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New REIT Regime to Benefit Investors

2 Oct 2012

On 7 September 2012, the Spanish Parliament approved a bill that contains several measures to improve the rental real estate market. Among them, a deep reform of the Spanish REIT Regime, the Listed Corporations for Investment in the Real Estate Market (SOCIMI) is introduced in order to make it more attractive to investors.

The approach taken by the Spanish Legislator consists of eliminating certain constraints within the regime by relaxing or removing certain requirements that were difficult to apply in practice. Moreover, significant changes to the tax regime itself have been introduced, bringing it closer in line with the REIT regimes applicable in other countries and making it more attractive, especially for non-Spanish investors. Taxand Spain summarises the main changes to be introduced to the Spanish REIT Regime.

Any Spanish corporation whose primary corporate purpose consists of acquiring or developing urban real estate to lease and holding shares in certain entities, can qualify as a SOCIMI and therefore, choose to apply the special tax regime (as long as it complies with certain requirements that can be grouped in investment, listing, capital stock, profit distribution and borrowing requirements).

The bill introduces interesting changes to the mentioned requirements; some requirements have been simplified (reduction of minimum share capital, minimum holding period of certain assets and percentage of ordinary income distribution obligation, among others), while some other have simply been eliminated (such as the borrowing requirements and diversification of real estate assets). Moreover, the listing requirement has been simplified by admitting the listing in any multilateral trading system. All in all, it will now be easier to meet the requirements.

These draft amendments to the Spanish REIT Regime are applicable to both company and shareholder.



  • In general, SOCIMIs will pay zero-rated corporate income tax (instead of the 19% rate under the current regulations), but cannot report or offset tax losses or tax credits. However, income and/or gains generated by real estate or capital gains on shares in respect of which the three-year ownership period is not met, will be taxed under the general regime (30% corporate income tax (CIT) rate).
  • In cases where the dividends distributed by a SOCIMI are exempt or are taxed at a rate below 10% in the hands of the shareholder, the SOCIMI must pay a CIT charge of 19%. This special tax will not be applicable in the case of dividends paid to entities which, in turn, are obliged to distribute them in full to the shareholders, where the shareholders are, in turn, taxable on the dividends at a rate of at least 10%.
  • In general, dividends will be subject to withholding tax, unless they are paid to an entity which, in turn, is obliged to distribute the entire dividend received, if the shareholders are taxable on the dividends at a rate of at least 10%.




  • Dividend and gains derived from the transfer or shares obtained by non-resident persons or entities without a PE in Spain will be taxed under the domestic general non-resident income tax law, being able to benefit from the Double Tax Treaties (DTTs) that might be applicable, and also from the Parent-Subsidiary Directive. As a result, the non-resident shareholder could end up not bearing any tax in Spain (unlike under the current regulations when it would always bear at least 19%). However, it might be difficult to avoid double taxation at the level of the shareholder if the 19% CIT charge was due upon the dividend distribution.
  • The final tax borne by Spanish corporate shareholders will not change, as, in general they will end up bearing a 30% rate on the dividends received.
  • Under the wording of the bill, the taxation of Spanish individual shareholders would increase from a 19% to 21%-27%.



Taxand's Take

Changes to the Spanish REIT Regime should make it easier and more feasible to set up a SOCIMI.

Foreign REITs could benefit from the Spanish REIT Regime if they:

  • Invested in a SOCIMI, or
  • Invested in fully-owned Spanish (not listed) subsidiaries that also complied with the profit distribution obligations and investment requirements laid down for SOCIMIs.

This would imply that they could end up bearing no tax in Spain if dividends received from Spain were to be fully distributed by the Foreign REITs to their shareholders, and if these were to be taxable at a minimum rate of 10%.

Under the new tax regime, other foreign investors (corporate and individuals) in a SOCIMI could benefit from a lower taxation than under the existing regime.

It is therefore worth exploring what these expected changes in the Spanish REIT Regime can offer to foreign real estate investors, as their after-tax return is likely to become higher in order to benefit from the tax advantage.

Your Taxand contacts for further queries are:
Manel Maragall
T. +34 93 253 37 00

Sara Orriols
T. +34 93 253 37 00

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