The Real Estate Investment Structure Taxation Review: Editors' Preface

The real estate sector plays a crucial role in the global economy and social environment.

In particular, the commercial property sector offers the infrastructure needed for the growth and development of entrepreneurship and business, including offices, shops, industrial and logistics premises, and hotels. In Europe alone, commercial real estate represents a business of €7 trillion.

Business operators often prefer to rent the spaces used for carrying out their activity. Therefore, commercial properties are generally held as investments by third-party investors, who buy commercial properties and rent them to business operators.

The real estate sector is also a fundamental source of employment. In 2017, the European real estate sector employed four million people – more than the car manufacturing and telecommunications sectors combined. Moreover, it provides residential accommodation and is seen as a tool to meet social and public needs. New types of properties are emerging and have increasingly been included in investment portfolios, such as healthcare, senior living, education and student accommodation. In addition, urban regeneration has become a key element of all the decisions taken at EU level, boosting city renovation and the residential sector. In such respect, the recovery fund and NextGenerationEU will play a key role in supporting this transformation.

In this context, attracting new resources and investment from institutional investors such as pension funds, insurance companies and sovereign wealth funds is crucial for the improvement of the real estate sector. In particular, it is desirable that those investors are involved in both financing large development projects and investing in properties held for rent.

Based on market practice, investments from foreign institutional investors are mainly carried out indirectly rather than through direct acquisitions, and especially through specialised vehicles like non-listed real estate funds, listed property companies and real estate investment trusts.

The pandemic emergency caused by covid-19 in 2020 has also affected the real estate sector. Although, generally, any disturbance to private real estate valuations is normally only revealed over time, listed real estate stocks suffered sharp falls in 2020 now restarting to peak in 2021. This is because of the role the sector plays in the real economy and for this specific reason it is widely considered that the coronavirus crisis may also have lasting effects on real estate usage; for example, because new public health regulations will be introduced. Accordingly, the post-crisis landscape in which we are now starting to live would be characterised by higher demand in alternative real estate sectors and for alternative assets, accelerating a process of transformation that was already ongoing. It is considered therefore that, in the long run, this will all contribute to the fundamental attractiveness of real estate as a long-term investment asset class.

We agree that within Europe, the role of the real estate sector as an economic, employment and social catalyst needs to be supported by a legislative framework that increases transparency and competitiveness, and simplifies and standardises bureaucratic processes.

However, within the European Union, the differing impact of the covid-19 crisis is exacerbating differences between the interventions made by legislators in the individual jurisdictions, with allowances, tax credits and other tax provisions introduced and applied very differently from one state to another. Generally, these disparities reflect the level of impact the pandemic has had in particular jurisdictions, the economic policies followed by their respective governments and the level of resources available to achieve those aims.

Correlatively, national legislators will need to adapt any new provisions to those pre-existing types of specialised real estate investment vehicles that currently benefit from tax exemptions or other advantageous tax allowances, for both direct and indirect tax purposes.

Given this presently rather fragmented scenario, the aim of this volume is to provide a useful guide to those international and institutional investors willing to invest in real estate properties located in Europe, and to illustrate in a comparative manner possible alternatives for the establishment of investment platforms in Europe and investment vehicles at a local level. In particular, each country-specific chapter provides insights from leading experts on key tax considerations and investment opportunities based on the relevant national legislation. Furthermore, in this edition, we have sought to provide indications of any allowances and facilitations introduced temporarily in response to the current economic crisis that may also present investors with investment opportunities in specific countries.

We would like to thank the authors of this volume for their extensive expertise and for their efforts to ensure the successful outcome of this work. We hope that the reader finds this volume useful and we welcome any comments and suggestions for its improvement.

Giuseppe Andrea Giannantonio
Chiomenti
Milan

Tobias Steinmann
EPRA
Brussels
June 2021

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