SIIQ -- Real Estate Investment Trusts in Italy
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In July 2007 the Finance Act (Finanziara budget Law 296) took effect in Italy authorizing their version of Real Estate Investment Trusts (REIT) -- the Societa di Investimento Immobiliare Quotate or SIIQ.
They are under the supervision of the Bank of Italy and Consob, and governed by Civil and Tax law.
Italian SIIQs Must Distribute 85%
Italian REITs must generate at least 80% of their income from rental properties and distribute at least 85% of their income to shareholders.
So long as they abide by these guidelines, a SIIQ's income from property rentals is exempt from IRES (corporation taxation) and IRAP the regional taxes which are 3.9%.
A SIIQ must be either: a S.p.A. (Societa per Azioni) -- which a joint stock company in Italy for tax purposes or a corporation from outside Italy. All SIIQ shares must be traded on a regulated European exchange.
No shareholder may own more than 51% of the voting rights or right to receive profits. 35% of the shares must be owned by shareholders with no more than 1%.
Any nonrental income the Italian real estate investment trust receives (up to 15% is allowable), including capital gains from sale of property, is taxed at the ordinary corporate rate of 27.5%.
A SIIQ Does Pay Capital Gains Taxes
Ordinary real estate companies that wish to convert to SIIQ status must pay 20% tax on unrealized capital gains.
They must have a minimum of 40 million euros in capital, and "SIIQ" must be part of the company name. Distributions are made annually.
Capital gains are taxed the same as any other real estate company.
Shareholders are subject to having 20% withheld from their dividends.
Few Italian Real Estate Investment Trusts
The Italian real estate industry took a long time to react to the SIIQ law. Of course, it's true that their timing was not good. 2007 was the beginning of the worldwide real estate/financial crisis, so REIT IPOs and conversions have more difficult than they would have been prior to 2007.
IGD Immobiliare Grande Distribuzione SIIC SpA is the first and, so far, the only SIIQ listed in Italy. It did not convert to this status until April 2008.
A major property company, Beni Stabili, had been expected to convert to SIIQ status but has not yet done so. It just recently met all the requirements, so it may well convert in the near future.
- IGD Immobiliare Grande Distribuzione -- first SIIC in Italy, owns many retail centers.
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