Merlin and Colonial threaten government to leave Spain if tax plan for socimis is approved

Merlin and Colonial, the two largest listed real estate investment companies (SOCIMI) in Spain, threatened this Wednesday the government to leave the country if the financial plan agreed between PSOE and Sumar is approved. Last Monday, both groups agreed to “remove” the special tax treatment for these companies (for which they pay 1% corporation tax) “which has failed to improve housing supply.”

Merlin and Colonial, the only two SOCIMI companies listed on the Ibex 35 that specialize mainly in office leasing, opposed the plan after leading the decline in the Ibex index on Tuesday and falling 7.3% and 5% respectively.

Merlin stood up first. The largest real estate agency on Ibex announced in a statement sent to the National Securities Market Commission (CNMV) that it is studying various scenarios and contingency plans for the protection of its shareholders, clients and employees, “without excluding any domestic legal possibility” . its reach.”

While there is no evidence to date that the financial agreement between PSOE and Sumar will have “sufficient political and technical consensus for its approval”, Merlin will calculate the short-term effective impact on the “cash flow” of the said agreement. a tax proposal which in any case provides that it will be “constrained” by the combined effect of various tax rules.

In the medium to long term, Merlin will focus its assessment on determining what measures need to be taken to protect the interests of shareholders, customers and employees, including legal action.

The company recalls that SOCIMIs in Spain are equivalent to real estate investment trusts (REITs) and regrets that the tax changes introduced in the PSOE-Sumar agreement “represent in practice a suppression of the SOCIMI regime.”

The company, founded and run by Extremaduran financier Ismael Clemente, says there is a “clear” business case for a Spanish version of the regime known as international REIT, “based on bringing to market active business entities with direct access to funds and personnel.” depends on activities (as opposed to funds) that are responsible for promoting, constructing, acquiring and operating the infrastructure needed for various sectors of the economy (offices, shopping centers, logistics, data centers, hotels, parking or telephone towers).”

All this, he adds, “with daily liquidity and as a popular form of savings for individuals, essential for the proper functioning of pension funds, investment funds, mutual funds, insurance companies, family offices and sovereign wealth funds.”

“Very serious”

For his part, Colonial President Juan José Bruguera indicated in a statement to Europa Press that the agreement is “very serious” and will make Spain a “prohibited territory” for international investment and that if approved, it will rethink its strategy and the location of its activities.

“The changes that some are proposing are very serious. The social media regime is nothing more than an adaptation to the Spanish case of the norms established in international markets. Modifications like these make the Spanish market a no-go area for international investment.”

In his opinion, the legal framework should protect companies that choose to attract international investment and make this compatible with the best social goals.

In any case, Bruguera argues that Colonial’s current business model is diversified across different regions and has a corresponding presence in the Paris market, which gives the group “great strength in scenarios of regulatory fragility.”

“If the reform of the Socimis legal regime is approved, Colonial will review its investment strategy, its place of business and its legal structure and take, where necessary, measures that are in the best interests of its shareholders and investors. all with the aim of ensuring that these potential measures do not have a negative impact on society.”

PSOE and Sumar on Monday reached a tax agreement with banks, holiday apartments and yachts, which also includes the abolition of a special tax regime for social media. These companies are in the business of purchasing real estate assets, such as apartments, offices or shopping centers, to rent out their premises to tenants, companies or stores in exchange for rent, without having to pay taxes on the profits they distribute to their shareholders.

The SOCIMI regime applies to these companies that distribute at least 80% of profits to their shareholders, have all their acquisitions in the portfolio for at least three years, are listed on the stock market, have a working capital of 25% and distribute at least 50% of profits, received as a result of the transfer of real estate or shares.

The regulation of SOCIMI in Spain was established by law in 2009 in the context created by the bursting of the real estate bubble, with the aim of ensuring the liquidity of investments in the real estate sector, guaranteeing a continuous flow of investment through the savings of investors. , although its explosion occurred after regulatory changes introduced by the government of Mariano Rajoy.

As of the end of fiscal year 2023, there were 116 SOCIMIs registered in Spain, positioning the country as the main market in Europe for the number of SOCIMIs, with a market capitalization of €24 billion.