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SOCIMI - Legal regime for Spanish REIT

Insight 12 April 2021

SOCIMI - Legal regime for Spanish REIT

Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario (SOCIMI), is the Spanish equivalent of an international Real Estate Investment Trust (REIT). The main activity is the acquisition, promotion and rehabilitation of urban real assets for lease, either directly, or through equity holdings of other SOCIMIs. In recent years, SOCIMIs have become very popular and have rapidly grown in the Spanish market, due to the beneficial tax regime and the simplicity of its requirements to opt for such regime. The law regulating SOCIMIs passed in 2009 and following its amendment in 2012 saw increased interest amongst investors.

Zero taxation of SOCIMIs: the big attraction

The main tax benefit of SOCIMIs is the levy rate on corporation tax as these companies are subject to a rate of 0%.

The main social object of the company must be for the purpose of acquiring real estate for its lease, or the holding of shares in the capital of other SOCIMIs or entities that have the acquisition of properties of an urban nature for lease (residents or non-residents of Spanish territory) as their main social object. Further activities may be carried out if the income obtained from these annuity activities represents less than 20% of the company's income in each tax period.

  • The minimum share capital is EUR 5 million.
  • Asset value: at least 80% of the asset value must be composed of:
    • Leased urban real estate;
    • Land for the promotion of real estate intended for leasing, provided that the promotion starts within the first three years since the acquisition; or
    • Shares in the capital of similar entities
  • Income: at least 80% of earnings must come from:
    • Lease of real estate
    • Dividends distributed by equity holdings of similar entities
  • Term of stay of assets: Both real estate and equity holdings of similar entities must remain in the company's assets for at least three years.
  • Quoted shares: Shares must be admitted to trade on a Spanish regulated market, or a regulated market of any EU member state, or from any other country with which there is effective exchange of tax information.
  • Obligation to distribute dividends: SOCIMIs shall distribute the profit obtained in the financial year as follows:
    • 100% of dividend profits
    • 50% of the profits from the transfer of real estate or shares
    • 80% of the remaining the profits earned

Many exciting opportunities in Spain

Due to the simplicity of the tax requirements for SOCIMIs, the regime has increased in popularity over the recent years. Currently 76 SOCIMIs are listed on the BME Growth (a Spanish alternative market), 4 on the Madrid Stock Exchange and 8 on Euronext. The approximate equity value is EUR 46 billion.

The straightforward nature of the tax requirements and the minimal operational limitations also allows access for smaller investors and family offices, whereas traditionally other regimes may have only been accessible to large institutional investors. There are no restrictions with respect to the minimum number or location of assets, as those may be located out of Spain. Additionally, there are no requirements relating to the financing mechanisms for the regime, all decisions are at the discretion of the management of each SOCMI with no regulations relating to obtaining finance or the amount required. Finally, as the quotation requirement is not limited to the Spanish market, so that a SOCIMI may qualify for the Spanish tax regime by being a subsidiary of a shareholder REIT listed on another market, or it may be listed on another market outside Spain (Euronext or similar), this expands the investment opportunities.

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