Real Estate Investment Structure Taxation Review – 2022

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Ariane Brohez, Christophe Laurent and Antoine Béchaimont contributed to the Belgian chapter of the 4th edition of the Taxation of Real Estate Investment Structures (published by “Les Revues de Droit”). Their contribution provides you with concise information on tax and legal issues such as property taxes, asset and share transactions, regulated real estate investment vehicles.

Insight

Real estate investment vehicles

The most commonly used unregulated legal structures for real estate investments are the public limited company (SA or NV), the limited liability company (SRL or BV) and the limited partnership (SComm or CommV). The limited partnership is the most flexible vehicle from the point of view of company law and is not subject to capital protection rules. It also facilitates the establishment of collateral in the context of acquisitions (share deals) financed by bank loans. The regulated vehicles are the Belgian Specialized Real Estate Investment Fund (SREIF) (FIIS or GVBF), which is an institutional fund, and the Belgian Real Estate Investment Company (REIT) (BE-REIT) (SIR or GVV), which is a listed company. vehicle. For an institutional investor, the choice between a non-regulated vehicle or a BE-REIT depends on its own status and the characteristics of the operation.

Property taxes

Acquisition and disposal Transfers of shares are not subject to transfer duties, stamp duty or VAT, unless the tax authorities demonstrate an abuse (to submit the transaction to the same tax regime as for a transfer of assets) . Transactions on assets are subject either to transfer duties or to VAT. When the property is qualified as a new building for VAT, the transfer of a right of ownership may (when the owner is not a professional developer and opts for an operation subject to VAT) or must (when the owner is a professional promoter) be subject to 21% VAT. A building is considered new for VAT purposes until December 31 of the second year following its first use or occupation. A major renovation qualifies as a new building when:

  1. a drastic modification of the essential elements, whether nature, structure or destination, regardless of the cost of the work, is carried out; Where
  2. modifications are carried out for which the cost of the work (excluding VAT) is equal to at least 60% of the market value of the building (excluding land) at the end of the work.

When VAT does not apply, the purchase of goods or the granting of usufruct is subject to transfer duty of 12% (in Flanders) or 12.5% ​​(in Brussels and Wallonia ) calculated on the higher of the agreed price or the market value. . Long-term lease rights and building rights are subject to transfer duty of 2% calculated on the total fees paid to the owner for the duration of the right plus the contractual charges borne by the beneficiary.

Holding period Non-regulated vehicles, as well as Belgian establishments of foreign investors in the case of direct acquisition of real estate, are subject to corporation tax (IRS). Net income, after depreciation and tax-deductible expenses, is subject to corporation tax at 25%. In the case of a direct acquisition by a foreign investor, no branch tax on profits applies. Capital gains realized on disposal are subject to corporation tax at 25%, subject to a rollover regime in the event of reinvestment of the price in eligible assets.

The tax burden differs for regulated vehicles. Entry into such a vehicle (for example, by conversion from a regulated vehicle) triggers exit tax – taxation of the unrealized gain on the asset at a rate of 15%. Going forward, investment proceeds will not be subject to corporation tax, but taxation will be shifted to investors through a mandatory annual dividend distribution, which will trigger treaty-based withholding tax. applicable tax.

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