Tag: legislation

MAB Introduces Tougher Entry Rules For New Socimis

31 July 2017 – Expansión

In August, an amendment to the regulations governing the Alternative Investment Market will enter into force, which has led to a wave of Socimi debuts on the stock market in July to circumvent the new requirements.

Six new Socimis debuted on the stock market in July, an unusually high level of activity compared to previous months. The reason is that on 1 August the new circular published by the Alternative Investment Market (MAB) will enter into force. It introduces changes for debuting on the stock market and will affect all companies wanting to list from next month (August) onwards, in particular, Socimis. The amendment sees a toughening up of the conditions to debut on the stock market, given that it imposes some very demanding requirements for minority shareholders.

The change is very specific: “At the time of listing, companies must have minority investors owning shares that are worth less than €2 million or 25% of the company’s share capital”, explained José Luis Palao, Partner of the Mercantile Department at Garrigues. Minority shareholders are considered to be those that hold less than 5% of the share capital. Until now, the regulations allowed companies a grace period of one year to fulfil this requirement.

Manuel López, Partner of Financial Regulatory Law at Ashurst, considers that some Socimis have formed closed-end funds of sorts that have no interest in allowing access to minority shareholders. The exception to the regulations that existed benefitted this type of company in particular, as they enjoyed additional time to adapt themselves.

In this sense, López understands that the regulations are reasonable and reflect what the Socimis are designed to be – entities with the vocation to expand and attract new investors, aimed at boosting the real estate sector. His colleague, Ismael Fernández Antón, Partner of Real Estate Law at the same firm, considers that “the legislation has not become less flexible, but rather more coherent”.

Although Circular 1/2017 does not explain the reasons for the change, the experts agree that the market for Socimis has reached maturity and does not require any further encouragement. The MAB was prudent at the beginning, offering these companies a certain amount of freedom to promote their growth. Fernández Antón says that “this measure was always going to have a sell-by date”, given that the Socimis already represent an attractive vehicle for real estate investment in Spain. Moreover, the modification represents a guarantee to “limit the desire to use them as a platform for pure fiscal optimisation”, says López.

The change only affects companies that start trading from August, in such a way that those that have debuted recently still benefit from the exception. This has meant that, in the last month, the rate of Socimi debuts on the stock market has multiplied. Those who have acted quickly can enjoy a period of one year to fulfil this requirement regarding the diffusion of shareholders.

Although almost 40 Socimis trade on the stock market, only five are listed on the Main Exchange and only two of those form part of the Ibex 35: Merlin Properties and Colonial. Within the last few days, the entities Numulae, Bay Hotels & Leisure and AM Locales have all debuted on the MAB.

Original story: Expansión (by Jesús de las Casas)

Translation: Carmel Drake

Madrid’s Town Hall Prepares To Legislate For Tourist Apartments

30 April 2017 – El Confidencial

The Town Hall of Madrid has decided to take the lead regarding the problem of the proliferation of tourist homes in the capital. Although it lacks the power to introduce legislation (that responsibility lies with the Community of Madrid), the Town Hall’s Councillor for Sustainable Urban Development is working towards signing a Memorandum of Understanding with Airbnb, and the other platforms that operate in the city, to try to put some order to a situation that isn’t showing any signs of letting up. (…).

José Manuel Calvo (pictured above), Councillor for Sustainable Urban Development, plans to have the agreement ready before the end of this legislature.

Specifically, there are three measures that the Town Hall of Madrid is hoping to extrapolate from an example that it has been studying in Amsterdam. The first is “to establish a maximum period of time, be it 60 days, 120 days, etc, that an owner may lease his/her property (home/room) for each year and for the platform to withdraw the property in question from its website, once that quota has been reached, until the following year”.

The second measure involves ensuring that only the owner of a property may lease it out, whereby preventing the involvement of any companies. This will allow “people who need to supplement their mortgage payments, or who need to lease their house to make ends meet, to continue to let out their homes/rooms, but it prevents people from creating tourist accommodation companies without paying taxes, or complying with legislation, etc”.

The crux of the agreement comes in the third measure: “we are considering a tourist tax for tourist homes only, not for hotels, given that hotels already pay taxes, fees, fulfil their obligations etc. Meanwhile, tourist homes do not currently pay any taxes. In other Central European cities, and even in some American cities, some of the landlords’ profits are reinvested in the town, in agreement with the operators”, said Calvo.

With this new revenue stream, the Town Hall could finance the systems of control that it plans to implement to verify that Airbnb and its competitors are complying with the agreed conditions.

But the problem of the touristification or gentrification of the centre of Madrid goes beyond the tourist homes and also affects the proliferation of hotels, to the detriment of residential buildings; another challenge that Calvo wants to tackle by limiting changes of use. (…).

Although he acknowledged that “Madrid faces a very different situation in terms of hotels to Barcelona, Venice and Lisbon (we have 2.7 beds for every 1,000 inhabitants, compared to 8 in Barcelona)”, he also admits that he is worried by the degree of saturation that is starting to be seen in certain neighbourhoods in the centre, where limits do need to start being imposed (…).

“Madrid undoubtedly still has the capacity to increase its hotel and tourist capacity, but, the question is whether that should all be concentrated in the centre, in the same neighbourhoods, where the residential fabric is being pushed out by the increase in hotels and tourist apartments? We don’t think so, we need to diversify. Ideally, they would go towards the Arganzuela district, towards Chamartín, towards Chamberí, to the outskirts, to the other side of the M-30…”.

And it was on this point that Calvo was most belligerent, going as far as to state that he would be willing to set thresholds, to establish limits in those areas where saturation is detected. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

There Are 17,000 Illegal Tourist Apartments In Madrid

26 April 2017 – Expansión

In just a year, the number of tourist apartments has increased by 100% in the Spanish capital. Of the 20,000 that currently exist in the Community of Madrid, only 3,000 have been registered. Hoteliers are asking for an urgent decree to be passed. 

“For a year and a half, we have been hearing that the Community of Madrid is going to publish a new decree to regulate the supply of tourist accommodation, but nothing. To open a hotel, one needs to comply with 400 rules, we have counted them; meanwhile, tourist apartments are not subject to any legislation. Unfair competition is harming every hotel in Madrid”. That is according to Madrid’s Association of Hotel Businesses, which is alarmed by the boom of tourist accommodation in the city.

According to the latest report from Exceltur, the alliance for tourist excellence, the supply of this type of tourist home has risen from 10,000 (37,000 beds) in 2015 to 20,000 (74,000 beds) in 2016, which represents an increase of 100%. Of the 20,000 beds, only 3,000 are actually registered, according to the Community of Madrid’s decree dated 2014, which governs tourist activity. (…).

To understand the severity of the problem, which has led to a 20% increase in rental prices in the city centre in a short space of time, causing gentrification, the expulsion of residents who have lived there for their entire lives, the Association presents another fact: Madrid’s hotels offer 80,000 beds in total, just 6,000 more than offered by the tourist accommodation establishments.

“We want to participate in the modification of the current decree, we don’t want to receive it a day before it is approved, but rather we want to work with the authorities to make the legislation correct and effective for both hoteliers and residents”, said Mar de Miguel, President of the Association. She added that these accommodation alternatives, besides not complying with the majority of the rules in terms of security or quality, are not subject to the urban development plan and do not pay the corresponding taxes, which is leading to tax fraud of €800 million per year. (…).

The Community of Madrid plans to legalise the market although it is very aware of the handicap that it faces. “The problem is that there is no legal precedent in Europe due to the mixing of jurisdictions and the reality of the fact that the activity is being performed in individuals’ homes, which significantly limits the capacity to exert control over it”, explained Carlos Chaguaceda, the region’s Director of Tourism. Homes let to tourists are therefore not regarded as businesses by law, and so “the Administration is unable to intervene in an agreement reached between two parties to rent a home”, said the Director of Tourism. (…).

The regional government proposes the creation of a register for these tourist apartments, where the owner legally acknowledges his/her activity. “Ideally, we would have the capacity to act against any platforms that advertise these properties online (without the corresponding permissions). For example, if a property does not have a registration number, it may not be advertised on any website”, suggested the Director of Tourism. (…).

Meanwhile, the Town Hall of Madrid considers that the Spanish capital is a long way from the problems that hoteliers are facing in Barcelona and Paris, given that the average number of beds per 1,000 inhabitants is 2.7 in the Spanish capital compared with 8 in the Catalan capital, but even so it wants to minimise the “risks of saturation” that is starting to exist in certain neighbourhoods, such as Cortes. (…).

The Town Hall is also looking to sign “memorandums of understanding containing certain commitments with Homeaway and Airbnb” (…).

Original story: Expansión (by R. Bécares and L. F. Durán)

Translation: Carmel Drake

Spain Is A Long Way Away From A New RE Bubble

21 April 2017 – Expansión

Spain’s large property developers consider that the (Government’s) policies in terms of housing are obsolete and so, they are requesting changes to the existing legislation to reflect the new habits and demands of Spanish society.

A more professionalised sector, with a greater industrial component, which is more disciplined in terms of debt, selective when buying land and prepared to adapt to the economic cycles. That is how Spain’s real estate developers see the future of the residential market in the country.

“I find it hard to believe that the market is not going to undergo a major transformation. The banks are not going to finance land and the radical fragmentation that we have seen until now is not going to continue”, said Juan Velayos, CEO of Neinor Homes, on Wednesday at the XXIV Meeting of the Financial Sector, organised by Deloitte, Sociedad de Tasación and ABC.

The CEO of Aedas Homes, David Martínez, said that between 130,000 and 150,000 new homes are going to be needed per annum over the next few years, so there is still a long way to go. For that Director, Spain has entered a new bonanza cycle following the crisis, which will probably last longer than the previous one.

The CEO of Sociedad de Tasación (ST), Juan Fernández-Aceytuno rejected the idea that there is currently a real estate bubble in Spain. “There is clearly stability in terms of prices, but it is still too soon to talk about a complete recovery in the market”. (…).

Thus, the President and CEO of Vía Célere, Juan Antonio Gómez-Pintado, said that the challenge for the sector in the future is to achieve greater industrialisation. “The situations that are being imposed on us by house and land prices are turning us into a speculative model. The sector was very badly affected during the crisis and there are only a handful of companies with their production capacity intact at the moment”.

For Gómez-Pintado, the sector is still very fragmented: “The large players will not account for more than 5% of the total market”.

Meanwhile, the CEO of Metrovacesa Suelo y Promoción, Jorge Pérez de Leza, highlighted the importance of recovering the reputation of brands.

In terms of his firm’s strategy for the future, Pérez de Leza explained that Metrovacesa Suelo y Promociones wants to become a “premium” channel for generating value from the land currently held by its shareholder banks (Santander, BBVA and Popular). “There has been a lot of speculation around whether we were going to end up as a dump. That is not the case. The strategy that we have chosen to adopt is for Metrovacesa to choose the land that will allow it to be a competitive property developer. The portfolio of land is very good and will be the envy of many of our competitors”.

Shortage of land

In terms of the lack of buildable land, Velayos acknowledged that, although Neinor currently has sufficient buildable land to carry out its strategic plan, which involves delivering between 3,500 and 4,000 homes per annum, the lack of supply may become a problem in the future. (…).

Moreover, the property developers are demanding a change in legislation in terms of housing in Spain so that it reflects the new needs of society. “I can’t think of any other sector that is worse in terms of regulatory matters than urban planning. It is absurd”, said Velayos. (…).

Meanwhile, the Managing Partner at Azora, Concha Osácar, pointed out that Spanish society is changing. “The rental market has been slow to reach Spain, due to a lack of investment and products, but it is now here to stay. (…). The stock of rental homes needs to be increased substantially”. (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Sareb Unlikely To Distribute Any Profits To Its Shareholders

30 December 2016 – Expansión

Accounting circular / The Ministry of Finance has softened its demands on Sareb. In exchange, the bad bank’s owners, namely, the State and Spain’s largest banks, will not receive anything for their investments in the bad bank, for at least the next few years.

The Ministry of Finance has softened the situation facing the shareholders of Sareb (the most important of which is the State, through the Frob), by not forcing it to recognise latent losses in its income statement, like it has been obliged to do until now. In exchange, the Ministry has shut down the possibility that these shareholders will receive any results from their investment, even if the company does manage to generate profits at some point.

The harsh situation created by the accounting circular that the Bank of Spain designed for Sareb has barely lasted a year. According to that legislation, Sareb was obliged, within a period of two years, to reappraise all of the assets on its balance sheet (which proceeded from the real estate portfolios of the former savings banks that received public aid) and recognise the latent losses in the income statement each year, given that the price at which it bought those assets was significantly higher than their market prices.

The reality of all of this was seen last year when, in order to avoid near bankruptcy, the bad bank reduced its capital to zero and converted a substantial part of its subordinated debt (€2,171 million) into capital, to offset some of the losses for the year and restore the equity balance. Sareb recognised provisions amounting to €3,900 million in 2015 and recorded capital of €953 million (2% of the balance sheet) and subordinated debt of €1,429 million.

It was expected that something similar would happen this year, although with a less intense effect, given that most of the assets were reappraised in 2015, and that the capital balance would again be reduced and more subordinated debt would be converted into capital.

But to avoid this, the Ministry of Finance has made two significant changes. The first is that Sareb must continue valuing its assets at market prices, but if those values result in the creation of latent losses, then rather than recognise them in the income statement, they should be recorded in the equity statement, whereby reducing the company’s share capital. In parallel, and to avoid the company having to file for insolvency due to an excessive reduction of its capital, Sareb may also benefit from the exception afforded to real estate companies at the height of the crisis, which exempted them from having to comply with a certain relationship between the value of their assets and their own funds. (…).

Two conditions

In exchange for these concessions, which will undoubtedly give Sareb some much needed breathing room, the new legislation from the Ministry of Finance establishes two conditions. The first is that when an asset is sold for below its acquisition price, the real loss must be recognised in the income statement; and the second is that if Sareb generates profits in the future, then whilst the equity account exists in which the latent losses are being reflected, then all of the profits earned must be applied to that account. That means that, in all likelihood, Sareb’s shareholders (…) will not receive anything for their investments in the company over the next few years. And it is reasonable to think that they will never receive anything, given Sareb’s asset composition.

This is the first time that this fact has ever been acknowledged, more or less explicitly. (…).

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Cifuentes Presents New Land Act For Community Of Madrid

25 October 2016 – Expansión

Yesterday, the President of the Community of Madrid, Cristina Cifuentes (pictured above), submitted the draft bill for the new Law governing Urban Planning and Land in the Community of Madrid, an initiative long demanded by the Madrilenian real estate sector. The bill aims to clarify and organise the management of urban planning in the region, whereby replacing the existing regional Land Act, which dates back to 2001.

During its 15 years of life, the existing text has been partially modified 15 times, which, as the Ministry of the Environment, Local Administration and Land Planning itself admits, has ended up making it “difficult to understand and interpret”.

“Circumstances have changed considerably over the last 15 years and so the content of the Land Act has been completely distorted”, acknowledged Cifuentes yesterday during the presentation of the new draft bill. “This new law has been put together as a single piece of legislation to give coherence to the urban planning rules”, she added.

The regional Government plans to submit the Draft Bill to the Assembly before the end of the year and, according to Cifuentes, it hopes to obtain “the maximum consensus and support possible”. It is something that seems almost impossible, taking into account that eight months ago both the PSOE and Podemos left the technical and political tables that have been managing the text presented yesterday.

This was not helped either by the fact that Ciudadanos decided to put “an end” to these working tables in a unilateral way “to look for a new consensus”, according to an announcement last week from its spokesman in the Assembly, Ignacio Aguado. The orange party’s idea is to look for maximum political support to approve the law, and so it is advocating that the work of these tables be transferred to the specific report about the Land Act, which already exists in the Assembly.

“We want a Law that represents the consensus of all of the political groups and not another piece of steam roller legislation from the PP”, said Aguado. “Ciudadanos is going to fight to ensure that there is real citizen participation and genuine transparency in the way that urban plans are prepared. We want to put an end to the current opacity”, said the spokesman. (…).

New elements

In addition to the goal of making urban planning “more agile and transparent”, the Draft Bill presented yesterday by Cifuentes includes some important innovations. The most notable is its commitment to urban renovation and regeneration, compared with the model of expansionist urban planning under the previous legislation.

In this sense, one of the most innovative aspects is the fact that cities in the region will have the opportunity to undertake the renovation of large areas without the need to modify their General Plans. (…).

The new text retains the categories of urban land – buildable and non-buildable, but eliminates the category of unsectorised buildable land, which becomes non-buildable common land. Nothing can be built on this kind of land, under any circumstances, unless its classification is changed in the general plan upon request by the town halls themselves. “The aim is to achieve a more sustainable urban planning approach that avoids unnecessary urban planning developments”, say sources at the Ministry.

Other novelties include the creation of a Simplified General Urban Plan, designed for towns with fewer than 5,000 inhabitants and budgets of less than €6 million. Those towns may choose to adopt this framework, which is more flexible and agile than an ordinary plan, provided that the work focuses on historical centres and does not include any new developments. This framework may be applied to almost half of the 179 municipalities in the region.

Original story: Expansión (byLuis M. De Ciria and Carlota G. Velloso)

Translation: Carmel Drake

ECJ Puts An End To The Eviction Of Family Guarantors

21 October 2016 – Cinco Días

The European Court of Justice (ECJ) has ruled that mortgage guarantees from individuals to companies are protected by the European directive on unfair terms. In this way, the EU judges have opened the way for the cancelation of this kind of guarantee and its most draconian conditions, when the contracts favour financial institutions in an unfair way. The ruling also jeopardises the execution of guarantees between individuals, which are very common in the case of house purchases.

In less than a year, and thanks to one case in Italy and another in Romania, the European Court of Justice has revolutionised the treatment of mortgage guarantees, many of which will be protected by the European directive on unfair terms from now on. Until now, it was assumed that the guarantors of a company were responding to a professional relationship and therefore, they were not covered by the rules governing consumer protection.

However, that interpretation did not consider numerous guarantors whose relationship with the company was of a family or friendly nature, without any commercial interest whatsoever. And so, the European Court of Justice has put an end to the gap by classifying these types of guarantors as consumers.

In November 2015, the EU judges indicated and they have just reiterated (14 September 2016) that the European Directive 93/13 governing unfair terms should protect people who guarantee the credit of a company that they do not manage or hold majority shares in.

In such cases, the new European legislation considers that the guarantor is acting as a consumer and therefore, the national courts may cancel the guarantee if they consider that the contract did not inform them properly about the risks or if the contract grants an unfair advantage to the financial institution.

The lawyer Juan Ignacio Navas, Partner-Director of the law firm Navas & Cusí, classifies these types of guarantees, which do not generate any economic benefits for the guarantor, as “altruistic”. And he says that they are granted regularly, particularly in the case of small and medium-sized companies. (…).

Navas believes that the new legislation will not only affect guarantees for loans to companies but will also be extended to all types of individual guarantors. (…).

The lawyer said that many mortgage loans are signed with these altruistic guarantees: “Cousin, brothers, daughters, parents and friends, in other words, people linked by family or friendship ties, without any economic interest”.

Legal sources stress that in these types of contracts “the guarantor is risking something as important as his/her home without gaining anything in return and he/she does so because of the pressure exerted by financial institutions”. (…).

Nevertheless, other lawyers, such as the Partner of the law firm Jausas, Jordi Ruiz de Villa, warn that the rulings from the European Court only ensure that the conditions of these guarantees will be reviewed from the perspective of consumer protection and that even if a contract includes an unfair term, a judge may decide to just cancel that term or amend the commission charged without the need, for example, to cancel the entire guarantee.

As a result, some Spanish judges have already declared some mortgage guarantees to be null and void as they considers that they include unfair terms, which means that the rulings from the European Court may help halt the evictions of these kinds of family or friend guarantor.

Original story: Cinco Días (by Bernardo De Miguel and Juande Portillo)

Translation: Carmel Drake

Merlin Consolidates Assets Following Merger With Metrovacesa

21 October 2016 – Expansión

Merlin Properties is entering a new phase. After completing the merger with Metrovacesa, the Socimi wants to initiate a new phase of asset consolidation. “Our goal is to not grow any larger”, said Ismael Clemente (pictured above), Chairman of the firm, speaking yesterday at the Barcelona Meeting Point real estate fair, which is being held from 19-23 October in the Catalan capital.

This new phase is looking for a soft landing following the merger with Metrovacesa. The primary objective of this process is to increase the value of the assets in Merlin’s portfolio. To this end, capital investments will be made in offices and in other assets owned by the Socimi.

Clemente also confirmed that 75% of Merlin’s offices are more than 10 years old and that the consolidation will be based on improving these spaces, in accordance with the new upwards cycle in the sector, which is leading to price rises and improved facilities. The recovery in the value of offices, above all in Madrid and Barcelona, is “just in its first phase”, said Clemente.

The Director said he was confident in the opportunities being offered in this segment compared with the situation in other European markets – such as the German, French and British markets – where prices are more mature. Even so, the Chairman of Merlin thinks that Spain is still a secondary country within the European real estate sector, given the insufficient legal security here and the lower presence of overseas investment compared with other markets across the Continent.

The merger with Metrovacesa is expected to be definitively formalised this month, following the payment of a €60 million dividend on 25 October, which was approved in a Board Meeting held last Wednesday.

Clemente regards the logistics sector as one of the best positioned in terms of investment following the downturn it suffered during the economic crisis. “Historically, the logistics sector has been undeveloped in Spain”, said the Chairman of Merlin.

Nevertheless, the recovery and development of online commerce is allowing the logistics sector to return to pre-crisis levels. Merlin considers that there are few investment opportunities left in the shopping centre segment and that only shopping macro-complexes, with flexible legislation, will offer the right conditions for investment.

Meanwhile, Clemente said that the disputes over forming the new government, and the nationalist tensions “have both gone too far”.

The merger with Metrovacesa will turn Merlin into the largest real estate company in Spain, with assets worth more than €9,000 million. The Socimi generated profits of €211 million during the first half of the year, up by 77% compared with the same period in 2015.

Original story: Expansión (by Eric Galián)

Translation: Carmel Drake

Political Uncertainty Deters Real Estate Investment

31 May 2016 – Expansión

The political uncertainty in Spain is hanging over the real estate sector, which, despite continuing to be active, is not shining with the same splendour that it did in 2015. Specifically, real estate investment during the first quarter of the year exceeded €2,100 million, which represents a 25% decrease with respect to 2015, according to data from CBRE.

The segment most affected by this slowdown was offices, where investment declined by 70% during the first three months of the year, to €180 million. Meanwhile, investment in retail amounted to around €770 million, almost 45% less. By contrast, investment in the logistics sector amounted to €200 million, compared with €80 million in the same period a year earlier. In other sectors – residential and hotels – investment amounted to more than €1,000 million, compared with €885 million during Q1 2015.

Pedro Lacambra, manager at Ibercaja Gestión, explained that the Spanish real estate market is showing signs of a slowdown, which is accentuated in certain business segments, such as offices. The expert said that Socimis account for 40% of all investment in offices, and that they are having to raise new funds to grow and invest in assets. Moreover, he said that the office business requires greater demand for space from existing companies, as well as the appearance of new companies and multinationals arriving in Spain. For Lacambra, the current panorama of political uncertainty does not encourage any of these scenarios.

Meanwhile, Daniel Pingarrón, market strategist at IG, considers that the political uncertainty is weighing down more on the Socimis and real estate companies than on players in other sectors. “ The stock exchanges and financial markets are more globalised and depend a lot less on politics and local factors. By contrast, the real estate sector is more sensitive, as we have seen with Operación Chamartín and Operación Campamento”.

In this sense, the analyst thinks that some investors are waiting for the uncertainty surrounding the formation of the future Government to be resolved before entering Spain.

Taxation of the Socimis

The analyst at Selfbank, Victoria Torres, explains that the political uncertainty that currently exists in Spain is one of the factors that is significantly affecting the real estate sector, which is very sensitive to the legislation in force. “There is a fear that a change in Government could increase the tax charges for Socimis. For that reason, we are not seeing any massive sales, but rather defensive moves to reduce positions until after the General Election”, explains Torres.

Torres thinks that these companies are helping to boost a depressed sector thanks to the tax benefits that they enjoy, amongst other reasons. Socimis pay Corporation Tax at a special rate of 0%, receive a 95% rebate on Stamp Duty (AJD) and Property Transfer Tax (ITP) on capital gains, and do not retain the dividends distributed to their shareholders, which include both individuals and corporations.

For Torres, the new concerns over the sector come at a key moment for the firms, especially Hispania, which is preparing a €231 million capital increase. (…).

Gonzalo Sánchez, analyst at Gesconsult, shares the same view. For him a more or less similar Government would benefit these companies. “Behind the Socimis are overseas investors, who want to have their money where they can see it and to avoid the chance of any nasty surprises”, he added. (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Regional Gov’ts Demand Rental Tax Payments From Tenants

3 March 2016 – El País

Tenants in the Community of Madrid with a residential rental contract signed within the last four years are now going to have to pay ITP (Property Transfer Tax or ‘Impuesto de Transmisiones Patrimoniales’). In the case of a rental charge of €600 per month, the tenant now has to pay almost €29 per year of the contract. Currently, it is typically for rental contracts to last three years, which means a cost of €86.40, to be made in a single payment. It does not matter whether this clause is included in the contract signed between the owner and the tenant or not.

Since the start of 2015, as part of its plan to combat fraud, the Ministry of Finance in the region of Madrid has been making a mass claim for the payment of this tax to the surprise and amazement of tenants, who have never heard of such a charge before. However, Madrid is not the only region. Cataluña, Asturias, Andalucía and Galicia have also included the ITP claim in their tax control plans.

The weak regional coffers are unable to forgive the payment of this tax any longer, the corresponding legislation has actually been in force for more than two decades. Until now, the Madrilenian Government, during the mandate of Esperanza Aguirre and then Ignacio González, generated revenues of €600,000 per year from this source. Now, Cristina Cifuentes’s Government hopes to raise a lot more, although it does not provide any figures. Cataluña, which is immersed in the same process, raised almost €6.4 million in 2015, compared with €482,000 previously. (…)

In force since 1993

Unbeknownst to the vast majority of Madrilenians, the ITP on rental payments in nothing new; in fact it has been in place since 1993, when the state law governing Tax on Property Transfers and Stamp Duty ruled that it considered a rental contract to be an onerous acquisition, much like a purchase. And the tax has even been envisaged in the law since 1980 (…).

Until now, “the small quantities involved meant that the Administration was not interested in allocating resources to find pockets of fraud against this tax, but now inspection activity is much simpler, given that with a simple cross reference of data, it is easy to find the debtors”, says Pelayo de Salvador Morell, a lawyer at the law firm deSalvador Real Estate Lawyer. (…).

The tax charge or amount to pay is obtained by applying the rate set by the regional government in each case, to the taxable base. Cristina Cifuentes’s Government is applying the State’s standard rate of 0.4%. Other regional governments, such as Cataluña, have increased the rate to 0.5%, which means that instead of the €86 mentioned above, tenants in Cataluña will have to pay €108 for three year rental agreements.

The payment of the tax must be made within 30 days of the contract being signed, through various means, such as using the stamp-impressed paper stocked in tobacconist shops…submitting the self-settlement 600 form to the General Tax Authorities…or telematically through the online office. Despite the mandatory nature of this legislation, the Community of Madrid has chosen to not penalise for non-compliance…due to the high cost involved. It is claiming only the amount of the tax that should have been paid at the time, plus late payment interest. (…).

Original story: El País (by Sandra López Letón)

Translation: Carmel Drake