PSOE Proposes 100% Corporate Tax Exemption for Socimis Investing in Affordable Rental Housing
The Spanish Socialist Workers' Party seeks to enhance affordable housing through fiscal incentives for real estate investment companies.
The Spanish Socialist Workers' Party (PSOE) has introduced a legislative proposal aiming to incentivize socimis (listed companies dedicated to real estate investment) to invest in affordable rental housing.
According to the proposal, socimis that allocate more than 60% of their properties to affordable rental housing will benefit from a 100% exemption on corporate tax, provided they also reinvest profits into the construction of new homes.
Conversely, socimis failing to meet this 60% threshold will be subjected to a 25% tax rate on undistributed profits derived from residential leasing.
The PSOE parliamentary group presented this non-legislative proposal on Thursday, which outlines various measures to promote affordable rental housing.
It includes changes to the 2009 law that governs socimis, a legal structure introduced under former Socialist Prime Minister José Luis Rodríguez Zapatero, which expanded rapidly following regulatory amendments made in 2012 by the government of Mariano Rajoy.
Socimis operate within a favourable tax regime, akin to Real Estate Investment Trusts (REITs) in other countries, particularly prevalent in the U.S. economy since the 1960s.
These entities enjoy a 0% corporate tax rate if they distribute 100% of their profits as dividends (which are taxable).
For undistributed profits, they incur a 15% taxation.
Their operations cover the ownership and leasing of a diverse range of properties, including offices, hotels, warehouses, shopping centres, and residential units.
The proposal aims to stimulate investment models that adequately respond to the persistent demands of the housing market while providing mechanisms for those facing difficulties in accessing affordable housing.
The document presented by the PSOE highlights this intent, issued alongside statements from Isabel Rodríguez, the Minister of Housing.
To further encourage the establishment of affordable rental housing, the PSOE suggests additional tax incentives for socimis that increase their portfolios with such properties.
Specifically, the 25% special tax rate could be reduced by 50% if affordable rental housing constitutes more than 60% of their portfolio.
Moreover, a full 100% exemption could be granted if the undistributed profits are reinvested in affordable rental housing within three years.
The proposed legislative changes also introduce a gradual increase of the corporate tax rate to 25% on undistributed profits for socimis focused on residential housing.
The increment will be phased in over time: by 2025, affected socimis must allocate at least 20% of their properties to affordable rental housing; by 2026, this requirement increases to over 35%; and by 2027, to over 50%, with the full tax increase applying in 2028.
Currently, significant socimis like Merlin, Colonial, Lar España, Castellana Properties, and General de Galerías Comerciales do not possess residential properties or only have minimal holdings.
In contrast, companies such as Testa and Fidere (both owned by Blackstone) and Vivenio (backed by APG and Aware funds) focus exclusively on the residential market.
The forthcoming regulations may have a limited impact as many of these listed entities typically distribute more than the 100% of accounting profit mandated by law, following international practices that often consider free cash flow (FFO) as superior to profit calculated under Spanish accounting standards, which includes depreciation.
The proposal further clarifies the definition of affordable housing, stating that properties with rental prices that do not exceed the rate set by the Ministry of Housing’s Price Index, annual rents over €26,400, or rents exceeding 30% of household income will be classified as affordable.
According to the proposal, socimis that allocate more than 60% of their properties to affordable rental housing will benefit from a 100% exemption on corporate tax, provided they also reinvest profits into the construction of new homes.
Conversely, socimis failing to meet this 60% threshold will be subjected to a 25% tax rate on undistributed profits derived from residential leasing.
The PSOE parliamentary group presented this non-legislative proposal on Thursday, which outlines various measures to promote affordable rental housing.
It includes changes to the 2009 law that governs socimis, a legal structure introduced under former Socialist Prime Minister José Luis Rodríguez Zapatero, which expanded rapidly following regulatory amendments made in 2012 by the government of Mariano Rajoy.
Socimis operate within a favourable tax regime, akin to Real Estate Investment Trusts (REITs) in other countries, particularly prevalent in the U.S. economy since the 1960s.
These entities enjoy a 0% corporate tax rate if they distribute 100% of their profits as dividends (which are taxable).
For undistributed profits, they incur a 15% taxation.
Their operations cover the ownership and leasing of a diverse range of properties, including offices, hotels, warehouses, shopping centres, and residential units.
The proposal aims to stimulate investment models that adequately respond to the persistent demands of the housing market while providing mechanisms for those facing difficulties in accessing affordable housing.
The document presented by the PSOE highlights this intent, issued alongside statements from Isabel Rodríguez, the Minister of Housing.
To further encourage the establishment of affordable rental housing, the PSOE suggests additional tax incentives for socimis that increase their portfolios with such properties.
Specifically, the 25% special tax rate could be reduced by 50% if affordable rental housing constitutes more than 60% of their portfolio.
Moreover, a full 100% exemption could be granted if the undistributed profits are reinvested in affordable rental housing within three years.
The proposed legislative changes also introduce a gradual increase of the corporate tax rate to 25% on undistributed profits for socimis focused on residential housing.
The increment will be phased in over time: by 2025, affected socimis must allocate at least 20% of their properties to affordable rental housing; by 2026, this requirement increases to over 35%; and by 2027, to over 50%, with the full tax increase applying in 2028.
Currently, significant socimis like Merlin, Colonial, Lar España, Castellana Properties, and General de Galerías Comerciales do not possess residential properties or only have minimal holdings.
In contrast, companies such as Testa and Fidere (both owned by Blackstone) and Vivenio (backed by APG and Aware funds) focus exclusively on the residential market.
The forthcoming regulations may have a limited impact as many of these listed entities typically distribute more than the 100% of accounting profit mandated by law, following international practices that often consider free cash flow (FFO) as superior to profit calculated under Spanish accounting standards, which includes depreciation.
The proposal further clarifies the definition of affordable housing, stating that properties with rental prices that do not exceed the rate set by the Ministry of Housing’s Price Index, annual rents over €26,400, or rents exceeding 30% of household income will be classified as affordable.
Translation:
Translated by AI
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