided for in Article 7.y) of the Personal Income Tax Act nº 35/2006 will not apply. - IRNR without PEThe exemption for dividends regulated in Article 14.1.j) TRLIRNR will not apply. 2. Incomes obtained in the transfer or reimbursement of the holding in the capital of companies which have opted for this regime will be treated as follows, when the recipient is a payer of: - IS and IRNR with PEThe deduction for avoiding internal double taxation (Article 30 Revised Text of the Spanish Corporation Tax Act (TRLIS)) will not apply in relation to income obtained corresponding to reserves originating from profits with regard to which the SOCIMI tax regime has been applied. - Personal Income Tax:the capital gain or loss will be determined in accordance with Article 37.1.a) Personal Income Tax Act. - IRNR without PEThe exemption provided for in Article 14.1.i) TRLIRNR will not apply 3. Any partners whose holding in the company's equity is equal to or more than 5% and who receive dividends or shares in profits for which they pay tax at a tax rate of at least 10% will be obliged to notify this circumstance to the company within ten days of the day following the day when they are paid. LOSS OF THE SPECIAL TAX REGIME • the right to apply the special tax regime will be lost in the tax period in which any of the following circumstances occur: a) Exclusion from trading on regulated markets or in a multilateral trading system. b) The substantial breach of information obligations referred to in article 11 of Act 11/2009, unless this breach is rectified in the report for the following fiscal year. c) The lack of a distribution agreement or the total or partial payment of dividends, under the terms and time periods referred to in article 6 of this Act. d) Waiving the application of this regime. e) A breach of any of the other requirements of this Act for which the entity can apply the special tax regime, unless the cause of the breach is rectified during the following fiscal year.Nevertheless, a failure to comply with the time period referred to in article 3.3 of this Act will not entail the loss of the special tax regime. • The loss of the regime will mean that this special tax regime cannot be opted for again for at least three years following the conclusion of the most recent tax period in which it was applied.