Spanish property regime a missed opportunity: EPRA

The new Spanish regime for property investment (SOCIMI) fails to capture the benefits of a true real estate investment trust (REIT) structure and is a missed opportunity for the Spanish Government, according to the European Public Real Estate Association.

EPRA views the ‘REIT’ label as unjustified since the SOCIMI regime has departed from the standard REIT model of tax exemption at the entity level. Instead, a reduced 18% flat rate is provided for qualifying net income, payable by the SOCIMI itself.

'The half-way option chosen by the Spanish government appears to be motivated by the fear of a loss of tax revenue,' said EPRA's Finance Director Gareth Lewis. The industry's view is that corporate tax and other onerous restrictions will limit the ability of the SOCIMI regime to attract new capital back into the Spanish market. This will deny Spain the benefits that REITs are capable of bringing, which have been witnessed in the more classical REIT markets.

'The reason REITs have been so successful in the more mature real estate markets, such as the US, Japan, the UK, France, the Netherlands, Belgium, Italy and Germany, is down to their ability to access a global pool of investment that comes from being part of a widely understood, transparent and well managed investment vehicle,' Lewis noted.