Listed real estate investment companies (socimis) have fitted with sportsmanship the fiscal change that the Government has planned for them in the draft General State Budgets (PGE) that it approved on Tuesday in the Council of Ministers. The measure contemplates introducing a minimum taxation of 15% on the part of the undistributed profit and in the sector there is a generalized feeling that it is more of a cosmetic measure than an effective one.
“The material effect of the tax change is very small and will probably fall on the smaller Socimis,” he said. Alberto Insured, Director of Debt and Corporate Finance at JLL in Spain, during the presentation of the Socimis report: Strength and Value for recovery, prepared by BME and the real estate consultancy.
Until now, the tax regime of Socimis in Spain contemplates not paying for Corporation Tax with the condition of distributing at least 80% of the dividends among shareholders and it is in that remaining 20% where the tax would be applied 15% contemplated by the Public Accounts for 2021.
The change was another of the demands of United We Can in the government agreement for the inauguration of Pedro Sánchez and to give its support to the Budgets that are presented this Wednesday in Congress.
However, for practical purposes, the measure will have little impact on tax collection and the reason has been outlined by Segurado himself. “The first eight Socimis in Spain, except for two of them, have a pay-out of 100% “, that is to say, they distribute the totality of the benefit that they generate, reason why they would not have any tax obligation as a company.” The effect will probably fall on the smallest Socimis “and even so, the plans of The Treasury plans to collect just 25 million euros in this way in 2022.
Jesús González Nieto-Márquez, managing director of BME Growth, has defended the commitment of the Socimis with their tax obligations. “Of course they pay taxes, through dividends and shareholders,” he pointed out at the appearance, while warning that all these announcements raise doubts among investors and entrepreneurs. “There are firms that are delaying the decision to become a Socimi due to changes and legal uncertainty,” he warned.
Recovery motor
However, Gonzalez and the rest of the participants in the meeting have defended the importance of the Socimis for the economic recovery facing the country and as a motor of the housing market.
On this last point, the BME Growth executive explained that “more and more Socimis are engaged in housing rental” and that this “will help stabilize rental prices through more professional management”.
Currently 83 Socimis are listed in Spain, four in the main market (Colonial, MerlÃn Properties, Lar Espaia and rima Real Estate), two of them (Colonial and MerlÃn Properties) included in the Ibex 35 index and 79 remaining, in BME’s BME Growth market.
As of December 2019, all of them together had a market capitalization of 25,733 million euros, although Covid-19 has had an impact on the sector and has caused a decrease of more than 17%, to 21,268 million euros.
In business terms, the Socimis recorded rental income of 2,060 million in 2019, 8% more compared to the previous year, and an EBITDA of 1,700 million, 22% higher. Net profit reached 2,500 million euros, 11% more, and the generation of net cash was over 500 million.
In terms of shareholder remuneration, the companies analyzed in the report distributed 1,254 million euros in dividends during 2019, a year-on-year increase of more than 60%.
Luis Molina Ura Men ndez’s tax attorney, stated that “Socimis have become major players in the Spanish real estate market, especially since the tax regime was adapted to that of traditional reits in 2013. In the next few years For years, the success of the model will depend on our institutions providing legal security and some flexibility in complying with tax and regulatory requirements, in line with the practice of other countries in our environment ” .
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