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Transcript of Real Estate Legal Services Ingrid Sumarroca Lawyer Balmes, 297, 3th floor +34 93 209 55 63 - + 34...
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Real Estate Legal
ServicesIngrid Sumarroca
Lawyer
Balmes, 297, 3th floor+34 93 209 55 63 - + 34 657 769 812
Barcelona, 26 November 2014
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Spain Real EstateMarket Issues
• Spain’s housing market is now recovering, amidst gradually improving economic conditions. Spanish house prices dropped 3.03% during the year to end-Q2 2014, (-3.12% inflation-adjusted), the lowest annual decline since Q2 2008.
• During the latest quarter, Spanish house prices increased slightly by 0.15% (-0.78% inflation-adjusted) in Q2 2014. Residential property transactions surged 48% in Q1 2014 from a year earlier, according to the Instituto Nacional de Estadistica (INE).
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Barcelona Real EstateLegal & Political Issues
• Legal Issues: • Reasonably hospitable climate for foreign investment. Lawmakers strive to
facilitate investment to the country (i.e., Residence for buyers of properties valued 500,000 € at least, SOCIMI, residential renting).• Foreign investment up to 100% of equity is permitted. • Capital movements are completely liberalized.
• Political Issues: • Spain has been successful in making the transition from dictatorship (up to
1978) to democracy. • Prime Minister, Mr Mariano Rajoy, has recently proposed that Barcelona had
the same political attributions as Madrid has. • Barcelona Council, whose financial situation is far better than Catalonian
Government, endeavours private iniciative through the Barcelona Activa platform.
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2014 SPANISH TAX REVIEW
A. Companies
B. Individuals
C. Other direct taxes
D. Turnover taxes
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A. CompaniesResident companies
Corporate tax rates • 30%• 25% for SMEs (annual profits over EUR
300,000)• 20% for micro-enterprises (annual profits up to
EUR 300,000)• surcharge from 0.01% to 0.75% may apply
Tax base worldwide
Capital gains yes, part of business income
Unilateral double taxation relief exemption and ordinary foreign tax credit
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A. CompaniesNon-resident companies
Corporate tax rates • 25.75% generally;• rates depend on type of Spanish-source
income
Capital gains on sale of sharesin resident companies
21% (exempt if derived by residents of the EU)
Final withholding tax rates
Branch profits
• for tax years 2012-2014:• 21% (effective rate 44.7%);• otherwise, 19% (effective rate 43.3%);• 0% (PEs of EU resident companies except
Cyprus)
Dividends 21%;0% for qualifying EU companies (5% participationfor 1 year required) (EU Parent SubsidiaryDirective)
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Interest 21%;0% for associated EU companies (EU Interestand Royalties Directive);0% on bank deposits and government bonds
Royalties 24.75%;0% for associated EU companies (EU Interestand Royalties Directive)
Fees (technical) 24.75% (exempt for associated EU companies)
Fees (management) 24.75% (exempt for associated EU companies)
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3. Specific issues
Participation relief inbound dividends: yesoutbound dividends: yes
Group treatment yes
Incentives investment/reinvestment credits and deductions;R&D and technological innovation credits;personnel costs credits;environmental tax credit;holding companies (ETVEs) - participationexemption;tonnage tax regime;special regions regimes;newly created companies;film industry
Anti-avoidance general rule;transfer pricing;limitation on interest deduction;CFC
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B. Individuals1. Resident individuals
Income tax rates general income:progressive - top rate 45% (over EUR175,000.20);surcharge - top rate 7% (over EUR 300,000);savings income:progressive - top rate 27% (over EUR 24,000)
Capital gains part of savings income if assets are held for morethan 1 year;subject to progressive income tax rates if assetsare held for less than 1 year
Unilateral double taxation relief yes
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2. Non-resident individualsIncome tax rates rates depend on type of Spanish-source income;
business and employment income: 24.75%
Capital gains on sale of shares inresident companies
21% (specific exemptions for shares transferredon stock exchange and there is a tax treaty or ifderived by certain EU residents)
Final withholding tax ratesEmployment income
24.75%
Dividends 21%;0% if less than EUR 1,500 or derived by EU ortreaty-country residents)
Interest 21%;0% if paid to residents of EU Member States(except Cyprus), on bank deposits, public bonds,securities issued in Spain by certain internationalorganizations)
Royalties 24.75%
Fees (technical) 24.75%
Fees (directors) 24.75%
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C. Other direct taxes
Net wealth tax yes (for 2011 to 2014)
Inheritance and gift taxes yes
D. Other indirect taxes
VAT/GST (standard) 21%
VAT/GST (reduced) 0%, 4%, 10%
VAT/GST (increased) no
Other no
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Spanish REIT- SOCIMI (Sociedades Anónimas Cotizadas en el Mercado Inmobiliario)Key features under Law 11/2009 amended by Law 16/2012
• Public listed companies (information issues). • Corporate purpose:
a) Leased urban assetsb) Stake in share capital of other SOCIMI or other foreign analogue vehicle o similar REIT.
• Requirements: • Share capital: ≥ 5,000,000 € (monetary or non monetary contributions).• ≥ 80% of its assets must be leasable urban properties or shares of other REIT.• ≥ 80% of its earnings must come from lease or dividends distributed by any
subsidiary REIT.• Property assets may be leased for a minimum 3 year term (Spanish Tax Authorities
will analyse the overall degree of compliance).
• To take into account: • SOCIMI must not comply with all the abovementioned requirements if the listed
company is not the SOCIMI itself but its parent company.• When opting for the special tax regime, some of the requirements may be met
within the following 2 years.
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• Corporate tax rate: 0%• Provided that the shareholders owning at least 5% of the SOCIMI are taxed on the
dividends received at a minimum rate of 10% (the most favorable scenario).• Where investors do not meet the above requirement, the SOCIMI will be taxed at
19% on the portion of the distributed profit corresponding to those investors (the least favoreable scenario).
• Non-Resident Investors:• With permanent establishment in Spain: • They will include the dividend in their Income Tax base without entitlement to
double taxation relief.• Without permanent establishment in Spain: • They will be subject to a withholding tax of 19% unless an exemption (parent-
subsidiary) or reduced tax treaty rate(*) is applicable.
(*) As set forth by Article 10 of the “Convention between the Kingdom of Spain and the State of Israel for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital”:
1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the dividends. (…)
Spanish REIT- SOCIMI (Sociedades Anónimas Cotizadas en el Mercado Inmobiliario)Tax Regime under Law 11/2009 amended by Law 16/2012
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• Transfer Tax: 5%
• 95% reduction on the Transfer Tax triggered on the acquisition of real estate assets if they are residential properties to be leased or land for the promotion of residential properties to be leased, to the extent that the holding period requirement of 3 year is met.
Spanish REIT- SOCIMI (Sociedades Anónimas Cotizadas en el Mercado Inmobiliario)Tax Regime
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• The listing requirement can be fulfilled within the MAB, which has
more flexible regulation and less regulatory requirements.• Alongside other segments (SICAVS, Venture Capital Companies and
Growth Companies), there is an specific MAB segment for SOCIMI regulated under Circular of the MAB 2/2013.• Requirements:
• Registered advisor. • Liquidity agreement (the liquidity provider could be an investment services
company or a credit institution). • Valuation report drafted by an independent expert under international
valuation standards. • Minimum free float required, ≤ 5% of share capital. These shareholders must
hold a number of shares representing the lesser of the following amounts: • 2,000,000 € (estimated market value); or• 25% of the shares issued by the company.
Spanish REIT- SOCIMI (Sociedades Anónimas Cotizadas en el Mercado Inmobiliario)Alternative Market (MAB)
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• Application (“information document for inclusion on the MAB”):
• Real estate assets: description, depreciation periods, situation and condition, policy for investment and replacement, potential costs due to a change in the lessee.• Finance:
• International Financial Reporting Standards (IFRS); or • General Accepted Accounting Principles used in the United States (US GAAP).
• Corporate & Management.
• Procedure:• It takes between 2-4 months. • Issuers of their shareholders will not be obliged to conduct an offering for the
sale or subscription of shares prior to their inclusion on the MAB in order to comply with the minimum free float requirement. • Once listed, core shareholders & key executives are obliged to maintain the
shares during the first year following their listing.
Spanish REIT- SOCIMI (Sociedades Anónimas Cotizadas en el Mercado Inmobiliario)Application & Procedure for Admission to Trading
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Spanish REIT- SOCIMI (Sociedades Anónimas Cotizadas en el Mercado Inmobiliario)Disclosure & Transparency requirements
Information Basis Content
Financial Half-yearly & Yearly • Key financial data related to the first 6 months each year.• Audited anual financial statements.
Material • Calling for shareholder’s meeting.• Changes in the management body.• Corporate transactions. • Bylaw amendments (Specific content for the Company
bylaws, see next slide). • Etc.
Ownership Half-yearly • Number of shareholders • List of shareholders (≥ 5%)
Side-agreements I.e., terminantion of shareholder’s agreements affecting the transfer of shares or shareholders’ voting rights.
Principles: 1. Sufficient information: investors may have available information to enable them to
make trading decisions.2. Simplicity: MAB is a more flexible market than any other regulated market.
Besides being disclosed to the market, the abovementioned information must be posted on the website which the company will have to have available.
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Spanish REIT- SOCIMI (Sociedades Anónimas Cotizadas en el Mercado Inmobiliario)Specific content for SOCIMI bylaws
Provisions to include in SOCIMI bylaws:• Obligation for shareholders to notify the Company of the acquisition or sale of
shares where it causes their ownership interest to reach, go above, or fall bellow, 5% of the capital stock and successive multiples of 5%; the same obligation applies at a lower 1% to directors and senior managers.• Obligations for shareholders to notify the issuing Company of the signing,
extension or termination of any agreements that restrict the transferability of shares or affect the right to vote. • Obligation for the issuing company, if it resolves to stop trading on the MAB
without the unanimous vote of the shareholders, to offer the shareholders who did not vote in favour, to acquire their shares at a justified price in accordance with the criteria set out in the legislation on tender offers.• Obligation for any shareholder who receives a purchase offer from another
shareholder or from a third party, which implies that the transferee is going to own a controlling interest (above 50%), not to be able to transfer their interest unless the potential transferee makes an offer to all the shareholders to buy their shares on the same terms.
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Individual Income TaxPrivate
Company Limited
Individual SICAV SOCIMI
InvestmentTransfer Tax
INCOME
5,000,000 €8 %
4,600,000 €
5,000,000 €8%
4,600,000 €
5,000,000 €0%
5,000,000 €
5,000,000 €0,35%(*)
4,982,500
Return Rent IncomeExtraordinary IncomeEXPENSES
12%552,000 €
12%552,000 €
12% 600,000 €
12%597,900€
Managemnt Management feeRESULT
1%50,000 €
3%150,000 €
3%150.000 €
EBITDA – Operating Margin% Corporate Income TaxIndividual Income TaxBENEFIT AFTER TAXES
502,000 €30 %
351,400 €
552,000 €0%
52%264,960 €
450,000 €1%
445,500 €
447,900 €0%
447,900 €
SOCIMI Comparison 26.46% 69.04% 0.54%
(*) Transfer Tax for SOCIMI is 0.35%. It results from 5% (95% reduction) • 7%.Transfer Tax for Private Company Limited and Individuals is 8%. It results from 7% (Transfer Tax) + 1%.
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Dividends Taxation for Individuals
DIVIDENDS DISTRIBUTED 351,400 € 264,960 € 445,000 € 447,900 €
Dividends Withholding (21%)Shareholding ≥ 5%Shareholding ≤ 5%
73,794 €-
55,642 €-
93,555 €-
94,059 €19% (*)
Less than 1.500 € (0%)1.500,01- 7.500 € (21%)7.500,01 € - 25.500 € (25%)More than 25.500,01 € (27%)
1,500 €1,260 €4,500 €
87,993 €
1,500 €1,260 €4,500 €
64,654.20 €
Less than 6.000 € (21%)6.000,01 € - 24.000 € (25%)More than 24.000,01 €
1,260 €4,500 €
113,805 €
1,260 €4,500 €
114,453 €
RESULT 19,959 € 14,772.60 € 26,010 € 26,154 €
SOCIMI Comparison 31.04% 77.04% 0.55%
(*) SOCIMI’s dividends are taxed at 19%. At any other cases, they will be taxed up to 27% within ranges.
Private Company Limited
Individual SICAV SOCIMI
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REAL ESTATE LEGAL SERVICES
Property selection
Corporate Formation
Day-to-Day Legal: handling rentals,
and any other issues.
Barcelona Corporate Address
Tax optimization
Contact to Barcelona Local Council
Bureaucracy issues intermediation
Rehab control
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INGRID SUMARROCAPractice AreasFinance & RestructuringsMergers & AcquisitionsCommercial law
ExperienceDeloitte Touche Tohmatsu - Uría MenéndezEducationLaw Degree (UAB, 2007)Administration and Management Degree (UAB, 2007)Corporate Finance & Law Master (ESADE, 2012)
Languages SP - CAT- EN
Professional AssociationsBarcelona Bar Association (N. 32482)International Bar Association (N. 1043778)
Contact: [email protected]+34 93 209 55 63 / +34 657 769 812
297, Balmes08006 Barcelona