Auric Partners - Invest in Spain

INVEST IN SPAINREAL ESTATE

INDEXIntroduction

Spain • Introducing Spain• Demographic and Macroeconomic outlook

Insight to the Real Estate Market

• Europe Europe’s future outlook• Spain Spanish Real Estate Market Prime residential cities in Spain Spanish residential market

Golden Visa

• Specifications (Benefits)• Requirements• Investment options• Additional information Duration and renewals Track record Asset management

Taxes and costs by Roca Junyent

Investment opportunities

Auric Partners

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INTRODUCTION

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IntroductionThe following document is designed to introduce the recently aproved Spanish residence visa and authorization for investors.

Therefor, this document is divided into 5 parts:

1. A general overview of Spain, its demographic and macroeconomic data.

2. A brief introduction to the European and Spanish Real Estate Market, with special focus on the residential segment.

3. A comprehensive explanation of the Visa itself, including benefits specifications, requirements, procedures, etc.

4. Taxes and costs to incur when investing in Real Estate. In Spain, information provided by our legal partners Roca Junyent.

5. Concrete investment opportunities in order to obtain the Visa.

For any additional information or questions, Auric Partners and Roca Junyent remains at your complete disposition.

04 Introduction

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The Spanish Golden Visa

…Spain, a prime investment destination…

The Spanish real estate market, is recovering from the world economic crisis (since 2007) that led to a huge stock of competitive Real Estate assets.

The available residential stock located all around the Spanish peninsula, derives from different sources: • New-build assets that did not have demand so far. • Non performing mortgages that were granted securing assets that now belong to the banks.

With the objective of attracting foreign investment to Spain and creating demand for this residential stock, the Spanish Government has created in September 2013 the:

“Spanish residence visa and authorization for investors”, or from now on Golden Visa.

05 Introduction

Introduction

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SPAINPa

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Introducing SpainDemographic data

• Spain is located in Southern Europe in the Iberian Peninsula, bordering with France and Portugal.

• The rest of the country is surrounded by 7,876 km of coast full of wonderful beaches and lovely landscapes, that attracted 60.7 million tourists during 2013.

• The country comprises 50.5 million ha.

• It is administratively divided in 50 provinces.

• Most of the population is concentrated in Madrid (14%) and Barcelona (12%).

• Spanish Real Estate prime locations are the two biggest cities, Madrid and Barcelona, which represent the main economic, business and political centers, and Costa del Sol (Southern Spain’s coast) which is a high-luxury tourism location.

Jan. 2013 Population by provinces (in millions)

Total National 46.8

Madrid 6.4

Barcelona 5.5

Malaga 1.6

07 Spain

“The Golden Triangle”

Lisbon

Costa del Sol

Madrid

Barcelona

Source: INE (January 2013)

Source: Company

Introducing SpainThe Spanish Market

• Spain is the 5th European economy with a 1,022 billion € GDP in 2013.

• During 2014, Spain is presenting a positive trend and starting to show signs of economic recovery: positive growth in GDP and consumption and unemployment is starting to decrease.

• Concerning the Real Estate market, prices are now at historical low levels but starting to recover, presenting an optimal opportunity for investments.

• Considerable Return on Investments (ROI) can now be achieved in the next 5 to 10 years.

Spain’s Real Estate market offers benefits, such as:

• Direct flights to China from Madrid and Barcelona (Air China)

• High market and institutional security

• Three continent gateway. Excellent business relations and logistics with Europe, South America and North Africa.

• Great logistics’ infrastructures: airports, ports, high-speed railway, etc..

• Unique climate, gastronomy, leisure and recreational facilities, quality of life and safety

Spain offers an optimal opportunity for investors.

08 Spain

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10 reasons to invest in SpainThe Spanish Market

1. It is an opportunistic momentSpanish economy has been hardly punished by the 2008 World’s Economic crisis, specially in the Real Estate and Construction sectors. Capital values have fallen down more rapidly than rental values resulting in an increase of yields. 2. Political reforms have strengthen the Spanish economyCurrent reforms, including cutting expenditures, privatizing industries and labor market reforms have turned Spain into a more competitive country. 3. Spanish economic powerSpain is the 5th largest economy in the European Union and the 14th worldwide. In 2013, it was ranked in 9th place among the countries with most international investments inflows and 1st in Europe with 39 billion dollars.

4. Spain is a three continents gatewayIts strategic location in Southern Europe and historical reasons permit Spain to be an important hub between Europe, North Africa and Latin America. 5. Excellent infrastructure networkSpanish’ airports, seaports, high-speed rail and motorways stand among the bests in the world, representing an optimal resource to promote international trade and tourism.

09 Spain

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Rank Country Foreign Investment inflows (million USD)

1 United States 188,000

2 China 124,000

3 Russia 79,000

4 Hong Kong 77,000

5 Brasil 64,000

6 Singapur 64,000

7 Canada 62,000

8 Australia 50,000

9 Spain 39,000

10 Mexico 38,000

Source: World Investment report 2014,United Nations Conference on Trade and Development,

10 reasons to invest in SpainThe Spanish Market

6. The third tourist destination in the worldSpain is a country that combines culture, history and leisure in its cities, coast and mountains. As a result, Spain ranked in 2013 as the 3rd most visited country according to World Tourism Organization, with 60.7 million tourists. 7. Global business leadershipSpanish companies are global leaders in industries such as construction and infrastructure (Sacyr, Ferrovial, ACS, FCC, OHL), commercial banking (Santander, BBVA), renewable energies (Gamesa, Acciona, Iberdrola, Endesa), pharma (Grifols), IT and telecommunications (Telefonica, Indra, Amadeus), and textile (Inditex). 8. One of the best most qualified working population in the worldMost of the workforce have completed higher education. Additionally, 3 Spanish business schools are ranked in the top 20 Financial Times global ranking (IE, IESE, ESADE).

9. Innovative developmentDuring the last years, entrepreneurship projects have increased, especially among young people, with special focus on IT, renewable energies and social impact projects and with international vocation. 10. High legal and market securitySpanish law framework is more liberalized and more flexible to foreign investors than other European countries, and offers mature investment markets with high security institutions.

10 Spain

-4

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-2

-1

0

1

2

3

4

2007 2009 2011 2013 2015 2017 2019

Spain. Macroeconomic data (I)

The Spanish market is starting to show a positive trend, after reaching bottom magnitudes.

• After 5 years of decrease of the Spanish GDP, the last government forecast predicted a growth of 1% for 2014 and of 1.5% for 2015

• This GDP growth is due very relevantly to International commerce balance (+2.1% between 2013 average and 1Q 2014) but also to an upturn in private consumption (+1.2% during the same period).

• Unemployment in Spain has started to reduce after its big increase during the crisis. Today it is still ranking second in Europe with the biggest unemployment rate for the next years.

• Forecast predicts unemployment to be at 25,2% by the end of 2014.

11 Spain

Source: Oxford Economics, INE, Datosmacro Source: INE

Source: INE

GDP evolution in Spain (%) Unemployment (%)

0

8

15

23

30

2007-2010 2011 2012 2013 2014

Forecast 2014

GDP (var. %) 1,00%

GDP per capita 22,400 €

Consumption (var. %) 0,20%

Unemployment 25,20%

Consumer Prices (var. %) 1,50%

FORECAST

FORECAST

Introducing Spain

3,5%

-3,7%

0,1%

-1,2%

1,0%1,7%

2,4%

14,4%

21,5%

26% 26%

25,2%

-3

-2

-2

-1

0

1

2007-2010 2011 2012 2013 2014

Spain. Macroeconomic data (II)

• After a big decrease in consumer prices between 2012 and 2013, consumer prices growth (1.5%) are now at similar levels as United Kingdom (1.8%) and Germany (1.3%).

• Consumption growth has turned to positive (+0.2%) after 5 years of decreases, which represents a good indication of macroeconomic recovery.

12 Spain

Source: Oxford Economics, INE, Datosmacro Source: INE

0

1

2

2

3

2007-2010 2011 2012 2013 2014

FORECAST

FORECAST

Introducing Spain

The Spanish economy is recovering, stabilizing and offering new opportunities.

Consumption (%)Consumer prices (%)

2,4%

2,4%

2,9%

0,3%

1,5%

-0,2%

-1,2%

-2,8% -2,6%

0,2%

Source: INE

Forecast 2014

GDP (var. %) 1,00%

GDP per capita 22,400 €

Consumption (var. %) 0,20%

Unemployment 25,20%

Consumer Prices (var. %) 1,50%

Spanish transportation infrastructuresThe Spanish Market

Airports• Spain has 46 airports, of which 35 operate international flights.• In 2013, more than 187 million passengers flew through Spanish airports, being the most important Madrid-Barajas Adolfo Suarez Airport with almost 40 million passengers, followed by Barcelona-El Prat with more 35 million passengers. • Madrid-Barajas Adolfo Suarez Airport is the 5th European airport in passengers’ traffic, while Barcelona-El Prat is the 8th. • Madrid and Barcelona have direct flights with China through AirChina, and a new route between China and Malaga (Costa del Sol) is expected to be opened in the near future.

Motorways• Spanish highway system is composed by 16,335 km of high speed road tracks and growing, representing around a 10% of all the roads infrastructures. • It is the 5th longest track in the world after China, United States, Russia and Canada.• Seep limit in highways is 120 km/h, however it is expected to be risen up to 130 km/h in 2014.

13 Spain

Source: Investing in Spain 2013. BNP Paribas

Spanish transportation infrastructuresThe Spanish Market

Ports• Since Spain is located in a Peninsula with 7,876 km of coastline and strategic location, it is a natural access to trade in Northern Europe and the Mediterranean Sea.• The main ports in Spain are Valencia, Algeciras, Barcelona, Las Palmas and Bilbao which are ranked in the top 125 worldwide.• Valencia’s port is the most important in the Mediterranean Sea, the 5th in Europe and the 30th worldwide.

High-speed rail• Spain is a pioneer country in high-speed rail systems, being the second country in the world with the longest track longitude, only behind China.• With its 3,000 km of track, the high-speed rail system connects 30 cities, attending more than a 55% of the Spanish population.• Spanish companies and institutions are a referent in high-speed train transportation, developing projects in Saudi Arabia, Qatar, Brazil and United States among others.

14 Spain

Source: Investing in Spain 2013. BNP Paribas

INSIGHT TO THE REAL ESTATE MARKET

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• European Real Estate markets are showing increasing signs of recovery as Europe’s economy stabilizes. • Non-EU investors are expected to boost transaction volumes through the international investment easing-programs all around Europe. • Countries that have suffered very hardly the financial crisis impacts, including Spain, Portugal and the Netherlands are now among the most optimistic about their Real Estate markets.• In 2014, investment activity across Europe increased 28% to €175billion.

In more than half of European countries, the residential Real Estate is the primary investment focus.

• Residencial: In general, prime residential prices previsions are weaker, predicting some falls in North and Eastern Europe. However, Spain shows a positive feeling as they have been the countries most affected by the crisis and are now starting to recover.

• Offices: Prices of prime office spaces, apart of Italy, Turkey, Sweden and UK tend to remain stable or increase.

• Retail: The feeling for retail property appears to be same as for offices.

16 Real Estate Market: Europe

Spain

UK

FranceSwitzerland Austria

Italy

Belgium

Netherlands

RussiaSweden

Germany Poland

UkraineLuxembourg

OfficeRetailResidential

Europe

Spain6 b€

France16 b€

UK47 b€

Ireland3 b€

Norway2 b€

Sweden4 b€

Russia4 b€

Denmark2 b€

Netherlands6 b€

Germany30 b€

Switzerland2 b€

Austria2 b€

Italy3 b€

Poland2 b€

Czech Republic1 b€

Total: €175billion

Real Estate Investment in Europe

Purchase price development forecast

Source: EY European real estate assets investment trend indicator 2015


• European Real Estate markets are being attractive in 2015.

• Most European countries expect an increase in Real Estate transaction volumes during 2014, specially in prime assets and prime locations. In Spain during 1Q 2014 it has already started to grow.

• The Real Estate market is currently starred by International Investment Funds that buy Real Estate portfolios from banks.

• Investment activity has also grown due to new legislation for REITs (Real Estate investment vehicles in public markets, SOCIMIs in Spain), that provide significant tax advantages.

• Spain is showing the highest residential yields in the past 10 years (3.8%-4.92%), still higher than other European capitals: Paris (2.24%- 4.01%) and London (2.72%-3.65%).

17 Real Estate Market: Europe

Europe’s future outlook

Europe’s real estate market, alongside its general economy, has already started its recovery and is expected to continue its positive growth in the next years.


• In spite of the decrease in transaction volumes during the last years of the economic crisis (2007-2013), the Spanish Real Estate market is predicted to improve due to: - Macroeconomic positive growth rates - Slightly higher access to financing for local buyers in the mid-term.

• This is leading to a stronger activity in the prime and new developed Spanish residential market, with an increase in the demand of luxury housing assets.

• International investors prevail since they have a better access to international mortgages and loan-to-value terms, due to the very high discounts (up to 40% from pre-crisis peak prices).

• London’s price-boom and the French wealth tax and market volatility, have benefited the Spanish Real Estate investments for foreigners that detect the potential of this market.

• Main investors in Spain are mainly Latin-American, Russian and Chinese that have identified the Spanish Real Estate market as a good offshore investment opportunity.

The vast majority of European Real Estate professionals consider Spain as a good investment opportunity

18 Real Estate Market: Spain

Introduction to Spanish Real Estate

Strongly agreeAgree slightly

Strongly disagreeNeither agree nor disagree

Disagree slightly

10%

1%19%

9%

61%

Source: Emerging Trends in Real Estate 2015, PwC. Over 500 European RE and finance professionals (Investment

funds, RE consultants, REITs, Banks, etc.) surveyed.

Are there now good buying opportunities in Spain?


• Volume has started to increase, reaching 2,500 M € in 2013, 12% more than the previous year, mostly due to increase in retail that reached around 50% of the total in 2013.• Spanish transaction volumes in all kinds of assets have also been above European average.

• Prime assets are the most demanded transactions since they are in short supply and their yields are above European average (Spanish averaged yields 11.75% above European average). - Offices: 6% - Shopping centers: 6.75% - Retail parks: 7.5% - High street: 4.75% - Logistics: 8.5%

• Economic recovery forecasts have led to an increased international investor confidence. • The international investors share has doubled from 40% in 2012 to nearly 80% in 2013. • 16% of the international investors in 2013 came from Latin America.


Spanish Real Estate

Source: SavillsSource: SavillsSource: Savills

Opportunistic funds, attracted by the high Real Estate discounts in Spain, have starred the market, specially in residential as it has been the most adjusted by price.

Investment volume Prime yields Investments origin


MadridMadrid is the political and economic capital of Spain. It is located in the center of the Iberian Peninsula and is the core of all transporting infrastructures.

In the last 5 years, international investors from US, Mexico, Colombia, Venezuela, Russia and China as well as investment funds have lead the market, resulting in a limited residential housing stock in the city center.

BarcelonaBarcelona is the second largest city in Spain. It is located in the Mediterranean coast and it not is the second business center of Spain, but also one of the main touristic and leisure destinations.

Barcelona’s Real Estate market improvement is mainly due to French, Russian, Swiss, Northern Europeans and Chinese investors, that are seizing the good opportunity moment.

Costa del Sol, MalagaThe prime holiday destination in Spain is located through 161km of coastline in the province and recieves the name of Costa del Sol. The main towns are Malaga city, Marbella, Mijas, Manilva, among others. The area offers great weather, wonderful landscape and a big leisure offer (clubs, marinas, golf, restaurants, shopping centers, etc.)

International investors from Northern Europe and Russia are very active in this location, registering over-average transactions during the last 7 years and benefiting from high discounts.


Prime residential cities in Spain


• Spain: Total volume has decreased 74% from 143 billion € in 2007 to 38 billion € in 2013. The national average transaction volume per province was 2.1 billion € in 2013.• Madrid: The decrease from 2007 to 2013 has been of 66% reaching a total transaction volume in 2013 of 6.5 billion €, highly above the national average and being the city with the highest volume.• Barcelona: Although Barcelona’s volume has decreased 75% from 2007 to 2013, in the last years the investment volumes are stabilizing, 4.5 billion € in 2013, ranking as the second city with highest volume.• Malaga-Costa del Sol: Volumes have experienced a similar evolution to the national average, with a 64% decrease for the same period, reaching 3 billion € in 2013.

• National: In 1Q 2014, historical low levels have been reached: 1,460 €/sqm, 30% less than historical peak prices in 2008. However, prices are starting to stabilize.• Madrid: Prices have also suffered from the crisis, standing at 2,011 €/sqm in 1Q 2014, although the average transaction price in Madrid is high above than the national average in 1Q 2014: 1,460 €/ sqm.• Barcelona: Prices for the same period have decreased 32% standing at 1,877 €/sqm in 1Q 2014.• Malaga-Costa del Sol: The peak price was achieved in 3Q 2007. Comparing to 1Q 2014 prices (1,466 €/sqm) there has been 19.7% of decrease. Prices are in line with the national average.

• Residential rental yields have been increasing throughout the period (+43.2% between 2008 and 2013), reaching in average 4.75%. Yields in 2014:

• Madrid: 4.2%• Barcelona: 4.1%• Malaga: 4.6%


Spanish Residential Market

Source: Banco de EspañaSource: Ministerio de FomentoSource: Ministerio de Fomento

Transaction volumes Prices Yields

30 b€

60 b€

90 b€

120 b€

150 b€144 b€

95 b€

75 b€ 81 b€

51 b€ 48 b€38 b€

0 b€

5 b€

10 b€

15 b€

20 b€

2007 2008 2009 2010 2011 2012 2013

8 b€

5 b€4 b€ 4 b€

3 b€ 3 b€ 3 b€

18 b€

9 b€8 b€

10 b€

6 b€ 6 b€4 b€

19 b€

13 b€12 b€

14 b€

8 b€7 b€

7 b€

0%

1%

3%

4%

5%

2007 2008 2009 2010 2011 2012 2013

4,59%4,18%

3,92%3,73%

3,40%3,30%3,35%

1.000 €/sqm

2.000 €/sqm

3.000 €/sqm

4.000 €/sqm

5.000 €/sqm

2007 2008 2009 2010 2011 2012 2013

2.782

2.4962.375 2.390

2.2592.178 2.185

4.769

4.361

4.097 4.046

3.548

3.217 3.183

4.262

4.0443.875

3.700

3.478

3.2093.107

2.086 2.0191.892 1.826

1.7021.531 1.467

GOLDEN VISA

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Golden Visa

The Golden Visa offers the following benefits:

• Residence permit for Spain of at least 1 year

• No minimum residence time. The only requirement is visiting Spain: - At least once to obtain the Visa - At least once to renew the residence

• Gateway to Europe: free circulation among Schengen zone. No additional Visa required.

• The option of bringing your family to Spain (husband or wife and under 18 years old offspring).

• No tax residence required.

• Speeded up administrative procedures: obtaining the Golden Visa in 10 days since the application.

• Opportunity to obtain: - Permanent residence (after 5 years of continuous residence in Spain) - Spanish nationality (after 10 years of continuous residence).

23 Golden Visa

Specifications

Spain

Portugal

France

GermanyBelgium

Netherlands

Denmark

Sweden

Norway

Iceland

Finland

Estonia

Latvia

Lithuania

Czech Republic

AustriaSwitzerland

Italy

Creta

Greece

Poland

Source: Company

Countries involved in the Schengen zone

Golden Visa

Applicants must:

• Hold a valid passport and be over 18 years old.

• Hold a public or private health insurance covered in Spain.

• Have proof of enough financial means whilst in Spain, for applicant itself and family members.

• Pay tax and rate payments of the residence permit.

• Invest in Spain according to the requirements to obtain the Golden Visa (details ahead).

Applicants must not:

• Be in Spain in an irregular situation.

• Have any criminal records neither in Spain nor in its previous residence countries for the last 5 years.

• Not to have been refused entry in any of the Schengen countries.

24 Golden Visa

Requeriments

Golden Visa

In order for the applicant to be eligible for the golden visa, one of the following investment options must be fulfilled:

1) Real Estate investment:• At least 500,000 € in Real Estate assets*.

2) Financial investment:• At least 2,000,000 € in Spanish bonds.• At least 1,000,000 € in Spanish company’s stocks and shares*.• At least 1,000,000 € deposit in a Spanish bank.

3) Entrepreneurship project:• Business project with a proven socio-economic impact, employment creation or scientific and technological innovation, which will be developed in Spain.

All of these transaction options must be accomplished unleveraged. The minimum amount for each category must be paid out at once, with no financing options.

* Investments can be divided into different assets, but must always reach the minimum amount in each category.

Auric Partners has its main focus on advising on Real Estate Investment options.

25 Golden Visa

Investment options (I)

Golden Visa

Required accreditation:

1) Real Estate investment:• Prove to have acquired the property through certification from the Land Register with information of domain and charges.

2) Financial investment:• Bonds: Certificate from the Bank of Spain or a financial institution.• Stocks and Shares: Certificate from the financial broker duly registered with the Spanish Securities Market Commission or Bank of Spain or a certificate from the Registry of Foreign Investments of the Ministry of Economy and Competitiveness.• Bank deposit: Certificate from the financial institution.

3) Entrepreneurship project:• Favorable report confirming that the business plan is of general interest issued the Economic an Commercial office of the project location.

26 Golden Visa

Investment options (II)

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Golden Visa

• When required conditions are fulfilled, investors are provided with a special temporary Visa for investors or Golden Visa that authorizes residence in Spain for a maximum of 1 year.

• After the first year, applicants can apply for an extended stay in Spain, for another 2 years, through a residence authorization for investors (Golden Visa renewal).

• This authorization can be renovated every 2 years as many times as the investment and requirements are still fulfilled.

• This extended residence authorization has the same characteristics as the initial Visa and grants the right to work in Spain.

*After 5 years of continuous residence in Spain through the residence authorization, long term residence might be requested. Spanish nationality could be given after 10 years of total continuous residence.These options are not related to the Golden Visa and are not regulated by the investors residence permit.

27 Golden Visa

Additional information: Duration and renewals

Golden Visa

1 Year 2 Years 2 Years

Can be repeated indefinitely

2 Years

Residence Authorization



Source:Company

Golden Visa

Track record:

• Spanish Golden Visas were endorsed in September 2013, following the steps of other European countries like Portugal, Malta, Latvia, Switzerland, Ireland, and Greece, among others.

• Up to date (Feb 2015), 530 applications have been accepted. 490 of them chose the Real Estate investment option. Only 14 applications were rejected because documentation was not submitted.

• First months of Spanish Golden Visa, and experience in other European countries, show that the main assets acquired through this modality are: - Newly built / renovated city apartments - Holiday destination apartments - City center, central business districts and prime locations

• The main investment location of these transactions from non-EU investors are Madrid and Barcelona, which are the biggest cities in Spain and host most of the economic and business activities in the country. Costa del Sol (Southern Spain), which is a prime luxury holiday destination for both national and foreign tourists is also a popular investment option.

• These destinations (including Lisbon) represent the Real Estate Golden Triangle, where Auric Partners is specialized in.

28 Golden Visa

Additional information (II)

Financial Investment

Real Estate Investment

Entrepreneurship Project

Source: El País (Spanish newspaper)

Visas granted by investment

Golden Visa

Type of asset Locations Characteristics Objectives Price range & Yields Auric’s Strategy and liquidity at exit *

City Apartment•Madrid• Barcelona• Costa del Sol, Malaga

• Newly built /renovated• Potential to long/short term rental• Good urban environment

• Rent to third party• Return of investment• Asset apreciation

150,000 € - 1,000,000€ (in 1 or more apartments)

3%-5%

• Conservative return on investment with asset appreciation• High liquidity

Resort/Condo Apartment or Villa

• Costa del Sol, Malaga• Newly built• Guaranteed return (touristic)• Good resort facilities

• Leased to well known operators• Guaranteed Return on Investment• Asset Appreciation

• 50,000 € - 200,000 €

3%-5%

• Return on investment with asset appreciation • Medium-high liquidity

Luxury Villa• Madrid• Barcelona• Costa del Sol, Malaga

• Prime residential areas, private urbanizations• Sea views, best environment and facilities.

• Vacation home• Asset appreciation

• 700,000 € - 5,000,000 €

3%-5%

• Luxury ownership with assets appreciation• Medium liquidity

Prime Asset• Madrid• Barcelona• Costa del Sol, Malaga

• Prime Asset, Prime tenant.• Offices, Hotels, High street retail

• Return on Investment• Asset appreciation

• > 2 Milllion €

4%-6%

• Low risk return on investment with asset appreciation• Excellent liquidity

Development project

• Madrid• Barcelona• Costa del Sol, Malaga

• Possibility to develop > 10 apartments

• Medium-long term return on investment• Development profit

• > 2 Million €

Depends on type of development

• Investment with strong discounts on land and high potential profit• Final units: medium-high liquidity

29 Golden Visa

Additional information: Asset management

For more liquidity and higher ROI, Auric Partners recomends to invest in Prime locations and Prime Assets.

TAXES AND COSTS

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In collaboration with

Spain taxation

31 Taxes and costs


Acquisition of Spanish property

The taxes that the investor needs to pay in the real estate purchasing procedure will depend on whether the real estate is a new home straight from the developer or a second-hand home. New Home. Buyer must pay value added tax (VAT) (10%) to the seller, and if the property is in the Canary Islands, the equivalent indirect tax (IGIC). This tax is paid to the seller, together with the price of the home. Buyer has to pay also the stamp duty tax for to the autonomous community (region) where the property is located (the tax ratio differs in each autonomous community, the usual being between 0.50% and 1.5% over the purchase price).

Second-Hand Home: Buyer must pay the transfer tax for the autonomous community (region) where the property is located. Transfer tax is a percentage of the price (the tax ratio differs in each autonomous community, the usual being between 6.0% and 10.0%, over the purchase price). Mortgage is also subject to stamp taxes for the autonomous community (region) where the property is located and range from 1.0% to 1.50%.

32 Taxes and costs


Spain taxationAcquisition of Spanish property

INDIRECT TAXATION ON REAL ESTATE ACQUISITION

Acquisition by business

people and professionals

New and renovated real estate

assets

VAT

Taxable base The consideration for the acquisition. The consideration for the acquisition.





assets

VATTax rate

10% Purchase of property destined for use as housing. No VAT refund even if destined for renting.





assets

VATTax rate

21%

Purchase of business premises.





assets

VATTax rate

21% VAT on the acquisition can be refunded if the business premises is destined for business or professional activities

in Spain and is eligible for a VAT deduction.





assetsAJD

(Stamp Duty)

Taxable base Value of the deed of sale. Value of the deed of sale.





assetsAJD

(Stamp Duty) Tax rate

0.5% The state tax rate (in the absence of the Autonomous Community rate).





assetsAJD

(Stamp Duty) Tax rate

1.5% Tax rate Catalonia.




Second-hand real

estate

VAT

The acquisition of second-hand real estate by a businessperson or professional is subject to but exempt from paying VAT. The exemption may be waived if it is a business premises and destined for business or

professional activities (including rental) and as long as particular additional requisites are met.


professional activities (including rental) and as long as particular additional requisites are met.


professional activities (including rental) and as long as particular additional requisites are met.INDIRECT TAXATION ON REAL ESTATE ACQUISITION



Second-hand real

estate

VAT Taxable baseTaxable base The consideration for the acquisition.INDIRECT

TAXATION ON REAL ESTATE ACQUISITION



Second-hand real

estate

VAT

Tax rateTax rate 21%




Second-hand real

estate

VAT

The deed of sale in this case is subject to AJD.The deed of sale in this case is subject to AJD.The deed of sale in this case is subject to AJD.




Second-hand real

estateITP

(Property Transfer

Tax)

If the VAT exemption is not waived or when the requisites are not met to waiver, the transaction is subject to transfer tax.






Second-hand real

estateITP

(Property Transfer

Tax)

Taxable base 6% The state tax rate (in the absence of the Autonomous Community rate).




Second-hand real

estateITP

(Property Transfer

Tax) Tax rate 10% Tax rate Catalonia.




Second-hand real

estateITP

(Property Transfer

Tax)ITP (Property Transfer Tax) is not a recoverable tax.ITP (Property Transfer Tax) is not a recoverable tax.ITP (Property Transfer Tax) is not a recoverable tax.




Second-hand real

estateITP

(Property Transfer

Tax)

The deed of sale is not subject to AJDThe deed of sale is not subject to AJDThe deed of sale is not subject to AJD


Acquisition by individuals

Second-hand real

estate

ITP (Property Transfer

Tax)

Taxable base Real asset valueReal asset value



Second-hand real

estate


Tax)

Tax rate6% The state tax rate (in the absence of the Autonomous

Community rate).



Second-hand real

estate


Tax)

Tax rate10% Tax rate Catalonia.



Second-hand real

estate


Tax) ITP (Property Transfer Tax) is not a recoverable tax.ITP (Property Transfer Tax) is not a recoverable tax.ITP (Property Transfer Tax) is not a recoverable tax.



Second-hand real

estate


Tax)The deed of sale is not subject to taxation by the AJD.The deed of sale is not subject to taxation by the AJD.The deed of sale is not subject to taxation by the AJD.

33 Taxes and costs

Spain taxationAfter acquisition: Conditions for Tax Residency

Individuals: Conditions for Tax Residency

Spanish tax law deems individuals to be tax resident on Spain territory under any of the following circumstances:

¥ If they are in Spanish territory for more than 183 days of the calendar year. Absences are not counted unless tax resident in another country can be demonstrated.

¥ If the centre of economic interest resides in Spain directly or indirectly.

Companies: Conditions for Tax Residency

Spanish tax law deems companies to be tax resident on Spanish territory under any of the following circumstances:

¥ If it has been incorporated under Spanish law.

¥ If its corporate address is on Spanish territory.

¥ If it has its effective management headquearters on Spanish territory.

¥ Tax residents pay tax in Spain on their total earnings regardless of the location in which the earnings were made.

¥ Non-resident taxpayers in Spain only pay on the earning made on Spanish territory.


34 Taxes and costs

Spain taxationAfter acquisition: Non-resident Tax

DIRECT TAXATION ON INDIVIDUALS

Possession of assets and earnings from such assets may be subject to direct taxation on Spanish territory. The taxation is determined by whether the investor is a legal tax resident or not, the investment vehicle used and the use for which the asset was acquired.








Investor status

Investment vehicle

Type of return

Applicable tax Tax treatmentTax treatmentTax treatment

DIRECT TAXATION ON INDIVIDUALS Non-

resident on Spanish territory

Investment made by an individual

Real estate income

Personal Income Tax

for non-residents (IRNR)

Personal use Taxable base 2% of the cadastral value of the property (1.1 % revised values).




Real estate income

Personal Income Tax


Personal useType of tax 24.75%




Real estate income

Personal Income Tax


Lease without permanent

establishment

Taxable base Full amount received without deduction of expenses (except EU residents).




Real estate income

Personal Income Tax


Lease without permanent

establishment Type of tax 24.75%




Real estate income

Personal Income Tax


Lease with permanent

establishment (EP)

Taxable base Income from EP with deduction of particular costs Certain deductions are applied.




Real estate income

Personal Income Tax


Lease with permanent

establishment (EP) Type of tax 30%




Real estate income

Personal Income Tax


Earnings from property transfer

Taxable base Capital gains (transfer value less acquisition value).




Real estate income

Personal Income Tax


Earnings from property transfer

Type of tax 21 % (taxation according to Agreement to avoid Double Taxation).DIRECT TAXATION ON INDIVIDUALS Non-



Ownership of real estate assets

Capital gains tax

(IP)

Ownership of real estate assets in Spanish territory subject to capital gains tax.Ownership of real estate assets in Spanish territory subject to capital gains tax.Ownership of real estate assets in Spanish territory subject to capital gains tax.





Capital gains tax

(IP)

The taxable base is the value of the real estate according to the law on capital gains. The tax rate is progressive and can be adjusted by the Autonomous Communities (Table 1).







Capital gains tax

(IP)

Minimum exemption: 700,000 euros (variable depending on the Autonomous Community) Catalonia: 500,000 euros.Minimum exemption: 700,000 euros (variable depending on the Autonomous Community) Catalonia: 500,000 euros.Minimum exemption: 700,000 euros (variable depending on the Autonomous Community) Catalonia: 500,000 euros.





Real estate tax (IBI) Ownership of the property is subject to local real estate tax (IBI).Ownership of the property is subject to local real estate tax (IBI).Ownership of the property is subject to local real estate tax (IBI).



Investment through Spanish

companies

Dividend Personal Income Tax


Dividends and profit shares

Taxable base Full amount of dividends or profit shares.




companies

Dividend Personal Income Tax



Type of tax 21% (withheld according to Agreement to avoid Double Taxation).




companies Capital gains

Personal Income Tax

for non-residents (IRNR) Gains from

transmission of shares





companies Capital gains

Personal Income Tax

for non-residents (IRNR) Gains from

transmission of shares Type of tax 21% (Taxation according to the Agreement to avoid Double Taxation).


35 Taxes and costs



Investor status

Investment vehicle

Type of return

Applicable tax Tax treatmentTax treatmentTax treatment

DIRECT TAXATION ON INDIVIDUALS Resident

on Spanish territory


Real estate income

Personal Income Tax

(IRPF)

Personal useTaxable base 2% of the cadastral value of the property (1.1 % revised values).




Real estate income

Personal Income Tax

(IRPF)

Personal useType of tax Progressive rate according to the Autonomous Community




Real estate income

Personal Income Tax

(IRPF)

Property destined to rent

Taxable base Full amount received less particular expenses.




Real estate income

Personal Income Tax

(IRPF)


Type of tax Progressive rate according to the Autonomous Community




Real estate income

Personal Income Tax

(IRPF)


Reductions 60% if the property is used for housing (100% if the renter is under 30 with income above the IPREM).




Real estate income

Personal Income Tax

(IRPF) Short-term earnings (generation < 1 year)





Real estate income

Personal Income Tax

(IRPF) Short-term earnings (generation < 1 year) Type of tax Progressive rate according to the Autonomous Community




Real estate income

Personal Income Tax

(IRPF)

Long-term earnings (generation < 1 year)





Real estate income

Personal Income Tax

(IRPF)

Long-term earnings (generation < 1 year) Type of tax Tax rate of 21% to 27% (Table 3).





Capital gains tax

(IP)

The taxable base is the value of the real estate according to the law on capital gains. The tax rate is progressive and can be adjusted by the Autonomous Communities.







Capital gains tax

(IP)Minimum exemption: 700,000 euros (variable depending on the Autonomous Community)

Catalonia: 500,000 euros.Minimum exemption: 700,000 euros (variable depending on the Autonomous Community)

Catalonia: 500,000 euros.Minimum exemption: 700,000 euros (variable depending on the Autonomous Community)

Catalonia: 500,000 euros.





Capital gains tax

(IP)The usual residence is exempt up to a limit of 300.000 euros.The usual residence is exempt up to a limit of 300.000 euros.The usual residence is exempt up to a limit of 300.000 euros.





Real estate tax (IBI) Ownership of the property is subject to local real estate tax (IBI).Ownership of the property is subject to local real estate tax (IBI).Ownership of the property is subject to local real estate tax (IBI).



Investment through Spanish company

DividendPersonal

Income Tax (IRPF)


Taxable base Full amount of dividends or profit shares.




DividendPersonal

Income Tax (IRPF)

Dividends and profit shares Type of tax Tax rate of 21% to 27%.




DividendPersonal

Income Tax (IRPF)


Exemption The first 1,500 euros are exempt.




DividendPersonal

Income Tax (IRPF)

Short-term earnings (generation < 1 year)





DividendPersonal

Income Tax (IRPF)

Short-term earnings (generation < 1 year) Type of tax Progressive rate according to the Autonomous Community.




Capital gains

Personal Income Tax

(IRPF)

Long-term earnings (generation < 1 year)





Capital gains

Personal Income Tax

(IRPF)

Long-term earnings (generation < 1 year) Type of tax Tax rate of 21% to 27%.

Spain taxationAfter acquisition: Resident Tax

The information contained in this presentation is of a general nature and does not constitute legal advice. This presentation was prepared on 20 October 2014 and neither Auric Partners nor ROCA JUNYENT

commit to any update or revision of its contents.

Barcelona

Aribau, 19808036 Barcelona

Tel.: +34 93 241 65 00Fax: +34 93 414 50 30

[email protected]

Jaime Espejo ValdelomarPartner

China Desk

(+34) 91 700 39 [email protected]

Madrid

José Abascal, 56, 7th floor 28003 Madrid

Tel.: +34 91 700 39 32Fax: +34 91 781 97 64

[email protected]

Cristina Chou Zhou LinLawyer

China Desk

(+34) 91 781 97 [email protected]

Shanghai

Suite 2209 Westgate Mall1038 Nanjing Xi Rd.

Shanghai 200041 China

Tel.: +86 21 62 18 06 66Fax: +86 21 631 12 291

[email protected]

Locations

Contacts

GOLDEN VISAINVESTMENT OPPORTUNITIES

Hou

se in

Mal

lorc

a

Investment opportunities40 Golden Visa

LocationMadrid

Prime location besides Retiro park.

DescriptionStudios and 1 to 4 bedroom apartments in the center of Madrid.

Swimming pools, gym, paddle courts, social areas and children’s playground.

PricesFrom 212,537 € to 634,887 €

LocationMadrid

Close to Atocha train station and Retiro park.

Description2 to 4 bedroom apartments in the center of Madrid.

Swimming pool, social spaces and children’s playground.

PricesFrom 284,227 € to 383,433 €

LocationMadrid

Close to Atocha train station.

Description1 to 4 bedroom apartments in the center of Madrid.

Swimming pools, gym, paddle courts, social areas and children’s playground.

PricesFrom 232,654 € to 571,520 €

LocationMarbella, Costa del Sol

Located at the foot of the mountains with excellent sea sights. 10 min. away by car from Marbella and Puerto Banus. Next to golf club

Description2 to 4 bedroom luxury townhouses with possibility of private garden and private swimming pool.

Common swimming pools, gym, spa, sauna and Turkish baths.

PricesFrom 650,000 € to 2,500,000 €

LocationFuengirola, Costa del Sol

Located besides the beach and marina.

DescriptionHotel rooms with beachfront and up to 5% guaranteed yield.

Hotel managed by Pierre & Vacances, European tourism leader company.

PricesFrom 44,150 € to 86,727 €

AURIC PARTNERS

Auric Partners• Auric Partners is an independent business consultancy firm, specialised in real estate advisory services nationally and internationally.

• We provide comprehensive solutions through services with high added value, our understanding of real estate and capital markets, and our strategic alliances with sector leaders.

• Auric Partners consists of a combined team of professionals from the real estate and financial transaction consultancy sectors.

• Our team boasts a comprehensive understanding of capital markets through our direct contact with major Institutional Investors, Family Offices, Financial Institutions and other companies within the real estate sector, both in Spain and abroad.

• We apply our extensive experience to our analysis, advisory and representation services in real estate investment and divestment processes on the basis of our knowledge of the real estate sector’s evolution and trends.

• Through our strategic collaborators in the accounting, financial, fiscal and legal spheres, as well as our architecture and projects team, we provide comprehensive solutions.

43 Auric Partners

Auric Partners

Golden Visa:

• TaxandlegalassistanceintheprocessofapplicationfortheGoldenVisa andResidenceAuthorization

Real Estate:

• Selectionandanalysisofinvestmentalternatives

• Assetmanagement

• Maximizethevalueofinvestment/ROI(i.e.:commercializingassetstorent)

• Architectureandinteriordesignprojects

• Desinvestmenttransactionsmanagement

44 Auric Partners

Howcanwehelp?

AuricPartnersremainsatyourfulldispositionforanyquestionsoradditionalinformationregardingthissubject.

Padilla 1, 2º dcha. 28006 Madrid. www.auric-partners.com | [email protected]

Team

Walter Fábrega Managing Partner

(+34) 616 469 [email protected]

Jen Xiao 萧靖臻Head of China DeskChina Desk


Martina SenaEditorCorporate Communication


Jessie Chen 陈碧霞Investment ConsultantChina Desk Representative


Ignacio GómezInvestment ConsultantCapital Markets & Strategic Consultancy


Puy Luengo ArchitectRE Management Services (+34) 620 808 [email protected]

Jorge Lozano Architect, Dept. ManagerArchitecture & Design (+34) 607 777 [email protected]

David Chamorro National Director


Andrew CawleyInvestment Consultant Capital Markets & Strategic Consultancy


Carlos SotoGraphic DesignerMarketing


Luis Perelló Investment Consultant Capital Markets & Strategic Consultancy


Sabrina ZhangInvestment ConsultantChina Desk Representative


Padilla1,2ºdcha.28006Madrid.www.auric-partners.com|[email protected]

ThispublicationisthesolepropertyofAuricPartnersandmustnotbecopied,reproducedortransmittedinanyformorbyanymeans,eitherinwholeorinpart,withoutthepriorwrittenconsentofAuricPartners.Theinformationcontainedinthispublicationhasbeenobtainedfromsourcesgenerally

regardedtobereliable.However,norepresentationismade,orwarrantygiven,inrespectoftheaccuracyofthisinformation.Wewouldliketobeinformedofanyinaccuraciessothatwemaycorrectthem.AuricPartnersdoesnotacceptanyliabilityinnegligenceorotherwiseforanylossordamage

sufferedbyanypartyresultingfromrelianceonthispublication.©October2014.

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