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Spain: SOCIMI: A true Spanish REIT


Luis M Viñuales

Spain launched a very particular type of REIT in 2009, the SOCIMI (sociedades cotizadas de inversión en el mercado inmobiliario or listed corporations for investment in the real estate market), with a tax regime that was very different from any other REIT regime in developed countries. For instance, the SOCIMI was taxed at a reduced 19% corporate income tax rate, while a typical feature of REITs is that the vehicle is not taxed but must distribute a significant part of its profits regularly, so that its dividends are normally taxed in the hands of its investors. This 19% tax at the level of the SOCIMI raised concerns among international investors about how to avoid double taxation. Three years later, there were no SOCIMIs listed on the Spanish Stock Exchange, so the new government decided to revise the SOCIMI regime to adapt it to the REIT regimes of neighboring countries. Consequently, Spain has approved a true REIT regime, with effect from January 1 2013, the main features of which are:

  • The SOCIMI is taxed at a corporate income tax rate of 0%, provided that the shareholders owning at least 5% of the SOCIMI are taxed on the dividends received at a minimum rate of 10%.

  • Where investors in the SOCIMI do not meet the above requirement, the SOCIMI will be taxed at 19% on the portion of the distributed profits corresponding to those investors. This 19% is a special corporate tax, not a withholding tax on the dividends distributed.

  • The SOCIMI must distribute at least 80% of its profits annually, as well as 50% of the capital gains, provided that the remaining 50% is reinvested within a three-year period.

As for the tax treatment of the investors, it will depend on the nature and tax residence of the investor:

  • Spanish resident individuals will be taxed on dividend income and on capital gains just as they are on dividends and capital gains from investments in other companies, that is at 21%, 25% or 27%, based on a progressive scale. This means a tax saving of approximately 25% on average on rental income if compared with the taxation of income derived from real estate owned by the individual directly.

  • Spanish resident corporations will normally be taxed at 30%. Thus, the main tax advantage for Spanish corporations could be the deferral of taxes on the undistributed profits of the SOCIMI.

  • Non-resident investors would be subject to the regular withholding tax rates on dividends established in the applicable tax treaties and, if eligible, could enjoy the EU parent-subsidiary dividend withholding tax exemption. This means that non-residents could be taxed in Spain at between 0% and 21%, depending on their shareholding and on their country of residence. This is relevant since, in many cases, Spain levies no tax on income derived by SOCIMI from real estate located in Spanish territory.

But one of the most interesting features of the Spanish REIT regime is that it is possible for Spanish subsidiaries that are wholly owned by foreign REITs to enjoy the special tax regime described above. The minimum 10% tax requirement would refer in this case to the investors in the REIT. Thus, a foreign REIT with investments in Spain that is currently taxed at 30% could opt, through certain restructuring, to apply the 0% tax. This could be a final tax if, for instance, the foreign REIT can identify its shareholders and none of them own at least 5% of the foreign REIT. This should also be appealing to foreign REITs that have not yet invested in Spanish real estate.

Finally, the new SOCIMI can be listed in a multilateral negotiation system like the Spanish Mercado Alternativo Bursátil (MAB), which is less complex and cheaper than being listed on the regular stock exchange. SOCIMIs can be listed in Spain or in any other EU country. This flexibility in the listing requirement could make the regime attractive for family offices and medium-sized groups with considerable real estate portfolios.

This revamped SOCIMI regime, this time a true REIT regime, comes at a time when foreign funds and investors have expressed an interest in the distressed real estate currently in the hands of many Spanish banks and/or the SAREB, which is the asset management company to which Spanish financial institutions have contributed a large part of their contaminated property-related assets (for example mortgage loans and associated real estate). It seems that all the necessary factors are in place to make this real estate investment vehicle a success in a Spanish economy that is making enormous efforts to overcome the economic turmoil.

Luis M Viñuales (

Garrigues Taxand

Tel: +34 91 514 52 00


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