FINANCIAL STATEMENTS 3Consolidated financial statements as of December 31, 2017 Note 7 Taxes Accounting policies The tax status of Sociétés d’Investissement Immobilier Cotées (SIIC) At the General Meeting of Shareholders held on September 26, 2003, Klépierre was authorized to adopt the SIIC tax status. General features of the SIIC tax status All SIICs are entitled to the corporate tax exemption status provided that their stock is listed on a regulated French market, that they are capitalized at €15 million or more and that their corporate purpose is either the purchase or construction of properties for rent or direct or indirect investment in entities with that corporate purpose. The option to adopt SIIC status is irrevocable. Subsidiaries subject to corporate income tax and owned at least 95% by the Group may also claim SIIC status. In return for tax exemption SIIC have to pay out 95% of rental income and 60% of the capital gains made on property disposals. In addition they must pay out 100% of any dividends received from subsidiaries. The new entities claiming SIIC status are immediately subject to a 19% exit tax on unrealized gains on properties and on shares in partnerships not subject to corporate income tax. The exit tax is payable over a four-year period, commencing at the point when the entity concerned adopts SIIC status. Discounting of exit tax liability The exit tax liability is discounted on the basis of its payment schedule. Following initial recognition in the balance sheet, the liability is discounted and an interest expense is recognized in the income statement on each balance sheet date. In this way, the liability is reduced to its net present value on that date. The discount rate is calculated on the basis of the interest rate curve, taking into account the deferment period and the Klépierre refinancing margin. Corporate income tax on companies not eligible for SIIC status Since adopting SIIC status in 2003, Klépierre SA has made a distinction between SIICs that are exempt from property leasing and capital gains taxes, and other companies that are subject to those taxes. Corporate income tax on non-SIIC French entities is calculated in accordance with French common law. Tax regime of Dutch companies (FBI) After various meetings held between Klépierre and the Dutch Ministry of Finance on Klépierre Group’s eligibility to the FBI regime, the latter considered that some activities carried out by the Group were not compliant with the FBI regime (tax regime providing for a CIT exemption applicable to Dutch subsidiaries). Due to business consideration of the activities concerned, Klépierre chose to waive the FBI regime application with retroactive effect from January 1, 2015. Tax regime of Spanish SOCIMI entities SOCIMIs are listed Spanish companies whose principal activity is the acquisition, promotion and rehabilitation of urban real estate assets for their leasing, either directly or through equity investments in other REITs (Real Estate Investments Trusts). Real estate income for SOCIMIs is taxed at a zero corporation tax (CIT) rate (instead of the general rate of 25 per cent), provided that the requirements of the SOCIMI regime are met. Furthermore, mandatory minimum distributions of profits must be carried out by SOCIMIs in accordance with the following criteria: > 100 per cent of the dividends received from participating entities; > 80 per cent of the profit resulting from leasing of real estate and ancillary activities; > 50 per cent of the profits resulting from the transfer of properties and shares linked to the Company activity provided that the remaining profits are reinvested in other real estate properties or participations within a maximum period of three years from the date of the transfer or, if not, 100 per cent of the profits must be distributed as dividends once such period has elapsed. 104 KLÉPIERRE 2017 REGISTRATION DOCUMENT