The Congress of Deputies approves the definitive text of the Law regulating listed Real Estate Investment Trusts (REITs)

13 November 2009

On October 15, 2009, the Plenary Session of the Congress of Deputies gave the green light to the law regulating REITs.

The final text introduced a series of significant changes to the bill sent to the Congress on December 19, 2008 including the following:

1.- The corporate purpose of the REIT has been broadened in scope to allow them to engage in building renovations.

2.- The minimum real estate and equivalent asset investment percentage has been lowered from 85% to 80%.

3.- The permissible income percentage for REIT secondary activities has been increased from 15% to 20%.

4.- Maximum outside financing percentage has been increased from 60 to 70%, allowing for a higher degree of debt for the REIT.

5.- The tax system for REIT income from leasing housing properties has improved for those cases in which said income equals at least 50% of their assets. Twenty per cent of said income is now exempt from corporate income tax.

6.- As regards indirect taxation, a lowering of the applicable tax rate for the Value Added Tax to 7% from the current 16% has been proposed for lease purchase contracts and to 4% from the current 7% for subsidized housing leasing.

7.- The reduced value added tax rate of 7% will apply to REITs who carry out building renovations in place of the current 16% rate.

8.- REIT incorporation or capital increase transactions are now exempt from the tax on property conveyances and documented legal acts.

For further information please contact Victor Manzanares: vmanzanares@mmmm.es