The Spanish Law establishes a Special Regime for companies with a share capital of at least EUR 5 million, under which the Corporate Tax rate is 0%. This Special Regime is called SOCIMI and it has its own regulation.
This is an optional regime. The option to be subject to the SOCIMI regime must be agreed by the General Shareholders Meeting and must be communicated to the Tax Agency Authorities corresponding to the company's tax domicile, before the last three months prior to the conclusion of the relevant tax period.
• The main corporate purpose of SOCIMI has to be the acquisition and development of urban real estate assets for lease or the holding of shares in the share capital of other companies, resident or not in Spain, whose main corporate purpose is the acquisition of urban real estate assets for lease with the same benefits distribution policy than the SOCIMI.
However, SOCIMIs might perform other accessory activities (which represent less than 20% of the company's incomes in each tax period).
• In general terms SOCIMIs must invest at least 80% of their assets in leasable urban properties or land plots acquired for the development of leasable urban properties.
The properties (or shares) 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.
Trade requirements to be accepted for SOCIMI:
• Shares in a SOCIMI must be admitted to trading in a regulated market.
• The minimum share capital of a SOCIMI company is €5 million.
• There can be only one class of shares and they must be nominative.
• The company must include "SOCIMI, S.A." or ' Sociedad Cotizada de Inversión en el Mercado Inmobiliario, Sociedad Anónima', in its company name.
Payment of dividends:
• SOCIMIs are obliged to distribute and pay dividends to their shareholders.
TAXATION OF SOCIMI
- Corporate Income Tax rate of 0% with certain exceptions.
- Negative taxable bases compensation does not apply to SOCIMIs.
- Special Levy on dividends: the SOCIMI is subject to a special levy of 19% on dividends distributed to Qualified Shareholders (those whose interest in the entity's share capital is equal to, or greater than 5%), when such dividends are exempted or are taxed at a rate lower than 10% (provided that the shareholder who collects the dividend is not an entity to which the SOCIMI Law applies) with certain exceptions.
TAXATION OF SHAREHOLDERS
1. Dividends distributed charged to profits or reserves are treated as follows, when the recipient is a payer of:
- Corporate Tax and Non-Resident Tax with Permanent Establishment: The deduction for avoiding double taxation (article 21 of the Corporate Income Tax Law) does not apply.
- Non-Resident Tax without Permanent Establishment: The dividends received are taxed unless the requirements provided in article 14 of the Non-Residents Personal Income Tax Law are met.
2. Capital Gains obtained in selling of the shares in companies which have opted for this regime are treated as follows, when the recipient is a payer of:
- Corporate Tax and Non-Resident Tax with Permanent Establishment: The deduction for avoiding double taxation (article 21 of the Corporate Income Tax Law) does not apply in most cases.
- Personal Income Tax: the capital gain or loss will be determined in accordance to the Personal Income Tax Law.
- Non-Resident Tax without Permanent Establishment: The exemption provided for in article 14 of the Non-Residents Personal Income Tax Law does not apply when the shareholder holds at least 5% of the share capital.
3. Any shareholder whose holding in the company's equity is equal to or more than 5% and who receives dividends or shares in profits for which it pays 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. In case this notice is not made, it would be understood that the above-mentioned requirement (10% taxation) is not met.
B Law & Tax
International Tax & Legal Advisors