Media ›

Taxand Reveals Macro Level Tax Issues That are Moving Real Estate Markets in 2011

Taxand Reveals Macro Level Tax Issues That are Moving Real Estate Markets in 2011
9 Mar 2011

For MIPIM 2011 this year Taxand looked around the world at macro level tax issues that are moving real estate markets. The comments provide Taxand's Take on how tax affects multinational businesses across the globe. Download the full MIPIM Cocktail presentation here {C}

LATIN AMERICA

"Latin America is currently an interesting place for property investment but also has its risks. Demand for commercial property in some regions is particularly high and prices will still go up with many investors benefiting from an increase, but there is an important need to monitor the effect of inflation carefully."

NORTH AMERICA

"The property investment industry in North America has been impacted by a raft of additional reporting requirements recently. The FATCA (Foreign Account Tax Compliance Act 2009) has meant that foreign financial institutions must disclose their US account holders and must be subject to external audit. This puts a significant burden on European institutions regarding IT and customer information."

ASIA

"In most countries the bottom has been reached - investors should be very aware of the risks associated with a changing tax environment and keep a pro-active attitude towards their tax structures.

"There has been little inflow of US and European money over the last quarter and significant competition from local funds. We are also seeing a trend of early movers into emerging markets like India and Vietnam.

"Whilst Asian banks are in a good position, they are limited by their tight rules for real estate financing."

EUROPE

France
"Without any prior notice, the 2011 Finance Act may directly impact the tax deductibility of financial interest borne on pending and future financing. The scope of application of the French thin capitalisation rules has been extended to bank loans, secured by security interest or a guarantee, granted by a company belonging to the borrower's group. Companies should immediately carry out audits of their bank loans to determine the exact financial impact and the action to undertake."

Germany
"Regulatory threats on insurance companies' real estate investments, particularly solvency II and tighter rules for real estate private equity, means this industry sector needs to be more sophisticated in its approach to real estate. Otherwise the impact of these regulations will reduce the performance of your business."

Poland
"New rules introduced in 2011 may make more popular use of investment funds for Polish real estate projects as they broaden the scope of the exemption from tax to cover EU funds. Under specific Polish rules investment funds meeting certain criteria may benefit from exemption from income tax on all operational profits. Distribution of profits to foreign investors should be possible without Polish income tax. This may offer a competitive edge for the investors using such funds as their net distributable profits may be free of 19% Polish income tax payable on operational profits in standard structures."

UK
"Tax authorities increasingly challenge the implementation of tax planning arrangements. This trend is extending to real estate ownership structures. Billions of pounds worth of UK real estate assets are held by non-resident entities. The benefit of using an offshore SPV is that the exit is outside the scope of UK tax. However, if the vehicle's "central management and control" is carried on inside the UK the SPV would be UK resident and the disposal taxable. Real estate owners should review internal operating procedures to minimise the risk of destroying the tax benefits their tax structures are designed to deliver."

Download the full MIPIM Cocktail presentation here

Taxand at MIPIM 2011
Over 30 Real Estate Taxanders from across Europe attended MIPIM, the primary event for the international property trade, held in Cannes, France.

Taxand hosted a cocktail reception at the Plage Royale, where Real Estate experts presented the market moving issues impacting multinationals to clients and contacts.

To discuss the latest real estate tax issues your media contact is:
Keith O'Donnell
Taxand Global Real Estate Tax Service Line leader
T. +352 26 940 257
E. keith.odonnell@atoz.lu

Taxand's Take

Taxand's Take Author