Earthquake in the real estate sector due to (listed investment companies in the real estate market). The main firm of this type of companies in Spain, (listed on the Ibex 35), is evaluating “determining the measures to be adopted to safeguard the interest of the aforementioned shareholders, clients and employees,” the company reported this Tuesday night in a statement sent to the National Securities Market Commission (CNMV). “Without excluding any legal possibility within our reach” in the medium and long term, the firm points out in the statement. Business sources consulted indicate that among these possibilities is taking Merlin’s headquarters to another European country, as Ferrovial did by moving its tax domicile to the Netherlands.
After knowing the agreement between PSOE and Sumar, Merlin Properties. Inmobiliaria Colonial, the other Ibex SOCIMI, fell 5.03%. This morning, both started the trading session with increases of around 1%. This fiscal proposal, which business sources indicate has not been consulted with the sector, has yet to receive support from the Government’s partners, such as ERC, PNV and Junts.
“In view of the circumstances, the company is currently evaluating different scenarios and contingency plans, in defense of its shareholders, clients and employees, in the event that such approval occurs. The evaluation focuses, in the short term, on calculating the effective impact on cash flow of this proposal, which we foresee limited by the joint effect of various tax regulations,” the document for the market states. In the medium and long term, those responsible for the SOCIMI do not exclude any legal possibility.
The company explains that it has always been clear about the economic justification of the Spanish version of the international REIT regime (a figure similar to Spanish SOCIMIs), based on introducing into the market “active business structures, with means and personnel directly involved in the activity.” , which are responsible for promoting, building, acquiring and operating necessary, modern and sustainable infrastructure for different economic sectors such as offices, shopping centers, logistics, data centers, hotels, parking lots or telephone towers, “all with daily liquidity and as a popular form of savings for individuals and essential for the proper functioning of pension funds, investment funds, mutual funds, insurance companies, family offices and sovereign funds.”
Furthermore, according to the company, this tax regime makes it possible to eliminate double taxation “while balancedly guaranteeing a certain level of effective taxation, the timely distribution of profits and the profitability of savers and investors. This regime is a great asset for the growth of the Spanish economy.” Companies like Merlin, for example, have 2,000 million to build data centers in Spain.
These companies were created by the socialist Government of José Luis Rodríguez Zapatero in 2009. But the regulations that promoted them were developed in 2012 under the Executive of Mariano Rajoy. It is a figure quite established internationally under the generic name of REIT (real estate investment trust or real estate investment fund), which was born in the United States at the end of the sixties and has expanded to almost all OECD countries.
Although “it has not served to improve the housing supply”, according to the joint document of the partners, these real estate agencies are dedicated to many other investments. Socimis are dedicated to renting properties of an urban nature. They invest in the purchase or construction of office buildings, shopping centers, data centers, hotels, student and senior residences or logistics platforms. In the Spanish case, the largest ones are mainly non-residential activity. They have the tax advantage of being taxed at 0% (although with some exceptions). In exchange, they must distribute at least 80% of the profit in dividends to their shareholders, who are obliged to pay taxes. In addition, they have the obligation to be listed on a European stock exchange.
In the document to the CNMV, the company also complains about the repeated links that certain political parties have made with this tax regime. “Arguments are being used repeatedly that link SOCIMIs with housing, whether due to increases in rents or prices or the current supply restriction in Spain. The reality is that neither Merlin, nor any of the other three SOCIMIs that are currently listed on the continuous market [Colonial, Lar España y Árima]operate in housing, nor do many commercial REIT internationals with whom we compete.”
Among the large companies in the sector, in addition to Merlin, are Inmobiliaria Colonial (offices), Lar España (shopping centers), Testa (housing), GMP (offices) or Montepino (logistics). These companies have their tax domicile in Spain under the Socimi regime, although some of them, such as Montepino, are listed on the French Euronext market. Merlin’s move, if he decides to leave Spain as an option, would involve taking his tax domicile outside the territory, as Ferrovial did in 2023.
As published Five Days This Wednesday, this type of tax regime is common in Europe, so its elimination would mean . A report by the law firm Clifford Chance prepared for this medium, with data from the European real estate association EPRA, lists the European countries where this exemption exists. In France, Germany, the United Kingdom, Italy, Belgium, Finland, Ireland, Hungary, Lithuania, the Netherlands, Luxembourg and Portugal, they have a zero rate for corporate tax. In Greece, in turn, a super-reduced rate is applied.
In Spain, growth has been very rapid. The Portuguese government of the then socialist Prime Minister Antonio Costa was inspired in 2019 by the success of the Spanish SOCIMI to create the so-called SIGI (Real Estate Management and Investment Companies). In just over . Some of them include large assets that take these types of companies public (BME Growth and Euronext, mainly) to benefit from tax advantages.
Although in Spain they are exempt from paying corporate tax, the rule does require them (in addition to distributing a dividend, which is taxed) to pay 15% on the undistributed profit (a change promoted in 2021 by PSOE and Unidas Podemos). and 19% on the shareholding proportion of those shareholders who pay less than 10% tax on their dividends. Companies such as Merlin Properties, the largest in the sector, paid 8.5 million euros in corporate tax last year, 8.8% of its results, as reflected in the firm’s consolidated accounts for 2023.
