Global REIT Survey 2011 - EPRA

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Global REIT Survey 2011REPORTINGSpain (RECII)Corporate shareholderi. Dividends will be grossed up and taxed at the standard 30% rate, witha right to a tax credit equivalent to 19% of the income included in theshareholder’s taxable base (with certain exceptions). The effective taxrate for the shareholder will be 11%, and therefore the overall tax burden(SOCIMI + Spanish corporate shareholder) will be 30% (19% plus11%).ii. Capital gains will be taxed at the standard 30% tax rate, subject to thefollowing rules:a. A tax credit of 30% to avoid double taxation shall be applicable inrelation to income derived from the transfer of the SOCIMI shares(art. 30.5 of Spanish CIT Act), corresponding to retained earnings ofthe SOCIMI that have been subject to the general rate of CIT (30%),provided that certain requirements are met.b. With regards to the portion of the capital gain corresponding toretained earnings of the SOCIMI that have been taxed at the special19% tax rate, these will be grossed up, with a right to a 19% tax credit.The effective rate for the shareholder will therefore be 11%.c. Any losses obtained will not be deductible if the shares wereacquired from a related party as defined in article 16 of the CIT Act,to the extent of the exempt income obtained by that party at the timeof the first transfer.Individual shareholderWe should distinguish:i. Dividends will be fully exempt.ii. Capital gains will be calculated according to Personal Income Tax Actrules. Should there be a gain, this gain will be tax-exempt up to the differencebetween:a. The result of multiplying 10% of the basis in the SOCIMI shares bythe number of years of the holding period in which the SOCIMI hasapplied the special tax regime.b. And the amount of the exempt dividends received during the holdingperiod.The capital gain will not be exempt if it was acquired from a related party tothe extent of the loss obtained by that company on the transfer.Withholding taxDividends distributed to shareholders are not subject to withholding taxes.4.2 Foreign shareholderCorporate shareholder Individual shareholder Withholding taxAs a general rule, dividends andcapital gains derived from theirinvestment in SOCIMI are exempt,subject to certain limitations.As a general rule, dividends andcapital gains derived from theirinvestment in SOCIMI are exempt,subject to certain limitations.No withholding tax.Corporate shareholderThe following relates to foreign corporate shareholders not acting in Spainthrough a permanent establishment. In such cases, the applicable tax treatmentwould be the same as for Spanish resident individual shareholders. Inthis respect we should distinguish:i. Dividends will be exempt. However, shareholders resident in a territorywhere there is no actual exchange of information will be taxed ondividends at 19% rate.ii. Capital gains will be subject to the same rules applicable to Spanish residentindividuals. However shareholders resident in a territory wherethere is no actual exchange of information will be taxed on capitalgains at a 19% tax rate.Individual shareholdersThe same tax treatment as corporate foreign shareholders applies.Withholding taxDividends distributed to shareholders (resident or non-resident) are not subjectto withholding taxes.« back to content page6
Global REIT Survey 2011REPORTINGSpain (RECII)5 Tax treatment of foreign REIT and itsdomestic shareholderForeign REIT Corporate shareholder Individual shareholderCase by case analysis needed. Subject to taxation in Spain.Specific analysis of foreignREIT is required.Subject to taxation in Spain.Specific analysis of foreignREIT is required.Foreign REITThe taxation of foreign REITs varies on a case-by-case basis. Many factorsare taken in consideration such as whether the foreign REIT operates inSpain through a permanent establishment, or if the foreign REIT qualifies asa transparent entity, among others. No special rules apply except for foreignREITs incorporated in black-listed tax havens, in which case special antiabuserules apply (similar to CFC rules).Corporate shareholderSubject to taxation in Spain. Double-taxation relief credit or participationexemption may be available, specific analysis of foreign REIT is requiredthough.Individual shareholderSubject to taxation in Spain. Double-taxation relief credit may be available,specific analysis of foreign REIT is required though. nAUTHORS CONTACTSpainRodrigo OgeaTel. +34 91 230 4500rodrigo.ogea@bakermckenzie.comLucas EspadaTel. +34 91 230 4500Lucas.espada@bakermckenzie.com« back to content page7
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Global REIT Survey 2011 - EPRA

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