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High Real Estate Tax Rates Hurting Investment In Healthcare Infrastructure

High Real Estate Tax Rates Hurting Investment In Healthcare Infrastructure

Spain ranked second most expensive market

Taxand T3 (Total Tax Take) research conducted by Taxand, the world's largest independent global network of specialist tax advisors to multinational businesses, has shown that high taxes, on average 5.5% above those for normal commercial property globally, are hurting investment in healthcare real estate.

The average tax rate globally for healthcare properties stands at 30.42% (commercial property 24.95%) and means that investors could be discouraged, in many countries, from ploughing their money into healthcare property when other commercial properties, which are often cheaper and simpler to construct, could provide a better return.

The USA heads the table as the most expensive country in the world in which to invest in healthcare-related property, such as hospitals, care homes or medical offices, with 43.33% of income swallowed by tax.

At the other end of the spectrum, India presents investors with the best opportunities for return on healthcare property investments with only 5.03% of the total income claimed by the taxman. This amazingly low figure is well below Turkey, which has the second lowest tax-take at 13.49%, and will prompt investors to look again at the attractive nature of healthcare property investment in India.

The research, conducted in over 20 key global markets, also shows that Spain (40.58%), Argentina (40.47%), Russia (40.37%) and Malta (39.93%) are among the countries with the highest tax take, causing a considerable impact on the total income on healthcare property portfolios in these countries.

Keith O'Donnell of Taxand, said: "Our research shows that high real estate taxes are hurting investment in healthcare property in developed markets while in emerging markets such as India and Turkey, low tax-rates are being used to attract fresh investment. It is surprising that given the high demand and need for healthcare infrastructure wherever you live, tax levels in this sector can be higher than those applied to commercial property."

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Taxand T3 research methodology

To arrive at the figures, Taxand has taken into account VAT (or its local equivalent), corporate income tax, and property taxes. The property taxes were usually subject to country specific assumptions and modifications as they often differ on a municipality basis or sometimes just location basis.

Those were reviewed by the coordinating Taxand team to assure comparability. Administrative fees, notary fees, court fees were excluded as having a relatively low impact on the overall tax take.

To ensure comparability of the results, certain data has been fixed such as size of the building, investment costs, and 100 percent non-interest bearing equity financing. With all of that built into the model, each real estate team from Taxand adopted it to the local law to ensure comparability.

Taxand T3 is a global research tool. Initial findings have focused on reviewing major jurisdictions. Other interesting findings include the high tax-take in the US etc and the cost of selling your home. More findings will be released later this year to cover all Taxand territories. The research will be carried out on an annual basis to establish year on year trends.

Your Taxand contact for further queries is:
Abigail Tarren, Global Operations Director
T. +44 (0)207715 5243


Taxand's Take

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