Real estate investment companies: tax advantages and Spanish residence

In the 60`s REITs (Real Estate Investment Trust) were born in the US, with the goal of making large-scale investments in real estate accessible to small investors. The formula chosen was to equate investment in real estate to investment in any industry; through the purchase of stocks in the stock exchange. Therefore, although not required, most REITs are in the public stock exchange.

In Spain REITs are called SOCIMI (Real State Investment Companies) and their purpose is limited to the acquisition of property for rental purposes. They include both urban real estate and plots of land acquired for the development of urban property to be leased after the development is complete, including shopping centers or others.

SOCIMIs are regulated by Law 11/2009 of 26 October, of Real State Investment Companies. The Law marks that these companies must be included in a stock exchange or regulated by the multilateral trading system in Spain, the European Union or the European Economic Area (eg Spain, the UK or Ireland). The REIT may avoid double taxation under EU Directives and tax treaties signed by Spain.

Moreover, there is no requirement regarding a minimum number of assets that a REIT should hold, which means you can have a single asset.

It does require, however, a minimum investment period: assets shall be maintained for a period of at least three years.

Furthermore, if the investment in a REIT reaches one million euros, the Entrepreneurs Act of 2013 will allow the investor to apply for the Spanish Golden Visa, the residence in Spain.

Being able to invest internationally creates many opportunities for small and large investors in real estate investment companies, which enjoy tax advantages over traditional real estate opportunities, and in the Spanish case also may involve access to the residence permit for foreigners. Specifically, the REIT is taxed at 0% provided that the holders of at least 5% of the REIT shareholders are taxed on dividends received at a minimum nominal rate of 10%. When shareholders do not meet this requirement, the REIT is taxed at a corporate tax rate of 19% on dividends distributed to shareholders (the 19% is a tax payable by the REIT and not dependent on dividends distributed).

Currently the investment requirements must comply with the 80/ 80 rule; ie at least 80% of the value of the assets of the REIT must be invested in qualified assets or shares and at least 80% of the income (excluding capital gains) must come from rental income and qualified dividends.

You can also buy a property through a foreign legal company as long as the company is not domiciled in a tax haven and the investor has, direct or indirectly, the majority of the voting rights and can appoint or remove a majority of the members of the board.

Sociedades inmobiliarias de inversión: ventajas fiscales y residencia española

En 1960 nacen en Estados Unidos los REIT (Real Estate Investment Trust), con el objetivo de que las inversiones a gran escala en bienes inmuebles fueran accesibles también a los pequeños inversores. La fórmula escogida consistía en equiparar la inversión en productos inmobiliarios a la inversión en cualquier otra industria; es decir, a través de la compra de valores. Por esta razón, aunque no están obligados, la mayor parte de los REIT son sociedades que cotizan en Bolsa de valores.

En España se les denomina SOCIMI (Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario) y su propósito se limita a la adquisición de propiedad con fines de arrendamiento. Incluye tanto bienes inmuebles urbanos como parcelas de terreno adquirido para el desarrollo de bienes inmuebles urbanos, para ser arrendados después de que el desarrollo se haya completado, incluyendo centros comerciales u otros complejos.

Las SOCIMI están reguladas por la Ley 11/2009, de 26 de octubre, de Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario. La Ley marca que deben estar incluidas en una bolsa de valores regulado o sistema multilateral de negociación en España, la Unión Europea o del Espacio Económico Europeo (por ejemplo, España, Reino Unido o Irlanda). Las SOCIMI pueden evitar la doble tributación en virtud de las Directivas de la UE y los tratados fiscales firmados por España.

Por otra parte, no hay ningún requisito en relación con un número mínimo de activos con los que debe contar una SOCIMI, lo que significa que puede contar con un único activo.

Sí requiere, sin embargo, un período mínimo de inversión: los activos deberán mantenerse por un período de al menos tres años.

Si además, su inversión en una SOCIMI alcanza el millón de euros, la Ley de Emprendedores de 2013 le permitirá incluso optar a la Spanish Golden Visa, la residencia en España.

El hecho de poder invertir internacionalmente genera multitud de oportunidades para pequeños y grandes inversores porque las sociedades inmobiliarias de inversión disfrutan de ventajas fiscales con respecto a las inmobiliarias tradicionales, y en el caso español, además pueden suponer el acceso al permiso de residencia para extranjeros. Concretamente las SOCIMI se gravan al 0% siempre que los accionistas titulares de al menos el 5% de la SOCIMI están gravados por los dividendos recibidos a una tasa nominal mínima de 10%. Cuando los accionistas no cumplen con este requisito, las SOCIMI se gravan con un impuesto de sociedades del 19% sobre los dividendos distribuidos a los accionistas (este 19% es un impuesto que debe pagarse por la SOCIMI y no un impuesto de retención sobre los dividendos distribuidos).

Actualmente los requisitos de inversión deben cumplir la regla del 80 / 80; es decir, al menos el 80% del valor de los activos de la SOCIMI debe ser invertido en activos cualificados o acciones y al menos el 80% de sus ingresos (excluyendo las ganancias de capital) debe surgir de los ingresos por alquileres y de los dividendos de acciones de calificación.

También se puede comprar una propiedad a través de una entidad jurídica extranjera siempre y cuando la sociedad no esté domiciliada en un paraíso fiscal, el extranjero tenga directa o indirectamente la mayoría de los derechos de voto y pueda nombrar o destituir a la mayoría de los miembros del órgano de administración.

Invest in a Spanish start up and obtain the Golden Visa

Investing in a Spanish start-up not only has numerous tax advantages, but can also open the doors for the Spanish Golden Visa, ie the residency permit in Spain.

A startup company or just emerging company is a term currently used to refer to a business project around ideas that are just beginning. These companies are generally associated with innovation, technology development, web design or web development.

There are currently more than 3,000 start-ups in Spain in which to invest. With the aim of promoting these projects, the government has implemented tax changes that favor investment in these companies. And if you decide to invest as an individual -and not as a society- you will benefit from even higher deductions and rebates.

All this is good news if you wanted to get the Spanish residency since according to the Spanish Law on Entrepreneurs of 2013, if a foreigner invests in a project, as long as they can prove that it will have a positive effect on job creation, have a social or economic impact in the geographical area of ​​investment, or represent a significant contribution to scientific innovation and / or technology, they will be eligible to obtain it.

So an investment of this type may allow you to apply for a Spanish residence, by means of the so-called Spanish Golden Visa scheme. If you want to invest in Spain for residency, you can search among thousands of emerging business projects, and benefit from many tax advantages.

Converting this investment in a residence permit requires the approval of the competent Spanish authorities, so it is advisable that this is managed by a specialized and competent agent.

Desea Obtener La “Spanish Golden Visa”?

Si aún se pregunta si cumple las condiciones para obtener la “Spanish Golden Visa,  le contamos cómo realizar una inversión para obtenerla

 

Una de las maneras de obtener un permiso de residencia en España es obteniendo una Spanish Golden Visa. Para ello debe hacer una inversión en España. Sin embargo, no vale cualquier inversión. Debe cumplir con los criterios expuestos en la Ley de Emprendedores de 2013 con el fin de que valga para obtener la residencia.

La primera, pero no la única manera de obtener el permiso es haciendo una inversión de capital. Y tal vez la inversión de capital más fácil, rentable y segura sea la inmobiliaria. Las condiciones son que debe utilizar al menos € 500.000 de sus propios fondos para empezar. Sin embargo, por encima de ese umbral no hay límite a la financiación de la deuda, por ejemplo, con una hipoteca en España.

Al hacer una inversión de este tipo, hay impuestos y tasas específicas hay que tener en cuenta.

  1. a) el IVA o la transferencia de impuestos: hasta un 10%
  2. b) Impuesto de Sellos, si procede: 1%
  3. c) Registro de la Propiedad, los honorarios notariales y legales: hasta el 2%

 

Por lo tanto, es importante tener en cuenta que para ser realmente capaces de asumir la inversión, a la cantidad total será necesario sumarle otro 13%.

Una alternativa a la adquisición de bienes inmuebles es la compra de acciones de una empresa española; en este caso la cantidad se eleva a 1.000.000 € o más. Otras opciones son depositar 1.000.000 € o más en una empresa financiera española o la adquisición de Bonos del Tesoro español por valor de 2.000.000 € o más.

 

Por último, también puede invertir en proyectos empresariales calificados como “de interés general”, si se puede demostrar que el negocio va a tener un efecto positivo en la creación de empleo, o generar un impacto social o económico en la zona geográfica de la inversión, o si representa una contribución significativa a la innovación científica y / o tecnológica. El permiso de residencia obtenida por este tipo de inversión requiere la aprobación de las autoridades españolas competentes.

 

Como ustedes saben, un permiso de residencia español le da acceso a todos los países “Schengen”, entre ellos Austria, Bélgica, Dinamarca, Finlandia, Francia, Alemania o Suiza, entre muchos otros.

Are you eligible for a Spanish Golden Visa?

In order to obtain a Spanish Residency permit by means of the Spanish Golden Visa scheme, you must make an investment in Spain. However, not just any investment will do. It must comply with the criteria exposed in the Spanish Entrepreneurial Act of 2013 in order to make you eligible for the Residency.

The first but not the only way to obtain the permit is by making a capital investment. And perhaps the easiest, most profitable and secure investment is in real state. The conditions are that you must be using at least €500,000 of your own funds to start with. However, above that threshold there is no limit to debt financing, for instance with a mortgage in Spain.

When making an investment of this type, there are specific taxes and fees one must consider.

  1. a) VAT or transfer Tax: up to 10%
  2. b) Stamp Tax, if applicable: 1%
  3. c) Land Registry, Notary and legal fees: up to 2%

 

So, it is important to keep in mind that, in order to apply for the Spanish Golden Visa, the total amount needed will rise approximately another 13% in order to actually be able to make the investment.

An alternative to acquiring real state is buying Stock shares of a Spanish Company; in this case the amount rises to 1.000.000€ or more. Other options are depositing 1.000.000€ or more in a Spanish financial company or acquiring Spanish Treasury  Bonds worth 2.000.000€ or more.

 

Lastly, you can also invest in business projects classified as “of general interest” if you can prove that the business will have a positive effect in job creation, or make a social or economic impact in the geographical area of the investment, or if it represents a significant contribution to scientific and/or technological innovation. The residency permit obtained by this type of investment requires the approval of the relevant Spanish authorities.

 

As you know, a Spanish Residency permit gives you access to all “Schengen” countries, including Austria, Belgium, Denmark, Finland, France, Germany, or Switzerland, amongst many others.

 

Foreign Notary Deed in Spain

A recent press release from the Consejo General del Poder Judicial (General Council for the Judiciary) reports an interesting ruling of the Spanish Supreme Court. The decision, of 19 June 2012, ratifies the one of the previous instance according the registration in a Spanish Land Registry of a deed of sale of an immovable located in Spain, notarized by a German Notary. Taking into account the rules of private international law the Supreme Court confirms the validity of the foreign deed in Spain as a basis for a Registry record.

In the instant case litigation arose from the sale of an apartment in Tenerife, which was acquired undivided by two German citizens. One of them sold his share to a third party with the consent of the other; the transfer was formalized by a German notary and the acquirer sought to have it recorded in the Land Registry of Puerto de la Cruz. The registrar refused, considering that the German document lacked full legal force in Spain; his decision was upheld by the General Directorate for Registries and Notaries, but rejected on appeal both by the Court of First Instance and the Audiencia Provincial, as well as by the Supreme Court.

According to the Supreme Court, a decision such as the one taken by the registrar and supported by the General Directorate cannot be approved under the current understanding of the freedom to provide services at the European Union level; also, to require the involvement of a Spanish Notary would mean an unjustified limitation to the freedom of transfer of goods. Article 1462 of the Spanish Civil Code, which applies in the case, equates issuing of a public deed with delivery of the sold thing; the provision does not require that the deed be granted by a Spanish Notary public, therefore a formally valid deed granted by a foreign Notary will have the same effect (in terms of equation with delivery) as one notarized in Spain. The Supreme Court believes that this interpretation matches the EU tendency to avoid duplication of formal requirements, once they have been fulfilled in a member State for a purpose identical or similar to that required in the State where the act thus documented aims to produce effects. To back this opinion the Court leans on the Commission’s Green Paper of December 14, 2010 entitled “Less bureaucracy for citizens: promoting free movement of public documents and recognition of the effects of civil status records”; on the consistency of the understanding with the Spanish regulation on foreign investments, which does not require that contracts be notarized by a Spanish Notary; and on Article 323 of the Spanish Civil Procedure Act, which accords full evidential effect to public documents formalized abroad when comparable to the Spanish “escritura pública” in as far as the role of the Notary is concerned, regardless of the formal differences.

Two members of the Court do nevertheless dissent with the idea that Article 1462 Civil Code allows for the same treatment to be granted to Spanish and foreign deeds, as, according to the provision, equation between the public deed and the delivery of the sold asset is excluded when the deed states (or it can easily be inferred) otherwise. In this regard, the differences between the German and the Spanish systems for the conveyance of ownership justifies the need for the intervention of Spanish Notaries: only they can safeguard the essential rules of the legal transfer of property that governs our country, which is that of título y modo (grounds of acquisition followed by the traditio or delivery)

Legal update on Spanish time sharing regulations

As published in Conflict of Laws website by Marta Requejo, one year after the expiry of the deadline set by the Directive 2008/122/EC of the European Parliament and the Council of 14 January 2009, on the protection of consumers in respect of certain aspects of timeshare, long-term holiday products, resale and exchange contracts, the Spanish legislator has transposed it through the Royal Decree-Law 8/2012 of 16 March (BOE of March, 17), already in force. The Time-sharing Act (Act 42/1998 of 15 December) is repealed.

In addition to some rules on the language of pre-contractual information and the contract itself, Art. 17, entitled “Rules of private international law”, states that when according with the Rome I Regulation the applicable law is the of a non-member State of the EEA, the consumer may invoke the legal protection granted by the Royal Decree-Law in the following cases: Continue Reading

Spanish Mortgages are Declared Illegal in Ecuador

As reported by professor Nicolas Zambrana a new draft bill has been submitted to the Ecuadorian Parliament explicitly stating that “no legal validity will be given in Ecuador to financial arrangements made to acquire the property of houses (viviendas) in Spain and the judicial acts which may have been derived from such arrangements because the latter have been made under conditions of illegality and fraud”.

Another paragraph of this draft bill introduces criminal sanctions for those responsible of entities which try to seize property for this reason in Ecuador (http://www.librered.net/?p=13006). Continue Reading

Jurisdiction for domain names

From Conflicts of Law Net I got this interesting case discussing the jurisdiction applicable to a domain name dispute. What are the potential tax consequences of this case?

If a domain name jurisdiction is that of its registration, may we infer that a tax presence could be deemed too? The legal reasoning of this case pave the road for this concluding statement. Continue Reading

Sharia as applicable law in Western Courts

Islamic Finance is the fastest growing industry in the financial panorama. The contractual arrangements are based in the Sharia, or Islamic Law. What would be the applicable law in a dispute between parties in an English or Spanish law jurisdiction where the parties submitted to the Sharia law?

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