REALWorld Law

Corporate vehicles

Taxation

How is each type of corporate vehicle used to invest in real estate taxed?

Angola

Angola

Following a significant change in the applicable law there has been a reduction of taxes due. Nonetheless, once incorporated real estate companies may be deemed to pay the following taxes:

  • Property Tax (Imposto Predial Urbano) –applicable to incomes generated from: urban buildings; planned urban building; buildings or structures of a continuous basis; buildings that integrate part of the legal rights of a natural or legal person; properties capable of generating income; and properties earmarked for purposes other than agriculture, forestry or livestock (payable tax of 25% or progressive rates, depending on whether the property is leased or not).
  • Real Estate Transfer Tax (SISA) – applicable to ownership transfers or any law made under consideration of real estate, purchase and sale promises, long-term leases, contributions in kind to the capital of companies and in some cases, acquisition of share capital in companies (payable tax of 2%).
  • Consumption Tax (Imposto de Consumo) – applicable to hotel services and other related and similar activities (payable tax of 10%).
  • Stamp Tax (Imposto de Selo) – applicable to notarial acts, contracts, requirements, permits, licenses, banking operations, bills and promissory notes, customs clearance documents etc. The tax payable is variable depending on the type of instrument or document in question. It shall be a fixed amount of a percentage or per thousand of its value. It is also applicable to any stamp tax receipts (1% rate) issued by the taxpayers as a discharge of any amounts received by the supply of good, material equipment, services etc.
Australia

Australia

Please refer to the taxes topic for Australia.

Belgium

Belgium

Closed limited liability company (besloten vennootschap met beperkte aansprakelijkheid, BVBA/société privée à responsabilité limitee, SPRL) and Limited liability company (naamloze vennootschap, NV/société anonyme, SA)

Taxation of current income in Belgium

Corporation tax

Resident companies are subject to a standard corporate income tax rate of 29.58 percent. This rate will be reduced to 25 percent as from 2020. The first income band of €100,000 of small companies (see definition below) is subject to a lower rate of 20.40 percent (20 percent as from 2020).

Immovable withholding tax

Regional tax is payable at the rate of 1.25 percent (in Brussels and Wallonia) or 3.97 percent (in Flanders) on the deemed rental income (or cadastral income) of the real estate, plus additional local surcharges (which may increase this tax to around 30 percent to 50 percent of the cadastral income). Immovable withholding tax is tax deductible.

Taxation of the distribution of current income to investors

Withholding tax 

A 30 percent withholding tax is due on the distribution of a dividend, irrespective of whether the shareholder is an individual or a corporate entity.

Under the EU Parent-Subsidiary Directive as implemented in Belgium, no withholding tax is payable on dividends paid by a Belgian company to another EU company, provided that:

  • The latter has held 10 percent of the share capital of the Belgian company for an uninterrupted period of 12 months
  • The EU company receiving the dividend is a tax resident in the relevant EU member state in accordance with that member state's domestic tax law, and
  • The company receiving the dividend is subject to corporate income tax in its EU member state of residence without benefiting from a regime that deviates from the normal tax regime

This regime also applies to dividends paid by a Belgian company to a parent company resident in a country with which Belgium has signed a bilateral tax treaty or any other agreement which provides for the exchange of information between the two countries.

Where the minimum holding period of 12 months has not yet expired, the distributor of the dividends must provisionally retain the withholding tax theoretically due on the dividends and the beneficiary must sign a declaration that the participation will be held for at least 12 months. If the beneficiary does not comply with this declaration, the withholding tax must be paid to the tax authorities. If the declaration is complied with, the amount withheld can be paid to the shareholder.

The withholding tax rate may also be reduced under an applicable double taxation treaty if the dividends are paid to foreign companies, or also under domestic legal provisions in some cases. Domestic law also provides for reduced rates in specific circumstances (eg 15 percent on dividends distributed by B-REITs or B-REIFs which invest at least 60 percent of their real estate directly or indirectly in immovable property that is exclusively or mainly used or destined for residential care units adapted to healthcare).

Small companies

Domestic law provides for reduced tax rates which may apply to the distribution of dividends (other than share buybacks or liquidation dividends) related to newly registered shares that were issued after 1 July 2013. These rates will apply provided that the following conditions are satisfied:

  • The new shares have been issued in exchange for a new cash contribution
  • These newly issued shares are registered shares
  • The capital contribution is made on or after 1 July 2013
  • The company receiving the contribution qualifies as a small company (see below – taxation of capital gains on the sale of shares)
  • The newly issued shares are fully paid-up and are not preference shares, and
  • The shareholder has, at all times since the contribution, retained full ownership of the registered shares (certain exceptions relax this retention requirement)

The reduced withholding tax rates will only apply to dividends paid out at the time of the profit distribution related to the second financial year following that of the contribution. Any such dividend distributions will be subject to a 20 percent withholding tax rate. Dividend distributions paid out at the time of the profit distribution related to the third or subsequent financial years following the financial year of the contribution, will be subject to a 15 percent withholding tax rate.

A company is 'small' if it stays below at least two of the following three thresholds during two consecutive financial years:

  • Average number of employees (yearly): 50
  • Annual turnover (excluding VAT): €9 million, or
  • Total balance sheet: €4,5 million

In the case of a group of affiliated companies (eg a holding company with operating subsidiaries), the above criteria need to be applied to the group as a whole. A company may in such a case still opt to apply these criteria on a stand-alone basis, but the annual turnover and total balance sheet amounts are then increased by 20 percent.

Companies qualifying as small companies may set up a liquidation reserve in order to be able to distribute dividends at a reduced rate. This reserve can be formed through a requalification of (part of) the profits after tax as a liquidation reserve. This requalification is subject to a separately assessed tax of 10 percent. If the liquidation reserve is distributed before the company is liquidated or within five years after the creation of the reserve, an additional withholding tax of 20 percent will be due (effectively bringing the total tax to 30 percent). If the distribution takes place after more than five years as from the creation of the reserve, a withholding tax of 5 percent will be due (effectively bringing the total tax to 15 percent). No withholding tax is due if the liquidation reserve is distributed upon liquidation of the company.

Income tax at the level of corporate shareholders resident for corporate income tax purposes

Corporate entities receiving dividends can normally benefit from the dividend-received deduction. As a result of this, 100 percent of the dividend received is exempt from corporation tax. Any excess dividend-received deduction in a given tax year (ie that could not be used in the year in which it arose due to a lack of net taxable income to offset it against) stemming from qualifying dividends received from an EU or EEA subsidiary (as defined in the Parent-Subsidiary Directive), can be carried forward indefinitely to future tax years. In practice, the Belgian tax administration also accepts that dividend-received deductions may be carried forward when they originate from qualifying dividends distributed by subsidiaries located in a third country with which Belgium has concluded a tax treaty which provides for an equal treatment provision for dividends.

The use of such carried-forward excess dividend-received deductions is limited in a given tax year to € 1 million plus 70 percent of the taxable basis in excess of € 1 million. Carried forward excess dividend-received deductions that cannot be used due to this limitation may be further carried forward indefinitely.

Taxation of capital gains

Capital gains on the sale of real estate assets

Capital gains realized on the sale of a real estate asset held directly (buildings as well as land) are subject to normal corporation tax. A system of tax deferral may apply to the taxation of capital gains if the real estate has been held as a fixed asset for more than five years, provided that the proceeds are kept on a blocked reserve account and are entirely reinvested in depreciable intangible or tangible fixed assets that are used for business purposes in Belgium or in any other member state of the European Economic Area (EEA) within three or five years. Losses related to real estate can be offset against other income. Tax losses may be carried forward indefinitely, but their use in a given tax year is limited to €1 million plus 70 percent of the taxable basis in excess of €1 million. Any carried forward tax losses that cannot be used due to this limitation may be further carried forward indefinitely.

Capital gains realised by non-resident companies on the sale of immovable property in Belgium are subject to a withholding tax retained at source by the notary public. Afterwards the companies may offset any relevant charges and losses carried forward against this income through their annual tax return. As such the withholding tax only results in a pre-financing cost.

Capital gains on the sale of a participation in a BVBA/SPRL

Unless there has been speculative activity, capital gains on the sale of shares realized by Belgian individuals that are not held for business purposes are tax-exempt. In the event of a speculative sale of shares that are not held for business purposes, a separate tax rate of 33 percent (plus a municipal surcharge) will apply to the capital gain.

Capital gains realized by Belgian individuals on the sale of shares held for business purposes are normally taxed at the general progressive income tax rates. A separate tax rate of 16.5 percent (plus a municipal surcharge) applies if the shares are held for more than five years. The minimum five-year holding period does not apply when the capital gains are realized in the context of the winding-up of a business or a branch of a business.

Capital gains realized by corporate shareholders on the sale of shares are exempt provided that:

  • The property company meets a subject-to-tax test
  • The vendor held a participation in the property company of at least 10 percent or with an acquisition value of €2,5 million, and
  • The vendor holds the shares in full ownership for at least one year

The non-fulfilment of either of the two first conditions would suffice to have the capital gain subject to the full corporation tax rate (ie 29.58 percent or 20.40 percent for small companies on a first income band of €100.000). If these first two conditions are met but the condition related to the holding duration is not fulfilled, a rate of 25.50 percent (or 20.40 percent for small companies on a first income band of €100.000) will apply.

B-REIT and B-REIF

Taxation of current income in Belgium

Corporation tax

In principle, there is no taxation of these entities' current income. They are subject to the standard corporation tax rate of 29.58 percent (i.e. 29 percent plus 2 percent crisis contribution), but their taxable income only consists of specific items, such as received abnormal or gratuitous advantages and expenses that are not deductible (other than reductions in value or capital losses on shares). This usually means that their taxable base is limited.

An exit tax will become due, at the special corporation tax rate (of currently 12.75 percent, i.e. 12.5 percent plus 2 percent crisis contribution), on the difference between the market value and the recorded value of all transferred assets when an existing ordinary taxed company is converted into a B-REIT or a B-REIF. The same special corporation tax rate applies to reorganizations involving a B-REIT or a B-REIF (unless only such entities are involved), including the contribution by an ordinary taxed company of a real estate asset into the share capital of such B-REIT or B-REIF.

Immovable withholding tax

Regional tax is payable at the rate of 1.25 percent (in Brussels and Wallonia) or 3.97 percent (in Flanders) on the deemed rental income (cadastral income) of the real estate, plus additional local surcharges (which may increase this tax to around 30 percent to 50 percent of the cadastral income). Immovable withholding tax is tax deductible.

Taxation of distribution of current income to investors

Withholding tax

In principle, a 30 percent withholding tax will be due on the distribution of a dividend by a B-REIT or a B-REIF, irrespective of whether the shareholder is an individual or a corporate entity. A rate reduction may apply under a bilateral tax treaty.

Non-resident savers may benefit from an exemption of Belgian withholding tax on the dividends they receive from a B-REIT or a B-REIF, to the extent those dividends do not stem from Belgian real estate and dividend income.

Qualifying non-resident pension funds may in principle benefit from a general exemption from Belgian withholding tax on dividends received from a B-REIT or a B-REIF, irrespective of the source of income – Belgian or foreign – that is distributed.

Income tax at the level of a shareholder who is resident for income tax purposes

An individual shareholder of a B-REIT or a B-REIF who holds his shares as a private investment, can choose either to report or not to report the dividends in his personal income return. If the dividends are not reported in the personal income return, the withholding tax of 30 percent will be the final tax in the hands of the shareholder. Reporting the dividends in the personal income return may allow the shareholder, depending on the circumstances, to recover the withholding tax, in total or in part, and may thus result in a more beneficial taxation.

Corporate shareholders that are subject to the Belgian corporation tax will in principle be taxable on the dividends they receive from a B-REIT or a B-REIF. As a rule, such dividends are not eligible for the Belgian participation exemption regime. These will therefore be treated as ordinary income and will be included accordingly in the calculation of the corporation tax.

An exception to this rule applies for the categories of income listed below that are (re)distributed by a B-REIT or a B-REIF. To the extent and insofar dividends received from a B-REIT or a B-REIF encompass such income, these dividends benefit from the Belgian participation exemption regime and are therefore exempt from corporation tax in the hands of the shareholder:

  • Redistribution of income (i) stemming from real estate assets located in the EEA or in a treaty country (with exchange of information), which (ii) has been subject to (a tax similar to) the Belgian corporation tax, without benefiting from a deviating tax regime
  • Subject to the B-REIT or the B-REIF complying with a 80 percent pay-out ratio, dividends encompassing a redistribution of the following income:
    • Dividends that meet the subject-to-tax requirement under the participation exemption regime; and
    • Capital gains on shares that qualify for the exemption from corporate income tax.

Taxation of capital gains

Capital gains on the sale of real estate assets

There is no taxation of capital gains at the level of the B-REIT or the B-REIF, since capital gains are not part of the taxable income of the fund.

Capital gains on the sale of a participation in a B-REIT or a B-REIF

If the shareholder is a private individual, capital gains realized outside the scope of his business activities will, in principle, be exempt from income tax, unless the tax authorities can demonstrate that there has been speculation or that the sale of the participation is not consistent with the normal management of the taxpayer's estate.

In the hands of a corporate shareholder, the net capital gains realized on the shares of B-REIT or a B-REIF will be exempt from corporation tax to the same extent as that the dividends received from those shares would have been eligible for the participation exemption regime.

Bosnia-Herzegovina

Bosnia-Herzegovina

Limited liability companies

Taxation of current income

In both the Federation of Bosnia and Herzegovina (FBiH) and the Republika Srpska (RS) corporation tax is payable at the rate of 10%.

All company profits as shown in its tax statement are subject to tax. The taxable amount includes revenues and capital gains. All expenditure must conform to recognized accounting standards.

Taxation of distribution of current income to investors

FBiH

Resident shareholders pay tax on the company's profits both in the territory of the FBiH and abroad.

They also pay withholding tax on dividends, interest and other amounts paid to non-residents.

Non-resident shareholders pay tax on company profits realized in the territory of the FBiH. They also pay withholding tax on dividends, interest and other amounts received.

Profits are taxed at the rate of 10% and withholding tax is also payable at the rate of 10%. Withholding tax on dividends applies at the rate of 5%.

RS

Resident and non-resident shareholders are subject to tax on company profits.

All of a company profits as shown in its tax statement are subject to tax at the rate of 10%. The taxable amount includes revenues and capital gains. All expenditure must conform to recognized accounting standards.

Individuals are subject to personal income tax at the rate of 10%. Withholding tax is payable on net income at the rate effective on the date of payment.

Taxation of capital gains

Taxable income includes capital gains.

Real estate transfer tax

In the FBiH each canton has its own tax laws relating to the transfer of property. For example, under the Canton of Sarajevo's Law on Taxes applicable to Transfers of Property and Rights, tax is payable at 5% of the market value of the property.

In the RS, the tax rate for transfers of property has been abolished for all contracts for the purchase of real estate concluded after 31 December 2011. A transfer of property effected before that date still attracts a tax at 3% of the market value of the property.

Property transfers are generally exempt from VAT. VAT at 17% is only payable on the first transfer of ownership rights, or rights to dispose of, newly constructed property.

Unlimited partnerships and limited partnerships

Taxation of current income

Corporation tax is payable in the FBiH and the RS at the rate of 10%.

All profits made by the partnership as shown in its tax statement are subject to tax. The taxable amount includes revenues and capital gains. All expenditure must conform to recognized accounting standards.

Taxation of distribution of current income to investors

FBiH

Resident partners pay tax on the company's profits both in the territory of the FBiH and abroad. They also pay withholding tax on dividends, interest and other amounts paid to non-residents.

Non-resident partners pay tax on company profits realized in the territory of the FBiH. They also pay withholding tax on dividends, interest and other amounts paid to non-residents.

Profits are taxed at the rate of 10% and withholding tax is also payable at 10%. Withholding tax on dividends is 5%.

RS

Resident and non-resident partners are subject to tax on partnership profits.

All profits made by the partnership as shown in its tax statement are subject to tax at the rate of 10%. The taxable amount includes revenues and capital gains. All expenditure must conform to recognized accounting standards.

Individuals are subject to personal income tax at the rate of 10%. Withholding tax is payable on net income at the rate effective on the date of payment.

Taxation of capital gains

Taxable income includes capital gains.

Real estate transfer tax

In the FBiH, each canton has its own tax laws relating to the transfer of property so tax varies from one canton to another. For example, under the Canton of Sarajevo's Law on Taxes on the Transfer of Property and Rights, tax is payable at 5% of the market value of the property.

In the RS, the tax rate for transfers of property has been abolished for all contracts for the purchase of real estate concluded after 31 December 2011. A transfer of property effected before that date still attracts a tax at 3% of the market value of the property.

Property transfers are generally exempt from VAT. VAT at 17% is only payable on the first transfer of ownership rights, or rights to dispose of, newly constructed property.

Canada

Canada

Please refer to the taxes topic.

China

China

Equity Joint Ventures, Cooperative Joint Ventures and Wholly Foreign-Owned Enterprises all generally have the status of a legal person and so are subject to the same taxes as set out in 'tax' for the People's Republic of China.

Croatia

Croatia

Limited liability company (društvo s ograničenom odgovornošćudoo)

Taxation of current income in Croatia

Corporate income tax is payable at 18% (or 12% in case of a company with less than HRK 3 mil. annual income) on income after the deduction of expenses.

Taxation of the distribution of current income to investors

For tax-resident shareholders which are corporations, dividends are not regarded as taxable income. In the case of tax-resident individuals, no income tax applies to dividends and profit share income up to HRK 12,000 per year; amounts above this threshold represent capital income and advance tax payments are withheld at 12% with no personal allowances included in the calculation. Withholding tax applies to dividends and profit shares distributed to foreign entities which are not private individuals. This tax applies at a rate of 12%. Since Croatia joined the EU, withholding tax on dividends and profit shares have not been payable if they are paid out to an enterprise that applies one of the joint taxation models applicable to holding and related companies in the various EU countries, if:

  • The dividend or profit share recipient holds at least a 10% share in the capital of the entity making the payment.
  • The recipient holds the minimum share stated above for at least 24 months.

Taxation of capital gains

Capital gains on the sale of real estate assets are taxable. For a doo, capital gains are fully taxable at the 18% (or 12%) corporate income tax rate. Capital gains on the sale of a participation in a doo by individuals are taxable at the rate of 12% (if the participation has been held for less than three years).

Public limited liability company (dioničko društvo – dd)

Taxation of current income in Croatia

Corporate income tax is payable at 18% or 12% (if the annual income is less than HRK 3 million) on income after the deduction of expenses.

Taxation of the distribution of current income to investors

As for a doo (see above)

Taxation of capital gains

Capital gains on the sale of real estate assets are taxable. For a dd capital gains are fully taxable at the 18% corporate income tax rate. Capital gains on the sale of stocks by individuals are taxable at the rate of 12% (if the shares are held for less than three years).

Public partnership (javno trgovačko društvo – jtd)

Taxation of current income in Croatia

Corporate income tax is payable at 18 % (or 12%) on income after the deduction of expenses.

Taxation of the distribution of current income to investors

For tax-resident shareholders which are corporations, dividends are not regarded as taxable income. In the case of tax-resident individuals, no income tax applies to dividends and profit share income up to HRK12,000 per year; amounts above this threshold represent capital income and advance tax payments are withheld at 12% with no personal allowances included in the calculation. Withholding tax applies to dividends and profit shares distributed to foreign entities which are not private individuals. This tax applies at a rate of 12%. Since Croatia joined the EU, withholding tax on dividends and profit shares have not been payable if they are paid out to an enterprise that applies one of the joint taxation models applicable to holding and related companies in the various EU countries, if:

  • The dividend or profit share recipient holds at least a 10% share in the capital of the entity making the payment.
  • The recipient holds the minimum share stated above for at least 24 months.

Taxation of capital gains

Capital gains on the sale of real estate assets are taxable. For a public partnership capital gains are fully taxable at the 18% (or 12%) corporate income tax rate.

Limited partnership (komanditno društvo – kd)

Taxation of current income in Croatia

Corporate income tax is payable at 18% (or 12%)on income after the deduction of expenses.

Taxation of the distribution of current income to investors

As for a jtd (see above)

Taxation of capital gains

Capital gains on the sale of real estate assets are taxable.

For a limited partnership capital gains are fully taxable at the 18% (or 12%) corporate income tax rate. Capital gains on the sale of shares in a limited partnership by individuals are taxable at the rate of 12% (if the shares are held for less than three years).

Closed end real estate investment fund (zatvoreni investicijski fond s javnom ponudom za ulaganje u nekretnine)

Taxation of current income in Croatia

As a closed end real estate investment fund is a public limited liability company so the corporate income tax rate of 18% (or 12%) applies.

Taxation of the distribution of current income to investors

For tax-resident shareholders which are corporations, dividends are not regarded as taxable income. In the case of tax-resident individuals, no income tax applies to dividends and profit share income up to HRK 12,000 per year; amounts above this threshold represent capital income and advance tax payments are withheld at 12% with no personal allowances included in the calculation. Withholding tax applies to dividends and profit shares distributed to foreign entities which are not private individuals. This tax applies at a rate of 12%. Since Croatia joined the EU, withholding tax on dividends and profit shares have not been payable if they are paid out to an enterprise that applies one of the joint taxation models applicable to holding and related companies in the various EU countries, if:

  • The dividend or profit share recipient holds at least a 10% share in the capital of the entity making the payment.
  • The recipient holds the minimum share stated above for at least 24 months.

Taxation of capital gains

Capital gains on the sale of real estate assets are taxable. For a closed end real estate investment fund capital gains are fully taxable at the 18% (or 12%) corporate income tax rate. Capital gains on the sale of shares in a closed end real estate investment fund by individuals are taxable at the rate of 12%.

 

Czech Republic

Czech Republic

Limited liability company (společnost s ručením omezeným – s.r.o.) and joint stock company (akciová společnost – a.s.)

Taxation of current income

Rental income is taxed after deducting related expenses (eg interest, depreciation and administrative costs).

Currently the corporate income tax rate is 19 percent.

Taxation of distributions of current income to investors

Dividend distribution to shareholders

In general, there is a withholding tax in the amount of 15 percent from dividends paid to corporate and individual shareholders.

There is no withholding tax if the dividend is distributed by a subsidiary to its parent company, provided that the parent company is a corporation registered in the Czech Republic, in an EU member state or in Switzerland, Norway, Iceland or Liechtenstein and has held 10 percent of the shares in the subsidiary for an uninterrupted period of 12 months preceding the dividend distribution. Loan interest is not tax deductible, although this can be modified with special tax structuring.

Taxation at the level of the shareholder

Under double-taxation treaties concluded between the Czech Republic and other countries, dividends may be taxed either in the country of the company's registration or in the country of the shareholder's residence. However, the rate of withholding tax in the country of the company's registration is usually lower.

Dividend income received from Czech subsidiaries is normally exempt from tax.

Taxation of capital gains

Capital gains from the sale of real estate made by non-resident corporations are subject to Czech corporate income tax.

Capital gains made by an individual are taxable only if the shares are sold within five years of purchase. Capital gains are taxed at the 15 percent tax rate.

Capital gains derived from the sale of shares by corporate investors are subject to tax.

Double-taxation treaties usually stipulate that gains from the sale of shares are taxed in the country of residence of the foreign investor or in the country where the company is registered. However, if a corporation's income is mainly derived from real estate, then the country in which tax is payable depends on the wording of the relevant tax treaty.

Unlimited partnership (veřejná obchodní společnost – v.o.s.) and limited partnership (komanditní společnost – k.s.)

Taxation of current income in Czech Republic

An unlimited partnership is considered to be transparent for income tax purposes. Any profits generated by the unlimited partnership or distributed to unlimited partners in a limited partnership are regarded as the profits of individual partners and are, therefore, treated as personal income.

Profits of an unlimited partnership which are to be distributed between its limited partners need to be first taxed as income of the limited partnership (corporate income tax) and, if they are to be subsequently paid out to the limited partners, such limited partners are obliged to pay tax on them as personal income.

Taxation of distribution of current income to investors

Where foreign investors have invested through a Czech partnership, business profits will already have been taxed and the partners will not, therefore, be taxed again. However, income which has been paid out to the partners will be taxed as personal income tax.

Taxation of capital gains

Not applicable.

Denmark

Denmark

Partnership (Interessentskab)

A partnership is tax transparent. The applicable tax depends on the status of each partner.

Capital gains in Denmark are subject to tax and for corporate owners (resident or non-resident) the applicable rate is 22 % (2019). For individuals, the rate is up to 42 %.

Public limited company (Aktieselskab) and private limited company (Anpartsselskab)

Danish-resident entities are subject to taxation in Denmark on all income deriving from Denmark. Income from permanent establishments and properties located in foreign jurisdictions is generally not subject to taxation in Denmark.

Taxable income comprises gross income minus deductible costs as shown in the company’s profit and loss statement. This may then be further adjusted to allow for exempt income, disallowable expenditure and losses brought forward.

All resident group entities and the Danish branches of non-resident companies are subject to mandatory tax consolidation.

Dividends from a Danish company distributed to a foreign parent company are exempt from Danish withholding tax if both the following conditions are met:

  • The parent company holds at least 10 percent of the shares of the Danish company, and
  • The parent company qualifies for an elimination or reduction of Danish withholding tax under the EU Parent

Subsidiary Directive or a tax treaty with the state in which the parent company is resident. Additionally, it is a requirement that the shareholder is treated as the beneficial owner of the dividends.

Capital gains on shares in Danish companies owned by foreign shareholders are generally not subject to Danish taxation.

Limited partnership (Kommanditselskab)

A limited partnership is tax transparent. The applicable tax depends on the status of each partner.

Limited partnership company (Partnerselskab)

Like the limited partnership a limited partnership company is treated as transparent for tax purposes.

France

France

SCI (société civile immobilière) - real estate civil company

As a general rule, an SCI is not subject to tax unless it opts to be subject to corporate income tax or unless it carries out a commercial activity. An SCI remains a pass-through entity even though it carries out an ancillary commercial activity, provided that the income received pursuant to such commercial activity does not exceed 10% of the total income of the SCI, including taxes.

Nevertheless, the SCI is not fully transparent for French tax purposes since its taxable profit is computed at its level before being taxed in the hands of its shareholders (each shareholder being taxable on its prorata share in the profits derived by the SCI).

Moreover, the taxable profits of an SCI are computed in practice in accordance with the tax provisions applicable to its shareholders as they appear at the end of the SCI's financial year (ie 31 December of each year). For instance, the portion of the SCI's profits attributable to corporate shareholders as at 31 December of each year, is computed in accordance with the tax provisions applicable to corporate income tax.

SNC (société en nom collectif) - partnership

The rules applicable to an SNC are similar to those applying to an SCI except that an SNC keeps its pass-through tax status even if it carries on a commercial activity, contrary to an SCI.

SARL (société à responsabilité limitée) – limited liability company

Taxation of current income in France

Corporate income tax is payable at the standard rate of 33.33%. A 3.3% social contribution applies to corporate income tax exceeding €760,000 resulting in a 34.43% effective tax rate.

The French Finance Law for 2018 provides for a progressive reduction of the corporate income tax from 33.33% in 2018 to 25% in 2022, as follows:

  • As from 2018, application of a reduced 28% rate for all taxpayers up to EUR 500,000 of taxable result and application of the standard 33.33% rate above (effective rate of 34.43% with the 3.3% social contribution)
  • As from 2019, application of a 28% rate for all taxpayers up to EUR 500,000 of taxable result and application of a 31% rate above (effective tax rate of 32.02% with the 3.3% social contribution)
  • As from 2020, general application of a 28% rate (effective tax rate of 28.92% with the 3.3% social contribution)
  • As from 2021, general application of a 26.5% rate (effective tax rate of 27.37% with the 3.3% social contribution), and
  • As from 2022, general application of a 25% rate (effective tax rate of 25.83% with the 3.3% social contribution)

Taxation of distributions of current income to investors

Until 2017, an additional 3% contribution to corporate income tax was also assessed (under conditions) on the amounts of distributed dividends, at the level of the distributing company.

In May 2017, the European Court of Justice ruled that such a contribution was in breach of the Parent-Subsidiary Directive.

The French Finance Law for 2018 repealed this contribution, which is no longer applicable since January 1, 2018.

Resident

Individuals: The French Finance Law for 2018 introduces a flat tax (PFU) applicable to capital gains, interests and dividends income. The rate for the PFU is set to 30% (12.8% of individual income tax and 17.2% of social contributions) and applies to dividends distributed as from 1 January 2018.

Previous to the introduction of the PFU, dividends were subject to French individual income tax at a progressive rate, after a flat-rate rebate of 40%. As from 1 January 2018, individual taxpayers may still elect for dividends to be taxed to the progressive income tax rate. However, please note that:

  • This election is global for all capital gains, interests and dividend income received within the fiscal year and it is thus not possible to combine the PFU and individual income tax at a progressive rate
  • When the PFU applies, the 40% rebate as well as the deduction of 6.8% out of the 17.20% social contributions are not applicable.

Companies: Dividends are subject to corporate income tax at the standard rate of 33.33% (or more if additional contributions apply - effective rate of 34.43% with the 3.3% social contribution).

Where a holding of at least 5% in the subsidiary has been held for at least two years or where the parent company commits to a two-year holding period, dividends benefit from the French Parent-Subsidiary regime, whereby dividends are 95% tax-exempt, resulting in a 1.7215% maximum effective tax rate.

In addition, distributions made between companies which belong to a same French tax consolidated group and distributions received by a member (French resident company or French permanent establishment) of a French tax consolidated group from EU or EEA qualifying subsidiaries held at 95% or more and fulfilling the criteria for tax consolidation (other than being a French tax resident) are 99% tax-exempt (resulting in an effective 0.34% taxation, provided that the additional contribution to corporate income tax does not apply).

The Parent-Subsidiary regime does not apply to dividends received from real estate companies whose shares are shown in the parent company's balance sheet as current assets (stock) as it is carrying on a real estate agency business (marchand de biens).

Dividends paid to a transparent entity by a company which is subject to corporate tax are declared at the level of the entity but taxed at the level of the shareholder.

Non-resident

Individuals: Dividend distributions to individuals who have their residence outside of France are subject to a final 12.8% withholding tax (aligned to the PFU rate), unless a lower rate is provided for by a tax treaty. The rate is 75% for dividends paid into a bank account located in a Non-Cooperative State or paid or accrued to persons established or domiciled in such a Non-Cooperative State.

Companies: Dividends arising in France distributed to non-resident shareholders are subject to a final withholding tax at the rate of 30%, unless a treaty provides for a lower rate. Please note that the Finance Law for 2018 provides for a decrease of the withholding tax rate from 30% to 28% applicable to dividend distributions as from 1 January 2020 and to 25% for dividend distributed as from 1 January 2025 (the withholding tax rate being aligned on the corporate income tax rate).

The withholding tax is reduced to nil for dividends paid by a French resident company to a qualifying EU parent company if the parent company has been holding at least a 5% participation in the French subsidiary for at least two years, or commits to a two-year holding period. The rate is 75% for dividends paid on a bank account located in a Non-Cooperative State or paid or accrued to persons established or domiciled in such a Non-Cooperative State.

Taxation of capital gains

Individuals: capital gain realized on the disposal of real estate assets held directly or through a pass-through entity (ie an SCI) by an individual, resident or non-resident, is subject to a 19% tax plus 17.20% social contributions (subject to the provisions of tax treaties).

Furthermore, a progressive 2% to 6% tax applies on real estate capital gains on sales of property. This tax applies indifferently on real estate rights or assets other than developable lands.

Allowances increasing with the holding period can be deducted from the taxable gain, leading to a full exemption of individual income tax after 22 years of holding and of social contributions after 30 years of holding.

Companies: capital gains realized on a disposal of real estate assets located in France are subject to corporate income tax at the standard rate. Under the French Finance Law for 2018, the corporate income tax should progressively decrease from 33.33% in 2018 to 25% in 2022.

Capital gains realized on a disposal of a qualifying participating interest, ie where shares represent at least a 5% interest in the subsidiary and have been held for more than two years, are exempt from corporate income tax up to 88%, resulting in a 4.1316% maximum effective tax rate.

The participation exemption regime does not apply to gains arising from the disposal of shares in a real estate company (ie a company where more than 50% of the assets consist of real property or real property rights, with the exception of real property used for the operation of the company’s business). Capital gains on a disposal of shares in real estate companies are subject to corporate income tax at the standard rate, or at a reduced 19% rate where the real estate company is publicly listed.

SA (société anonyme) – stock corporation

As above for an SARL (société à responsabilité limitée) – limited liability company.

SAS (société par action simplifiée) – simplified stock corporation

As above for an SARL (société à responsabilité limitée) – limited liability company.

SCPI (société civile de placement immobilier) – real estate civil investment company

Taxation of current income in France

As a transparent entity, the SCPI's profits are taxed at the level of the shareholders.

Taxation of distributions of current income to investors

Income is distributed to investors and taxed at the level of the individual investor.

Taxation of capital gains

As above for an SARL (société à responsabilité limitée) – limited liability company.

Sale of equity

As above for an SARL (société à responsabilité limitée) – limited liability company.

SIIC (société d’investissement immobilier cotée) – listed real estate investment company

Taxation of current income in France: The SIIC and its nominated subsidiaries (which must have the same business purpose and be at least 95% owned, directly or indirectly) are exempt from tax on renting or subletting real estate under finance lease agreements (lease agreements including an option for the tenant to buy the property at a fixed price during, or at the end of, the term), on capital gains arising from a disposal of real estate assets and on dividends received from SIIC subsidiaries, provided that at least:

  • 95% of the rental income is distributed to shareholders by the end of the first financial year following the year in which the income was generated
  • 100% of the dividends received from nominated subsidiaries is distributed by the end of the first financial year following the year in which the income was generated
  • 60% of gains arising from the sale of real estate or shares in an SIIC subsidiary is distributed by the SIIC by the end of the first financial year following the year in which the income was generated

Where a company, which is subject to standard corporate income tax, elects for the SIIC regime to apply, the election entails (1) taxation of all untaxed or deferred profits at the standard 33.33% corporate income tax rate and (2) taxation of latent gains on real estate assets at a reduced 19% rate (note that the 3.3% social contribution is not applicable in the latter case).

Taxation of distributions of current income to investors

Resident

Individuals: The flat-tax rate at a 30% rate (12.8% of income tax and 17.20% of social contributions) is payable on 100% of the dividends received. Please note that if the individual opts for the progressive income tax rate, the 40% rebate is not available.

Companies: Dividends are subject to corporate income tax at the reduced rate of 28% up to EUR 500,000 of taxable result and to the standard rate of 33.33% above (34.43% if social contributions apply). The Parent-Subsidiary regime is only available for distributions made by the SIIC to its corporate shareholders when they are made out of taxable profits made by the SIIC and/or capital gains taxable at the 19% rate (but the Parent-Subsidiary does not apply to the distributions made out of the SIIC's tax exempt profit).

In addition, distributions made to a corporate shareholder that holds at least 10% of the SIIC's capital trigger a 20% withholding tax in the hands of the distributing SIIC if such dividends are not subject to corporate income tax (or any equivalent outside of France - at the rate of 8.33% in 2018) in the hands of the French corporate shareholder. This tax only applies when dividends are distributed out of the tax exempt profit of the SIIC.

Non-resident

Dividends arising in France distributed to non-resident shareholders are subject to a final withholding tax at the rate of 33.33% for a legal entity and at the rate of 12.8% for individuals, unless a treaty provides for a lower rate to apply.

The 20% withholding tax at the level of the SIIC is applicable if the dividends are not subject to a minimum rate of corporate income tax in the country where the foreign corporate resident which holds at least 10% of the distributing SIIC is established (8.33% in 2018). This tax only applies when dividends are distributed out of the tax-exempt profit of the SIIC.

Taxation of capital gains

Capital gains arising from the disposal of real property or shares in SIIC subsidiaries (and certain other real property rights) are normally exempt from corporate income tax, provided that the company complies with distribution requirements related to the gains.

Other gains are taxed in the same way as for an SARL (société à responsabilité limitée) – limited liability company.

Germany

Germany

Gesellschaft mit beschränkter Haftung (GmbH) – limited liability company and Aktiengesellschaft (AG) – stock corporation

Taxation of current income in Germany

15.825% corporation tax including a solidarity surcharge is payable on profits, and (generally) between 7% and 17.15% trade tax on taxable profit for trade tax purposes, which is defined as taxable profit for corporation tax purposes plus certain add back items and less certain deductions. The trade tax rates vary, since this tax is levied by the municipalities. A company, or corporation can have a tax presence in more than one municipality. The company or corporation can qualify for a trade tax‑exemption if it generates income only from leasing its own property. Business expenses, depreciation and amortisation are tax deductible. Deductions can also be claimed for interest, provided that the deductibility is not limited by the interest cap rule, introduced by the Business Tax Reform Act 2008. Under the interest cap rule, interest expenses are generally fully deductible as business expenses in an amount equal to the interest income of the business unit (Betrieb). If  interest expenses in excess of interest income (that is net interest expenses) exceed €3,000,000, deductibility is limited to 30% of EBITDA (earnings before interest, taxes, depreciation and amortisation). Exemptions to this interest cap rule may apply.

In respect of trade tax, 25% of all interest on debt payments (as far as interest payments have already been deducted) and 6.25% of the expenditure on temporary usage rights (for example licences and concessions) must be added back into the taxable income to the extent it exceeds €100,000.

Withholding tax on the distribution of current income to investors

Tax-resident shareholders

A GmbH must deduct withholding tax on dividends at the rate of 25% plus a solidarity surcharge (total tax rate 26.375%).

Withholding tax may be credited against the investors’ income or corporate income tax. As regards private investors, in certain circumstances a flat tax of 26.375% may apply which is treated as settled by the withholding tax deducted.

Non-tax-resident shareholders

If the EU Parent-Subsidiary Directive applies, (ie if dividends are paid by a German GmbH or AG to another EU corporation, which has held 10% of the shares in the German GmbH or AG for an uninterrupted period of 12 months prior to the distribution of dividends), and the shareholder is sufficiently large and active, no withholding tax is payable as long as the shareholder provides an exemption certificate to the company. The shareholder must apply for this certificate from the German Federal Central Tax Office (Bundeszentralamt für Steuern). If the shareholder has not obtained an exemption certificate but the requirements of the Parent-Subsidiary Directive and the substance requirements are met, the tax will be refunded upon application. 

If the EU Parent-Subsidiary Directive does not apply, but a double‑tax treaty does, withholding tax of between 10% and 15% is normally payable (although this is generally deductible against tax due on taxable German income).

Withholding taxes exceeding these rates will be refunded upon application, provided the shareholder meets the substance requirements. In addition, withholding taxes may be refunded eg if the shareholder held a stake of at least 10% of the share capital as of the beginning of the relevant fiscal year of the distributing entity.

Real estate investment trust (REIT)

German tax law provides a special tax regime for REITs when the following requirements are met:

The maximum direct shareholding by any one person or entity is limited to 10% of the shares. In addition, at least 15% of the shares must be held in free float and, at the date of the admission of the REIT, 25% of the shares must be held in free float. A share is held in free float if the shareholder holds less than 3% of the voting rights in the REIT.

At least 75% of the assets of a REIT must consist of real estate (an existing residential building cannot be part of the assets) and 75% of the REIT's gross yield must result from leasing or selling immovable assets.

Taxation of income of the REIT in Germany

A REIT's income is exempt from corporate and trade tax as long as at least 90% of its profits are distributed to the shareholders. If less than 90% of the profits are distributed the tax authorities may impose penalty payments amounting to between 20% and 30% of the difference between 90% of the profits and the dividends actually distributed.

Taxation of distributions of income to investors

Distributions are fully taxable at shareholder level. The REIT must impose a withholding tax of 25% plus a solidarity surcharge (total tax rate 26.375%). Presently this withholding tax will be credited against assessed income tax and/or refunded if applicable.

As of 1 January 2009 the taxation of private income from capital investment was changed by the Business Tax Reform Act 2008. From that date private capital investment income became subject to a final withholding tax of 25% plus a solidarity surcharge (total tax rate 26.375%) if certain requirements are met. 

Immobilien Sondervermögen – real estate fund

Taxation of current income in Germany

The fund is a tax‑exempt entity for corporation and trade tax purposes.

Distributions of current income to investors

German resident individual investors, both companies and individuals, are subject to tax on distributions and on deemed distributions as if they have invested directly in the fund's assets.

Distributions and deemed distributions received by private individuals are treated as dividends. Distributions are generally subject to a final withholding tax of 25% plus solidarity surcharge (giving a total tax rate of 26.375%). This, however, is subject to reductions under applicable double-taxation treaties if certain requirements are met.

If the fund units are held by German individuals holding the units as business assets, or by corporations, the distributions and deemed distributions are subject to income/corporation and trade tax. Where the distributions and deemed distributions are financed through dividends received by the fund, a preferential tax treatment of the dividends applies, ie for individuals generating business income 40% of the distributions are tax exempt, for corporations 95% of the distributions are tax exempt. A foreign investor can, additionally, benefit from a reduced rate under applicable double taxation treaties.

For Spezialfonds, income from real estate is allocated to unit holders in the fund in proportion to the units they hold.

Taxation of capital gains

Sale of real estate by the fund

The fund itself is tax-exempt.

At the level of the unit holders, capital gains are tax‑exempt if the real estate has been held by the fund for more than 10 years, and the unit holder is an individual holding units outside a trade or business.

If the unit holder is an individual holding units as a business asset, capital gains are subject to income and trade tax. If the unit holder is a corporate entity, capital gains are subject to corporation and trade tax. The income tax payable depends on the total taxable income and amounts to between 15% and 45% (plus solidarity surcharge of 5.5% on the tax due). The corporation tax rate is 15.825% and the trade tax rate varies between 7% and 17.15%.

In the case of Spezialfonds, special rules apply. Capital gains from the sale of real estate are allocated to unit holders in the fund in proportion to the units held. Unit holders are subject to tax as if the real estate were held by the unit holders directly.

Sale of units by unit holders 

Any capital gains from the sale of units held outside a trade or business and acquired after 31 December 2008 are subject to withholding tax at the rate of 26.375% (including solidarity surcharge of 5.5% on the tax due) which generally also settles the income tax liability of the unit holder.

Capital gains from the sale of units held as an asset of a trade or business, or units held by corporate investors, are subject to corporation/income and trade tax. Capital gains on the sale of units by an individual holding the units as a business asset are subject to withholding tax in the same way as mentioned above. The withholding tax, however, is credited against the actual income tax.

Please note that in any case there can only be a withholding tax if the relevant taxpayer is subject to limited or unlimited tax liability in Germany. This fact results in several opportunities to optimize the tax burden of (institutional) investors in a number of scenarios.

For funds established after 21 July 2013 this tax regime only applies if the investment fund qualifies as an investment fund ("Investmentfonds") under the rules of the Investment Tax Act as amended by the AIFM - Tax Amendment Act (AIFM-Steuer-Anpassungsgesetz). This, among other things, requires that the fund complies with certain investment rules as regards the type of assets to be acquired as well as the degree of leverage involved. If the fund does not qualify as an investment fund under the new rules, it may qualify as an investment partnership or investment corporation, depending on the legal form it takes. Investment partnerships are generally treated for tax purposes as transparent entities, whereas investment corporations are recognized as non-transparent corporations.

Investment funds that were established prior to 22 July 2013 and which fulfil the requirements as fully transparent entities under the tax rules which applied previously still retain the status of transparent entities indefinitely under the new rules (grand-fathering).

Kommanditgesellschaft (KG) – limited partnership

Taxation of current income in Germany

A KG is a tax-transparent entity. The taxation of income from letting real estate in Germany by a partnership depends, for corporation tax purposes, on the status of its partners and, for trade tax purposes, on whether or not the real estate is held through a permanent establishment.

Corporate partners are subject to German corporate income tax at the rate of 15.825% (including solidarity surcharge). Individuals who are partners are subject to German income tax at their individual tax rate.

Only if the partnership has a permanent establishment in Germany (which can only be the case if it carries on a trade or business, or is deemed to carry on a trade or business) is it subject to German trade tax on income. The partnership may qualify for a trade tax‑exemption if it generates income only from leasing its own property. If there is no German permanent establishment, no trade tax will be payable.

Taxation of repatriation of current income to investors

There is no additional tax on profit repatriation from the German partnership to investors.

Taxation of capital gains

The sale of real estate by the partnership, as well as a sale of an interest in a partnership which is not engaged in a trade or business, is treated as the partial sale of the underlying assets by the partners. Thus, the taxation depends on the legal status of the individual partners. Corporate partners are subject to German corporate income tax at the rate of 15.825% (including solidarity surcharge). Individuals are subject to German income tax at their individual tax rate.

If the German partnership is engaged in a trade or business, the partnership itself is subject to German trade tax at a rate of between 7% and 17.5% on capital gains arising from the sale of real estate (although certain deductions and exemptions may apply). The same applies to any capital gains from the sale by a corporation of its interest in a partnership. 

Hong Kong

Hong Kong

Companies / Branches of a foreign corporation

Hong Kong adopts a territorial principle of taxation, therefore under the Inland Revenue Ordinance (Cap. 112 of the Laws of Hong Kong) only profits arising in or derived from Hong Kong are subject to Hong Kong profits tax. Profits sourced elsewhere are not subject to Hong Kong profits tax.

Partnerships

Profits generated by the partnership are assessed in accordance with the Inland Revenue Ordinance. Thereafter, the assessed profits for the relevant year of assessment will be apportioned amongst the persons who were partners during the relevant period in the ratio in which the profits for that year of assessment were divided. Such apportioned profits will constitute the shares of the assessable profits of the individual partners for that year of assessment and taxed accordingly, without any taxes levied against the partnership itself.

Trusts

Trusts are generally subject to profits tax from a business carried on in Hong Kong. However, unit trusts which are authorized by the Securities and Futures Commission may enjoy tax exemptions, which means that the profits derived from the investment activities of the unit trust in accordance with the trust deed and other applicable statutory requirements will be exempt from profits tax.

Hungary

Hungary

Limited liability company (korlátolt felelősségű társaság)(kft), company limited by shares (részvénytársaság)(zrt or nyrt), limited partnership (betéti társaság)(bt) and unlimited partnership (közkereseti társaság)(kkt)

All four of these entities are subject to corporate income tax at the general rate of 9 percent. In addition, a local business tax of up to 2 percent also applies, so that the specific tax rate is determined by each local municipality.

Dividends paid to shareholders who are not private individuals are not subject to withholding tax.

Dividends paid to non-resident private individuals are taxed at the rate applicable under the relevant double taxation treaty. If no double taxation treaty applies, withholding tax is payable at the rate of 15 percent.

Dividends distributed to Hungarian business associations (companies) are exempt from tax at source and in the hands of the shareholders.

Real estate investment fund

Hungarian real estate investment funds are not subject to direct taxation in Hungary.

REIT (real estate investment company)

REITs and their wholly owned special purpose vehicles are, as a rule, exempt from corporate income tax and local business tax.

Ireland

Ireland

Company

Rental profits are subject to corporation tax at a rate of 25% where the property is held by an Irish tax resident company or a non-Irish tax resident company carrying on a trade in the jurisdiction through a branch or agency. Income is taxable on an arising basis.

Deductions allowed when calculating taxable net rental income include:

  • Repairs
  • Insurance
  • Management costs
  • The cost of services rendered or goods provided where legally bound under the lease to render or provide and no separate consideration received
  • Rent
  • Local authority taxes
  • Interest expenses incurred on the purchase, improvement or repair of the property

A full deduction is available for interest on borrowings used by a landlord to fund the purchase, improvement or repair of both commercial and residential property. Prior to the Finance Act 2018, the deduction available for interest on borrowings and residential properties was restricted.

A tax deduction cannot be made for expenditure on capital expenses, although it may be possible to claim tax depreciation (capital allowances) on these.

Deductions cannot be made for expenditure incurred before the first letting of the property but should be allowed for expenditure incurred between lettings. A deduction is allowable for ‘pre-letting’ expenses of a revenue nature (for example, routine repairs and maintenance costs) incurred on a residential property which has been vacant for a period of 12 months or more (such expenses incurred before the first letting of the property would not currently be considered deductible). The relief will be subject to a cap of €5,000 per property and will be available for qualifying expenditure incurred up to the end of 2021.

Where deductible expenses exceed rental income, a rental loss results. This can be offset against net Irish rental profits for the same period. Any residual losses can be carried forward indefinitely and offset against future rental profits.

Rental profits may be taxed at the rate of 20% where the property is held by a non-Irish resident company that is not carrying on a trade in Ireland through a branch or agency.

Capital gains tax is payable on the disposal of Irish real estate whether held through a company or by an individual and whether the owner of the property is resident in Ireland or elsewhere. The current rate of capital gains tax is 33%.

A new exit tax regime was introduced by the Irish government in the Finance Act 2018 and it will tax unrealised capital gains where companies migrate their tax residence out of Ireland or transfer assets offshore, such that they leave the scope of Irish tax. An Irish company which migrates its tax residency out of Ireland will be deemed to have disposed of and immediately reacquired its assets at the current market value and any gain arising on this deemed disposal will be subject to capital gains tax at the rate of 12.5% or in some instances 33%.

Collective investment vehicle

Generally, collective investment schemes regulated by the Central Bank of Ireland do not pay any tax on income and gains in Ireland. Nor do they apply any withholding tax on income distributions to or redemptions of units by non-Irish tax resident investors. However, Collective Investment Vehicles (CIVs) must operate an exit tax at 20% on the occurrence of certain taxable events, namely the making of a relevant payment to a non-resident  investor or on redemption of a non-resident investor’s shares where that fund is deemed to be and Irish Real Estate Fund (IREF) to the extent that the amount of redemption is attributable to profits derived from Irish real estate activities.

A fund will be an IREF if 25% of the value of the umbrella fund (or sub-fund, as applicable) is derived from Irish real estate assets or if it would be reasonable to assume that the purpose, or one of the main purposes, of the umbrella fund/sub-fund was to acquire Irish real estate or engage in the development of Irish real estate.

For CIVs involved in long-term capital appreciation strategies, the redemption proceeds paid to an investor should not be subject to the exit tax mentioned above where the proceeds relate to a capital gain arising to the CIV on the disposal of property it acquired at market value and owned for a minimum of five years, provided that the disposal is to a person unconnected with the fund or any of its investors (further anti-avoidance provisions may apply). Payments to certain categories of investors, including pension funds and other Irish and EEA regulated funds are also exempt, as are ‘Section 110 companies’.

For investors who are Irish tax resident or ordinarily resident in the jurisdiction for tax purposes, the fund must withhold tax (at a rate of 25% where the investor is a company and in all other cases 40%) on the happening of a “chargeable event” which includes distribution payments to unit-holders and gains arising on the encashment, redemption, cancellation or transfer of units. A deemed “chargeable event” also occurs on the expiry of each eight year period beginning on the date of acquisition of the units by the unit-holder. This tax will be a tax liability of the fund, although the cost is effectively borne by the unit-holder out of the investment proceeds.

It is assumed that the investors do not have the right to influence investment decisions. Where investors have the right to influence investment decisions the Collective Investment Scheme may be treated as a Personal Portfolio Investment Undertaking resulting in higher rates of withholding tax.

Limited partnership

A limited partnership is treated as transparent for Irish tax purposes resulting in income and gains being attributed to the underlying investors. Assuming that the investors and the limited partnership are Irish tax residents, the limited partners will be subject to Irish tax on the partnership's worldwide income. Profits that are generated by the limited partnership and distributed to the partners are treated as ordinary income and subject to income tax at the level of the partners. If the partner is a company then corporation tax applies. If the partner is an individual then income tax applies.

In the event of the disposal of assets, the winding-up of, or transfer of interest in the limited partnership, the partners would be responsible for paying their proportionate share of capital gains tax at a rate of 33%.

Real Estate Investment Trust

A REIT is exempt from tax in respect of the income obtained through its property rental business or property profits and will also be exempt from tax in respect of the chargeable gains arising from the disposal of assets of its property rental business (subject to meeting certain conditions and maximum shareholding thresholds). A REIT is required to distribute at least 85% of its income to its shareholders annually by way of dividend.

Dividends paid by a REIT may be subject to withholding tax (at a current rate of 20%), subject to the provisions of Ireland’s double-tax treaties. Non-Irish tax resident shareholders will not be liable to Irish capital gains tax on disposal of shares in an Irish REIT. Irish tax resident shareholders will be liable to Irish capital gains tax (at a current rate of 33%) on any gain arising on the disposal of shares in a REIT. Irish stamp duty will arise (at a current rate of 1%) on the transfer of shares in a REIT, provided there is no change in control of the underlying property and the property is held for long term rental income (and not for disposal) or where the underlying property is residential property. In all other cases, Irish stamp duty will arise at 6% on the transfer of shares in a REIT.

Italy

Italy

Società a responsabilità limitata (Srl) and Società per azioni (SpA)

An Srl, an Srls and an SpA in Italy are subject to IRES (corporation tax) payable at the rate of 24% (27.5% for fiscal years before 2017) and to IRAP (business activity tax) payable at the rate of 3.9%. IMU (municipal property tax) is payable on all property held by a business at a rate of between 0.46% and 1.06% of the cadastral value (although the whole regime of property taxation is being discussed by the Italian Parliament – the municipal property tax is now generally referred to as IUC which includes:

  1. IMU
  2. TARI (the tax on waste production and collection), and
  3. TASI (the local tax on municipal services).
Japan

Japan

TMK

Normal corporation tax rate applies to a TMK.  However, in the case of a tax-qualified TMK, dividends to equity holders may be deducted from the TMK's taxable income.  So, in theory no corporation tax liability is possible by distributing all the profits as dividends.  Withholding tax applies to dividend distributions.

The requirements for a tax-qualified TMK include, without limitation:

  • a TMK is properly registered under the Act on Securitization of Assets:
  • a TMK issues:
    • JPY100 million or more specified bond through a public offering;
    • specified bond held by qualified institutional investor(s) (QII) only;
    • preferred equity held by 50 or more preferred equity holders;
    • preferred equity held by QII only;
  • more than 50% of preferred equity is issued in Japan; and
  • each fiscal year, more than 90% of distributable profits is distributed to its equity holders.

GK (for TK-GK)

Normal corporation tax rate applies to a GK, a TK operator.  However, as far as proper TK arrangement is recognised, any share of the TK business profits allocated to TK investor(s), together with other TK business expenses, may be deducted from the GK's taxable income.  So, in theory no corporation tax liability is possible by distributing all the profits to TK investor(s).  Withholding tax applies to profit distributions to TK investor(s).

GK (for Real Estate Specified Joint Enterprise using TK-GK)

Normal corporation tax rate applies to a GK, a TK operator.  However, as far as proper TK arrangement is recognised, any share of the TK business profits allocated to TK investor(s), together with other TK business expenses, may be deducted from the GK's taxable income.  So, in theory no corporation tax liability is possible by distributing all the profits to TK investor(s).  Withholding tax applies to profit distributions to TK investor(s).

Investment Corporation (for J-REIT)

Normal corporation tax rate applies to an investment corporation.  However, in the case of a tax-qualified investment corporation, dividends to equity holders may be deducted from the investment corporation's taxable income.  So, in theory no corporation tax liability is possible by distributing all the profits as dividends.

The requirements for a tax-qualified investment corporation include, without limitation:

  • an investment corporation is property registered under the Act on Investment Trusts and Investment Corporations;
  • an investment corporation issues
    • JPY100 million or more investment equity through a public offering:
    • investment equity held by 50 or more investment equity holders; or
    • investment equity held by QII only.
  • more than 50% investment equity is issued in Japan; and
  • each fiscal year, more than 90% of distributable profits is distributed to its equity holders.
Netherlands

Netherlands

Limited liability company (Besloten Vennootschap) and Public limited company (Naamloze Vennootschap)

Taxation of current income in the Netherlands

The applicable rate in 2017 is 20 percent for the first €200,000 and 25 percent thereafter. Financing costs, depreciation and other at arm's length expenses are generally deductible from rental income. Depreciation on Dutch real estate is allowed only to the extent the tax book value of the real estate concerned is higher than its ‘minimum value’ and limited to the difference between those two values. Dutch real estate which is not leased out to related parties can only be depreciated up to a certain threshold. This threshold amounts to 100 percent of the ‘WOZ-value’. This is the fair market value of the real estate established annually. This means that tax depreciation is substantially limited. Real estate which is not leased out to third parties, that is, used within the group of the owner of the real estate, may be depreciated by up to 50 percent of its WOZ-value. Anti-base-erosion rules may limit the deductibility of interest paid on intra-group debt relating to certain transactions, subject to rebuttal (eg unless such interest is subject to sufficient (roughly 10 percent) effective taxation in the hands of the creditor or otherwise based on business considerations). Also, the deduction of 'excessive' financing costs (on related and third-party debt) could be restricted in certain situations.

Taxation of distribution of current income to investors

General

Dividend distributions by a Dutch B.V. or N.V. to its shareholders (domestic and foreign) are in principle subject to 15 percent dividend withholding tax.

In addition, 25 percent Netherlands corporate income tax may apply by assessment in case of a 'substantial shareholding' (ie 5 percent or more), but only if the shareholding is both held with the principal purpose, or one of the principal purposes, of avoiding the levy of Dutch personal income tax at the level of another person and the shareholding is part of an artificial (non-genuine) structure or transaction or series of transactions.

Dutch tax-resident shareholders

If the Dutch resident shareholder is an entity holding 5 percent or more of the shares, no Dutch dividend withholding tax applies provided that the Dutch participation exemption applies to the proceeds.

Non- Dutch tax-resident shareholders

If the shareholder is an entity, tax resident in the EU or EEA (Iceland, Norway and Liechtenstein), no Dutch dividend withholding tax applies, provided that the Dutch participation exemption would apply to the proceeds if the EU or EEA shareholder were a resident of the Netherlands, which generally is so in the case of a 5 percent or more shareholding.

In addition, as of 1 January 2018 the Netherlands will unilaterally refrain from applying dividend withholding tax (ie apply a 0 percent rate) to all distributions made to corporate shareholders tax resident in a country with which the Netherlands has double taxation treaty with a dividend clause (irrespective of whether that treaty itself already provides for a 0 percent rate, or a 5 percent or 10 percent rate).

Also as of 1 January 2018, the same anti-abuse rule applied to substantial shareholdings will apply to deny the aforementioned dividend withholding tax exemptions. This means the exemptions will be denied if the shareholding is both held with the principal purpose, or one of the principal purposes, of avoiding the levy of dividend withholding tax and the shareholding is part of an artificial (non-genuine) structure or transaction or series of transactions.

Taxation of capital gains

Capital gains on the sale of real estate are taxed at the same rates as rental income.

Capital gains on the sale of shares in a Besloten Vennootschap or in a Naamloze Vennootschap

For corporate shareholders that are tax resident in the Netherlands, the participation exemption regime should apply in most cases. Hence, capital gains realized on the sale of the shares in a B.V. or a N.V. should be exempted from tax.

Capital gains on the sale of shares in a BV or NV are taxed at 25 percent with Dutch corporate income tax, by assessment in case the shares constitute a 'substantial shareholding' (ie 5 percent or more) in the hands of the disposing shareholder, but only if the shareholding is both held with the principal purpose, or one of the principal purposes, of avoiding the levy of Dutch personal income tax at the level of another person and the shareholding is part of an artificial (non-genuine) structure or transaction or series of transactions.

The Netherlands may yet refrain from levying taxation on capital gains realized from the sale of a substantial interest under a relevant tax treaty, provided that the shareholder is resident in that other jurisdiction for tax purposes and is entitled to tax treaty benefits.

Fiscal investment vehicle (Fiscale Beleggings Instelling)

Taxation of current income and capital gains

Where this special tax regime applies, the applicable corporate tax rate is 0 percent, both for rental income and for capital gains. Various specific conditions apply in relation to the capacity of the shareholders and the number of shares they hold. There are also debt financing limitations (debt must not exceed 60 percent of the book value of the real estate and 20 percent of the book value of other investments). The annual profits of the entity must be distributed to shareholders within eight months of the end of each financial year. It should be noted that the purpose and activities of the fiscal investment vehicle must be limited to portfolio investment activities.

The dividend withholding tax rate is, in principle, 15 percent but is often reduced by relevant tax treaties. See comments above under the heading ‘Non-Dutch tax-resident shareholders’.

Limited Partnership (Commanditaire Vennootschap)

Taxation of current income in the Netherlands

A Limited partnership (CV) can be structured as either a transparent (closed) or a non-transparent (open) entity for Dutch tax purposes. An open limited partnership (open commanditaire vennootschap) is a limited partnership in which admission or substitution of the limited partners can take place without the prior written consent of all partners, general as well as limited. If a CV cannot be classified as an open CV, the CV should be deemed to be closed. Thus, a CV is deemed to be closed if the admission or substitution of a limited partner (apart from through inheritance or bequest) requires the unanimous consent of all general and limited partners.

If the CV qualifies as an open CV, the CV itself is liable to Dutch corporate income tax, as it is considered to be a non-tax-transparent entity for Dutch corporate income tax purposes. A closed CV, which is transparent for Dutch corporate income tax purposes, is not (itself) liable to Dutch corporate income tax, instead the profits will be allocated to the partners of the CV and taxed in accordance with the rules of their jurisdictions.

Nigeria

Nigeria

Companies Limited by Shares

The profits of a Nigerian company are taxed on its worldwide income, assessed on a preceding year basis. The tax rate is 30%. Any investment income that is paid to a foreign shareholder is subject to 10% withholding tax and is deemed as a final tax paid by the foreign shareholder.

Real Estate Investment Trusts and Companies

Under the Companies Income Tax Act, RIETs are treated as companies, and unit holders as shareholders. While the profits earned by Collective Investments Schemes are subject to company income tax of 30%, the government has issued Value Added Tax (VAT) and withholding tax waivers which apply to asset and mortgage backed securities. Accordingly, dividends of publicly traded REIT securities are exempt from withholding tax in the hands of the investors, and VAT and Capital Gains Tax are not applicable on the sale of the securities.

In addition, qualifying REITs and REICOs may be eligible for the Government’s grant of Pioneer Status Incentives which are company tax holidays of 3–5 years, under the recent Pioneer Status guidelines.

Norway

Norway

Aksjeselskap/AS (private limited company) and Allmennaksjeselskap/ASA (public limited company)

Net rental income from real estate located in Norway is subject to general corporate income tax at 22% (2019 rates). Under the Norwegian tax-exemption model (TEM), corporate shareholders in Norway are not subject to tax on capital gains on the sale of shares and dividends within EEA. Correspondingly, capital losses on shares are not deductible. Dividends are tax-exempt if the shareholder owns more than 90% of the distributing company’s share capital and controls a corresponding share of the voting rights at the shareholders’ meeting. In other cases, 3% of the dividend will be taxed at a rate of 22%.

Other income, including that from the sale of assets, interest and income from real estate etc, is taxable as ordinary income at a rate of 22%. Costs connected to this income are tax deductible.

An investor company has the right to set interest costs – including those connected with (tax-free) investments off against taxable income. However, Norway has introduced interest deduction limitation rules which generally limits the tax deductions of interest to 25% of the Norwegian company's "Tax-EBITDA".

Dividends distributed to non-resident corporate investors are subject to withholding tax at the rate of 25%, unless the recipient is protected by a tax treaty or the holding company is resident in the EEA and fulfils certain other requirements. For corporate investors resident in the EEA, under the TEM no withholding tax applies. The TEM applies only to qualifying entities considered to be the real (beneficial) owner of the dividend paid by the Norwegian company, and that the shareholder has an actual establishment and carries out genuine economic activities in the EEA country. The 3% rule referred to above does not apply to corporate shareholders resident outside Norway without a permanent establishment in Norway.

For corporate investors’ resident outside the EEA, the withholding tax rate is usually reduced to 15% or less depending on the relevant tax treaty between Norway and the investor’s country of residence.

Profit from the sale of shares in a Norwegian limited company is not taxable in Norway as long as the investor is not resident there and the shareholding is not connected to a business carried on by the shareholder in Norway. This applies to both foreign companies and private individuals.

Kommandittselskap/KS (limited partnership)

A KS is taxed as a partnership and is therefore not a separate taxable entity. The profit and loss of partnerships, including net rental income from real estate located in Norway, are calculated at the partnership level and the result is allocated to the partners and taxed in their hands. The tax rate is 22%. Non-residents are liable to the same income tax as residents on income derived from a business or participation in Norwegian business activities which is carried on or managed from Norway and on income derived from immovable property located in Norway.

An additional tax is levied on distributions by a limited partnership to private investors. The tax rate on distributions is 31.68% (the tax rate is 22% but the distribution is multiplied with a factor of 1.44), effectively amounting to an extra tax at 24.71% points on the business’s net rental income. The marginal rate of taxation is therefore 46.71%.

An investor company has the right to set interest costs off against taxable income subject to the same rules as apply to limited liability companies. However, the interest deduction limitation rules may apply.

Gains on investments covered by the TEM are tax-exempt while losses are not tax deductible.

Ansvarlig selskap/ANS (general partnership with unlimited liability) and ansvarlig selskap/DA (general partnership with pro rata liability)

Partnerships are not separate taxable entities. The profit and loss from a partnership, including net rental income from real estate located in Norway, is calculated at the partnership level and the result is allocated to the partners and taxed in their hands. The tax rate is 22%. Non-residents are liable to the same income tax as residents on income derived from a business or participation in Norwegian business activities which is carried on or managed from Norway and on income derived from immovable property located in Norway.

An additional tax is levied on distributions by the limited partnership to private investors. The tax rate on distributions is 31.68% (the tax rate is 22% but the distribution is multiplied with a factor of 1.44), effectively amounting to an extra tax at 24.71% on the business’s net rental income. The marginal rate of taxation is therefore 46.71%.

An investor company has the right to set interest costs off against taxable income subject to the same rules as apply to limited liability companies. However, the interest deduction limitation rules may apply.

Gains on investments (covered by the TEM) are tax-exempt while losses are not tax deductible.

Poland

Poland

Limited liability company and joint stock company

Corporate income tax is payable at a flat rate of 19% on net income. Entities resident in Poland, as a rule, pay corporate income tax in Poland on their worldwide income.

Income can be transferred to shareholders in the form of a dividend. Generally, distributions are subject to a withholding tax of 19% of the gross amount (regardless of whether dividends are paid to a company or to an individual, or whether the recipient is resident or non-resident).

There may be an exemption from withholding tax on dividends where the EU Parent-Subsidiary Directive applies. Generally, a tax-exemption on dividends paid by a Polish resident company applies if all of the following conditions are met:

  • The shareholder of the Polish entity is resident in Poland, another EU country, the European Economic Area or Switzerland and is subject to taxation on its worldwide income in the country of residence.
  • The shareholder holds at least 10% of the shares in the Polish company (where the dividend is paid out to a Swiss shareholder the minimum shareholding is 25%).
  • Such shareholder or its permanent establishment is the actual recipient of the dividend.
  • The shareholding is maintained for an uninterrupted period of two years (shareholding period may be reached after distribution of the dividends).
  • The shareholder does not benefit from the exemption from income tax on its entire income, irrespective where such income is earned.

The taxation of dividends may be modified by a double-tax treaty, in which case a withholding tax of between 5% and 15% normally applies.

Net income from the sale of real estate is subject to income tax (corporate income tax) which is paid by a limited liability company or joint stock company in accordance with the general rules on taxation.

Limited partnership and unlimited partnership

Taxation of current income in Poland

Both types of partnership are treated as transparent for tax purposes so no tax is payable at the level of the partnership. Income is allocated directly to the partners who are taxed individually in accordance with the applicable rate of corporate income tax (for legal entities) or personal income tax (for individuals). For income tax purposes, partners are treated as if they hold the real estate themselves.

Personal income tax rates are progressive. The following rates apply: 18% and 32%. However, partners carrying out business activities may opt for 19% flat rate taxation.

As a rule, non-tax-resident partners pay personal income tax in Poland on the net income earned in connection with real estate located in Poland. Double tax treaties may also apply.

Corporate income tax is payable at the rate of 19%. In the case of corporate non-tax resident partners, as a rule, tax is paid in Poland on income earned in the territory of Poland. However, double tax treaties may modify this position.

Taxation of distribution of current income to investors

There is no taxation on distributions: income is simply allocated to the partners who pay income tax in accordance with general tax rules. In the case of cross-border income distribution, double tax treaties may apply.

Taxation of capital gains

Sale of real estate

Net income earned on the sale of real estate is subject to income tax (personal income tax or corporate income tax), which is paid by the partners.

Sale of shares in a company consisting mainly of real estate

The sale of shares in an entity, the assets of which consist mainly of real estate, may trigger a corporate income tax obligation in Poland for the seller (depending on the relevant double-tax treaty; if there is no tax treaty such income will be subject to corporate income tax in Poland).

Sale of a share in a limited or unlimited partnership

A share in a limited or unlimited partnership may be sold only if the sale is expressly allowed for in the partnership agreement. Income earned on the sale is subject to personal income tax (in the case of an individual) or corporate income tax (in the case of a legal entity subject to corporate income tax). Double-tax treaties may modify this rule.

In addition, the sale will be subject to a 1% tax on civil law transactions (PCC) levied on purchaser.

Closed-end real estate investment fund

There is no taxation of income at the level of the fund, unless such income is generated by the partnership and allocated (transferred) to fund (in the form of dividend, portion of its income allocated to the Fund, interest from a loan granted to partnership, etc). Funds, therefore, provide efficient tax planning opportunities for investment in real estate since all income (including that from rent and sale) is exempt from corporate tax.

Taxation of capital gains on the sale of a share in the closed-end real estate investment fund

For individuals: capital gains are taxable at the 19% personal income tax rate.

For corporations: capital gains are taxable at the 19% corporate income tax rate.

Tax planning schemes may reduce the applicable rates of tax.

However, due to a new general anti-avoidance clause, the optimization possibilities may be limited and they require business justification.

Portugal

Portugal

Sociedade por Quotas (SQ) and Sociedade Anónima (SA)

Portuguese corporate income tax (IRC) is levied at a normal rate of 21% plus a municipal surcharge of up to 1.5%. (levied by many Portuguese municipalities) and a state surcharge of 3%, on income between €1.5 million and €7.5 million. For income varying between €7.5 million and € 35 million the surcharge rises to 5%. For income above €35 million the tax rate rises to 9 %. Taxable income for IRC purposes is calculated on the basis of the net accounting profit as adjusted for tax purposes. A reduced rate of 17% may be applicable to the first €15,000 of taxable income (if the company is recognized as a small or medium-sized company). Municipal tax on real estate ownership (IMI) is payable on the taxable value of each property, and is levied at the following rates:

Property Rates
Rural property 0.8 percent
Urban property 0.5 percent to 0.8 percent
Urban property appraised by the Tax Office after 1 January 2004 0.3 percent to 0.5 percent
Rural or urban property held by a company established in a country,
territory or region whose tax regime is deemed to be clearly less onerous
7.5 percent

The Portuguese State Budget for 2017 has introduced the Additional to the IMI (AIMI). The AIMI is levied on the sum of the VPT’s of all dwellings owned or in relation to with the taxpayer has the right of use or the surface right.

 

In the case of individuals, to the sum of the VPT’s should be deducted the amount of €600,000 (being the AIMI levied on the residual value at a rate of 0.7% where the taxable value is less than €1 Million, of 1% marginal rate, if and where higher and a marginal rate of 1.5% is applied when the taxable value is above €2 million. 

 

 

In the case of companies, no deduction is to be applied, and the AIMI should be levied at a rate of 0.4%,

 

The value of buildings held by companies that are affected by the personal use of capital holders, members of company bodies, or their spouses, ascendants and descendants is subject to a rate of 0.7%, where the taxable value is less than €1 million,  a 1% marginal rate if higher than €1 million and less than €2 million and a marginal rate of 1.5% if higher than €2 million.

 

Urban property classified as “commercial”, industrial, or for services” and “others” are excluded from AIMI.

For dwellings owned through a company established in a country, territory or region whose tax regime is deemed to be clearly less onerous the AIMI rate is 7.5%.

Dwellings covered by an exemption on IMI are also not subject to AIMI.

In relation to the taxation of dividends, if the shareholder is resident in Portugal:

Companies

Distributions of dividends to Portuguese-resident corporate shareholders are exempt from IRC if certain conditions are met, notably:

  • the taxpayer holds shares representing at least 10% of the share capital or voting rights in respect of the entity distributing the dividends;
  • the relevant holding is maintained uninterruptedly during the previous year of the distribution;
  • the taxpayer does not fall within the tax transparency regime;
  • the entity distributing the dividends is subject to and not exempt from IRC or any identical tax at a rate not lower than 60% of the Portuguese tax (for 2018 this rate will be 12.6%); and
  • the entity distributing profits is not resident in a country, territory or region whose tax regime is deemed to be clearly less onerous.

If the conditions are not met, the amount received as dividends is also taken into account in determining the taxable profits for the accounting period of the Portuguese-resident corporate shareholder, on the same terms as other income is taxed.

Distributions of dividends to Portuguese-resident corporate shareholders may be made without withholding tax if the participation exemption regime applies, and such equity was held by the shareholder in the year preceding the distribution. If the shareholder has its registered office in Portugal (ie is a Portuguese corporate entity) or if its management is located on Portuguese territory then it is deemed to be tax resident.

In all other cases a 25 percent withholding tax applies and the amount received as dividends is also taken into account in determining the taxable profits for the accounting period of the Portuguese-resident corporate shareholder.

Capital gains from the sale of real estate are equally subject to IRC at a rate of 21 percent plus surcharges up to 9 percent. It should be noted that there is a tax-exemption of 50 percent applicable to capital gains, if the sales proceeds are reinvested in the purchase of certain qualified assets.

In Portugal, capital gains generated by the sale of shares held uninterruptedly for a period of 12 months are exempt from taxation if:

  • The taxpayer holds shares representing at least 10 percent of the share capital or voting rights of the entity distributing the dividends
  • The taxpayer does not fall within the tax transparency regime
  • The entity distributing the dividends is subject to and not exempt from IRC or any identical tax at a rate not lower than 60 percent of the Portuguese tax (for 2018 this will be 12.6 percent); or
  • The entity distributing profits is not resident in a country, territory or region whose tax regime is deemed to be clearly less onerous. This regime is also applicable to capital gains arising out of the sale of other equity instruments associated to the relevant shares

The relevant exemption is not applicable if the company holds real estate located in Portugal which represents more than 50 percent of its assets, except if the real estate is used for an agricultural, industrial or commercial activity which is not the sale and purchase of real estate.

Where the participation exemption is not applicable, the sale of equity interests in the share capital of an SQ or an SA is subject to either:

  • IRC in the case of companies, at a rate of 21 percent plus surcharges up to 9 percent, depending on the amount of the income, or
  • Personal Income Tax (IRS) in the case of individuals; the relevant rate is set at 28 percent. It should be noted that the rate will only apply to 50 percent of the capital gains if the company whose shares are being sold is a micro or medium enterprise (less than 50 employees with an annual turnover or annual balance sheet total not exceeding €10 million)

Capital gains derived from the sale of shares in a real estate company (at least 50 percent of whose assets are comprised of immovable property located in Portugal) are subject to taxation in Portugal, even if the shareholder is a non-resident.

In the case of a share acquisition of a private limited liability company (SQ) which holds real estate assets, IMT will be due if, after the acquisition, the acquirer holds 75 percent or more of the company's total equity.

The acquisition of an equity interest in an SA which solely owns real estate is not subject to IMT in any circumstances.

Individuals

28 percent withholding tax will be payable, but this may constitute a tax credit for the shareholder if dividends are included in the total reported income that will be subject to progressive rates of up to 48 percent. In this case only 50 percent of the dividends will be taken into consideration for tax purposes.

Non-resident shareholders

  • Companies: no Portuguese withholding tax is applicable (only under the EU Parent-Subsidiary Directive)
  • Companies/individuals: (where the EU Parent-Subsidiary Directive does not apply but an OECD Double Tax Agreement (DTA) does) withholding tax of 10 percent to 15 percent is imposed, depending on the terms of the applicable DTA
  • Companies/individuals: (where neither the EU Parent-Subsidiary Directive nor a DTA applies) withholding tax is levied at a rate of 25 percent for companies and 28 percent for individuals
  • Companies/individuals established in a country, territory or region whose tax regime is deemed to be clearly less onerous, withholding tax is levied at a rate of 35 percent

Non-disclosed shareholders

Dividends deposited in accounts of fiduciary entities, on behalf of non-disclosed shareholders, will be subject to withholding tax at a rate of 35 percent.

Romania

Romania

Business entities in Romania are subject to a flat rate profit tax of 16 percent. The taxable profit is the difference between the entity's income from all sources and the expenses incurred for the purpose of generating that income, after deducting non-taxable income and adding non-deductible expenses.

Expenses are only deductible if they are incurred for the purpose of generating taxable income, which may mean that certain types of expenses are only deductible to a limited extent.

Russia

Russia

Limited liability company (OOO) and joint stock company (AO)

Taxation of operating income – profits tax

Russian legal entities pay profits tax at a general rate of 20 percent on their total income (sales and non-sales), less any related expenses and allowable deductions. Expenses are generally considered to be deductible if they are incurred in the course of a taxpayer's income-generating activity, economically justifiable and supported by relevant documentation. Certain types of expense (eg loan interest and insurance) may be deducted for tax purposes with partial limitations or restrictions. Depreciation of buildings, plant and equipment (but not land) is allowed to a certain extent.

VAT

VAT is payable at the standard rate of 18 percent on most sales of goods, works and services (including the leasing of buildings) supplied in Russia. VAT is also imposed on most imports into Russia. The transfer of property rights and certain self-supplies, such as the transfer of goods and services produced by a taxpayer for internal consumption, are also subject to VAT. The sale of shares and plots of land is VAT exempt.

Assets tax

Assets tax is payable on immovable and movable fixed assets. Land, water and other natural resources as well as construction works in progress are not subject to assets tax but any buildings on the land are. Movable assets booked as fixed assets after 1 January 2013 (excluding assets obtained from the reorganization or liquidation of a corporate entity, or assets obtained in transactions involving related parties) and certain other items are also exempt from assets tax.

The tax is calculated on the average annual residual value of the asset (its historical cost less depreciation) in accordance with Russian accounting standards. The maximum rate set by the Russian Tax Code is 2.2 percent. However, a reduced tax rate or exemption may be allowed by some regional authorities, often dependent on investment in the region.

Generally, the tax calculation is based on the average annual residual value of the property. However, regional authorities may apply an alternative assets tax calculation method based on the cadastral value of immovable fixed assets, which is similar to the market value of the assets and usually much higher than the residual value. This option may be applied only to (i) administrative complexes, business complexes and shopping malls and/or (ii) offices and premises used for shopping, catering or public services purposes and/or (iii) in certain cases, real estate owned by foreign companies and/or (iv) residential property not booked as fixed assets. Corresponding tax rates are to be provided for by local laws not to exceed (in all regions except Moscow) 1.0 percent for 2014, 1.5 percent for 2015 and 2 percent for the following years.

Land tax

Land tax applies to legal entities and individuals owning land or holding permanent rights to use it. Legal entities and individuals holding land under leases or free of charge are not subject to land tax.

The tax is calculated on the cadastral value of the land as of 1 January of the reporting year. The cadastral value for a specific plot is determined in accordance with the Land Code and local authorities set the land tax rate. Under the Tax Code, these rates must not exceed the following limits:

  • 0.3 percent of the cadastral value of land which is used for agricultural purposes or occupied by residential properties or utilities
  • 1.5 percent of the cadastral value of other land
Slovak Republic

Slovak Republic

Limited liability company and joint-stock company

Taxation of income

The taxable income is the rental income minus tax deductible expenses (for example, depreciation and administrative costs).

Corporate income tax is payable at the rate of 21 percent.

Taxation of distributions of current income to an investor

The distribution of dividends to shareholders — natural persons — is taxed. In the case of shareholders — legal entities, the dividends are not subject to income tax, with certain statutory exceptions.

Taxation of capital gains

Capital gains on the sale of shares held by individuals and corporate investors are subject to tax.

Double taxation treaties usually stipulate that capital gains from the sale of shares are taxed in the foreign investor's country of residence, but they may also be taxed in the country where the company is incorporated if the company's assets consist mainly of real estate.

Unlimited partnership and limited partnership

Taxation of income

Since a partnership is considered to be transparent for income tax purposes, any profits generated are regarded as the profits of individual partners and are therefore treated as personal income.

Taxation of distributions of current income to investors

Not applicable.

Taxation of capital gains

Since a partnership is considered to be transparent for tax purposes, capital gains are regarded as the profits of individual partners and taxed accordingly.

Spain

Spain

Limited liability company – sociedad de responsabilidad limitada (SL), public company – sociedad anónima (SA), limited partnership – sociedad en comandita (S.en Com. or S. Com.), partnership limited by shares – sociedad en comandita por acciones (S.Com. p. A.) and general partnership – sociedad de responsabilidad colectiva

Taxation of current income in Spain

Corporation tax (CT) is generally payable at the rate of 25% of the profits shown in the accounts prepared in compliance with IS rules. In some cases this tax can be reduced.

Tax on real estate (IBI)

This tax is fixed by each municipality and depends on the cadastral value of the real estate, which may be subject to tax rates from 0.4% to 1.3%.

Taxation of distribution of current income to investors

Tax-resident shareholders: distributed dividends are subject to CT at the rate of 25 percent. Additionally, an exemption may be available if the participation held is, at least, 5% or more or if the investment in the shares exceeds €20,000,000 and has been held for at least one year. This requirement may be fulfilled after the distribution of the relevant dividend.

Non-tax-resident shareholders: the distribution of dividends to shareholders is subject to Spanish non-resident income tax (NRIT) at the rate of 19% unless the EU Parent-Subsidiary Directive applies (in which case no tax is payable), or an applicable tax treaty reduces the tax to a lower level.

Taxation of capital gains

Sale of a real estate asset:

  • Tax-resident owners: CT is generally payable at 25%

  • Non-tax-resident owners: NRIT is payable at the rate of 19% unless an applicable treaty provides otherwise

  • In addition, most Spanish municipalities impose a tax on the increase in the value of urban land (IIVTNU) which is payable on the transfer of property other than rural land. This is paid by the seller and calculated on the basis of the cadastral value

Sale of a participation in a real estate company:

  • Tax-resident shareholders: CT is payable at the rate of 25%. Additionally, an exemption may be available if the participation held was 5% or more or the investment in the shares exceeds €20,000,000 and had been held for at least one year

  • Non-tax-resident shareholders: NRIT is payable at the rate of 19% unless an applicable treaty provides otherwise

Indirect taxation

A transfer of real estate assets by a business is subject to VAT (at 21%, except for residential real estate where a 10% rate applies). In the case of a second or subsequent transfer, a VAT exemption applies and the transfer is subject to Transfer Tax. Transfer Tax may be avoided if the VAT exemption is waived.

Transfer Tax amounts to between 6% and 11% of the value of the underlying real estate assets at the time of the transfer. Where the transfer is subject to and not exempt from VAT, Stamp Duty will apply (0.5–3%).

The transfer of shares is exempt from VAT and Transfer Tax . Nevertheless, Transfer Tax /VAT can be incurred on the transfer of shares in companies, when the transfer of the shares is made with the purpose of avoiding the payment of the tax that would have been paid in case of transfer of the real estate. The law considers there are tax avoidance reasons where 50% or more of the assets consist, directly or indirectly, of real estate located in Spain and are not used for business activities, and, as a result of the transfer, the buyer acquires control over the company (ie more than a 50% stake in its share capital) or increases its stake once it has obtained control.

Special tax on real estate owned by non-resident entities

A special tax on real estate owned by non-resident entities applies in Spain. Entities resident in a jurisdiction classified as a tax haven owning real estate or rights over property are subject to a special tax of 3 percent of the cadastral value (valor catastral) which accrues at 31 December each year.

Real estate investment fund – fondo de inversión inmobiliario (FII) and real estate investment company – sociedad de inversión inmobiliaria (SII)

Taxation of current income in Spain

The rental income and capital gains obtained by the SII will be taxed at a rate of 1%. To benefit to from this rate the SII must comply with the following requirements during the whole investment period:

  • The SII must have at least 100 shareholders

  • The SII's sole corporate purpose must be investment in urban real estate for rental

  • The assets acquired should be held for a minimum of three years, unless an early sale is authorized by the CNMV (National Securities Market Commission)

Taxation of distribution of current income to investors

  • Tax-resident unit holders: CT is payable at the rate of 25%

  • Non-tax-resident unit holders without a permanent establishment: dividends are subject to withholding tax at the rate of 19 percent. A reduced withholding tax may apply under a relevant tax treaty

Taxation of capital gains

  • Tax-resident unit holders: CT is payable at the rate of 25%

  • Non-tax-resident unit holders without a permanent establishment are subject to non-resident income tax (NRIT) at the rate of 19 percent. A reduced withholding tax may apply under a relevant tax treaty

Real estate investment trust – sociedad anónima cotizada de inversión inmobiliaria (SOCIMI)

This is the broad appeal of this vehicle. In general, the SOCIMI is exempt from the payment of CT in relation to the rents arising from leasing property but the shareholders will be taxed on the dividends and gains distributed by the SOCIMI. Only where shareholders with a stake greater than 5% in the share capital are taxed at a rate lower than 10 percent, is a special rate of 19% payable by the SOCIMI.

  • Tax-resident companies: CT is generally payable at the rate of 25%

  • Non-tax-resident companies: a rate of 19% applies

Exceptions arise in the event of the application of specific regulations as double taxation treaties, EU regulations or any other particular circumstances on the company or its shareholders.

Sweden

Sweden

Limited liability company

Taxation of current income in Sweden

Income tax

The tax rate is currently 21.4% (20.6% in 2021). Rental and other income, including capital gains, is treated as ordinary business income. Interest payments and other costs are tax deductible. A general reduction of net interest deduction corresponding to 30% of EBITDA applies. However, the reduced interest deduction applies only if negative net interest exceeds SEK 5 million (simplification rule). The amount is measured on a group level. Certain additional restrictions apply to the deduction of interest on intercompany loans. Depreciation for buildings is allowed for tax purposes at the following annual rates: 2% to 5% for industrial premises, 3% for retail and 2% for offices. Speeded up depreciations (additional 2% the first six years) are available for newly produced apartment houses. 

Property tax

Property tax is calculated as a percentage of the tax value of the property, which is 75% of the estimated market value. For the following types of property, the rates are:

  • Industrial premises: 0.5%
  • Offices and other commercial buildings: 1%
  • Apartment blocks: normally SEK 1,377 for each apartment, but a maximum of 0.3% of the tax value assigned to the apartment
  • Family houses: normally SEK 8,049 , but a maximum of 0.75% of the tax value assigned to the house
  • New apartment blocks and family houses that that were built in or after 2012 are exempt from property tax for 15 years

Taxation of distribution of current income to investors

Resident shareholders

Corporate shareholders are normally exempt from tax on dividends from shares in non-listed companies. An individual is normally taxed at a rate of 25 percent. Special rules apply to closely held companies in which the shareholders are actively engaged.

Non-resident shareholders

The Parent-Subsidiary Directive applies. No withholding tax is imposed in Sweden on dividends paid to a foreign parent company, provided the parent company is comparable to a Swedish company (AB) and is taxed in a similar way. Withholding tax is normally imposed only on the distribution of dividends to companies located in tax havens. Special rules apply to dividends paid to non-corporate shareholders.

Taxation of capital gains

Capital gains on the sale of real estate are taxed as ordinary business income at the rate of currently 21.4% (20.6% in 2021).

Non-resident shareholders (without a permanent establishment in Sweden) are not taxed in Sweden on capital gains made from the sale of shares.

Resident corporate shareholders are exempt from tax on capital gains from unlisted holdings. Resident individuals are normally taxed at the rate of 25 percent on capital gains from the sale of shares.

Partnership

Taxation of current income in Sweden

Income tax

A partnership is transparent for income tax purposes. Income tax is calculated in the same way as for ordinary business income in an incorporated company. Depreciation is allowed for tax purposes at the following rates:

  • 2 percent to 5 percent for industrial premises
  • 3 percent for retail
  • 2 percent for offices

The tax rate is currently 21.4% (20.6% in 2021) for corporate partners, and there is a progressive rate of 30–68% for individuals.

Property tax

A partnership is subject to property tax. Property tax is calculated as a percentage of the tax value of the property, which is 75 percent of the estimated market value. For the following types of property, the rates are:

  • Industrial premises: 0.5 percent
  • Offices and other commercial buildings: 1 percent
  • Apartment blocks: normally SEK 1,377 for each apartment, but a maximum of 0.3% of the tax value assigned to the apartment
  • Family houses: normally SEK 8,049 but a maximum of 0.75% of the tax value assigned to the house
  • New apartment blocks and family houses that that were built in or after 2012 are exempt from property tax for 15 years

Taxation of distribution of current income to investors

No withholding tax applies to the distribution of profits.

Taxation of capital gains

Non-resident partners are not taxed in Sweden on capital gains made from the sale of shares in the partnership.

Capital gains from the sale of shares in a partnership are exempt from tax for corporate partners. Resident individuals are normally taxed at the rate of 30 percent on capital gains.

Capital gains from the sale of property owned by the partnership are taxed as ordinary business income for corporate partners at currently 21.4% (20.6% in 2021). Individual partners are taxed on capital gains at 27%.

Thailand

Thailand

Limited Company

Corporate Income

A gain derived from a sale of real estate assets is required to be included with other taxable income and subject to corporate income tax at the rate of 30% in a given year. Conversely, a loss resulting from the sale can be used to offset any other taxable income in the given tax period.

Specific Business Tax ('SBT')

SBT at the rate of 3.3% (including municipal tax) applies on the greater of the sales price or the most current appraised value on record by the Department of Land ('DOL'). The SBT must be paid at relevant land office upon the registration of the real estate assets.

Withholding Tax

A seller of real estate assets who is a legal person will be subject to withholding tax at the rate of 1% of the sales price or the most current appraised value on record at the DOL, whichever is greater.

Transfer Fee

The sale/ transfer of real estate assets is subject to a transfer fee at a rate of 2.0% of the official appraisal value of the DOL. The transfer fee will be collected by the DOL.

Stamp Duty

The sale of real estate assets is subject to 0.5% stamp duty on the sales price of the land or the most current appraised value on record with the DOL, whichever is greater. The stamp duty will be exempt if the SBT has been paid on the sale of the real estate assets.

Property Fund

Property funds are exempt from corporate income tax, specific business tax, and stamp duty. The transfer fee is reduced to 0.01% of the DOL's official appraisal value.

REIT

REITs are not regarded as taxable entities. Dividends distributed by the trustee will be subject to withholding tax at the rate of 10% when paid out to the unit holders of the trust. Income derived by the trustee from the REIT, apart from its fee and other benefits from its service, will be exempt from corporate income tax.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

Most of the individual Emirates have issued income tax decrees. While these decrees are in principle applicable to all (respective) entities, in practice corporate tax is currently only enforced against oil and gas companies, including certain petrochemical companies, and in certain Emirates, branches of foreign banks. The enforcement practice may change at any time and corporate tax could be enforced, potentially even retroactively, on a larger population of corporate entities. Companies established in one of the Emirate level instated Free Zones could enjoy a temporary exemption from corporate tax, granted by the relevant Free Zone Authority.

There are some municipality taxes paid on rent and certain land transfer charges paid when transferring real estate.

On 1 January 2018 the UAE introduced VAT. The standard rate of VAT is 5% whereas some supplies are exempt (eg the supply of bare land) or zero rated (eg first supply of residential property within three years of completion). In principle, VAT applies on the domestic supply of goods (eg sale of commercial real estate) and services (eg lease) as well as on the import of such goods and services.

United Arab Emirates - Dubai

United Arab Emirates - Dubai

Most of the individual Emirates have issued income tax decrees. While these decrees are in principle applicable to all (respective) entities, in practice corporate tax is currently only enforced against oil and gas companies, including certain petrochemical companies, and in certain Emirates, branches of foreign banks. The enforcement practice may change at any time and corporate tax could be enforced, potentially even retroactively, on a larger population of corporate entities. Companies established in one of the Emirate level instated Free Zones could enjoy a temporary exemption from corporate tax, granted by the relevant Free Zone Authority.

There are some municipality taxes paid on rent and certain land transfer charges paid when transferring real estate.

On 1 January 2018 the UAE introduced VAT. The standard rate of VAT is 5% whereas some supplies are exempt (eg the supply of bare land) or zero rated (eg first supply of residential property within three years of completion). In principle, VAT applies on the domestic supply of goods (eg sale of commercial real estate) and services (eg lease) as well as on the import of such goods and services.

UK - England and Wales UK - England and Wales

UK - England and Wales

Limited partnership

Taxation of current income in the UK

Limited partnerships are tax transparent for tax purposes. An investment partnership will not generally be regarded as carrying on trade in its own right. Therefore, the income tax payable by the investors will depend on their individual circumstances. This means that a limited partnership incorporated in the UK (of which England and Wales form part) is a suitable vehicle for participation by UK tax-paying and tax-exempt investors (for example, charities or pension funds).

Taxation of capital gains

For UK capital gains tax purposes, all investors are regarded as owning a share of each underlying property investment. When a property investment is disposed of by the partnership, each investor is therefore regarded as disposing of their share, corresponding to its profit-sharing interest. Capital gains tax charges can arise when new partners are introduced to the partnership if there is a revaluation of the partnership's assets or if payments are made between one or more of the partners outside of the framework of the partnership accounts. Otherwise capital gains tax payments should be deferred until the disposal of each property within the partnership. Each partner is responsible for tax on his share of the capital gain. The partnership is not a separate taxable entity.

Limited liability partnership

Taxation of income in the UK

A limited liability partnership (LLP) is tax transparent for UK income tax purposes and members are treated like partners in a general partnership provided the LLP is carrying on a business. However, an LLP which has its principal purpose as investment in real estate is not tax transparent for capital gains tax exempt investors, for example, pension funds.

Taxation of capital gains

An LLP is tax transparent except for capital gains tax exempt investors (for example, pension funds, personal pension schemes and charities).

Investment syndicate trust

The trust is regarded as tax transparent provided it is not a collective investment scheme.

Taxation of capital gains

Each investor is regarded as entitled to a share of profits corresponding to their beneficial entitlement under the trust. Accordingly, the trust is ignored for capital gains tax purposes and individual beneficiaries are subject to capital gains tax in relation to their proportion of the gains from the sale of property.

The tax treatment of the investors in the syndicate trust as described above is dependent on the trust not being regarded as a collective investment scheme. This means all decisions which could affect the financial return of the investors in relation to the property must be taken by the investors rather than being delegated to the manager or administrator of the trust or to the trustees (thereby giving investors the necessary day-to-day control over the trust property required by statute).

Property unit trust

Taxation of current income in the UK

Property unit trusts are normally subject to income tax but income can be offset against loan costs and running expenses to minimise tax exposure. Income tax can also be reclaimed by investors in an exempt unauthorized unit trust.

Taxation of capital gains

The unit trust is exempt from capital gains tax either by virtue of Financial Conduct Authority (FCA) authorized status or the trust's status as not resident in the UK (of which England and Wales form part). With a dedicated unit trust for UK pension fund investors only (known as an exempt unauthorized unit trust scheme), the trustee will not be liable to capital gains tax where the unit holders are all UK tax authority registered pension schemes or UK-registered charities.

Limited company

Any UK-incorporated company and any non-UK-incorporated company which is UK resident because it is managed and controlled in the UK, is subject to corporation tax on its worldwide income and gains, subject to applicable reliefs under a relevant double tax treaty. A non-UK-resident company is subject to corporation tax on its income and gains from any trade or business carried on through a branch or agency in the UK.

Public limited company

The position is the same as that for limited companies described above.

UK - Scotland

UK - Scotland

Limited partnership

Taxation of current income in the UK

Limited partnerships are tax transparent for tax purposes. An investment partnership will not generally be regarded as carrying on trade in its own right. Therefore, the income tax payable by the investors will depend on their individual circumstances. This means that a limited partnership incorporated in the UK (of which Scotland forms part) is a suitable vehicle for participation by UK tax-paying and tax-exempt investors (for example, charities or pension funds).

Taxation of capital gains

For UK capital gains tax purposes, all investors are regarded as owning a share of each underlying property investment. When a property investment is disposed of by the partnership, each investor is therefore regarded as disposing of its share, corresponding to its profit-sharing interest. Capital gains tax charges can arise when new partners are introduced to the partnership if there is a revaluation of the partnership’s assets or if payments are made between one or more of the partners outside of the framework of the partnership accounts. Otherwise capital gains tax payments should be deferred until the disposal of each property within the partnership. Each partner is responsible for tax on his share of the capital gain. The partnership is not a separate taxable entity.

Limited liability partnership

Taxation of income in the UK

A limited liability partnership (LLP) is tax transparent for UK income tax purposes and members are treated like partners in a general partnership provided the LLP is carrying on a business. However, an LLP which has its principal purpose as investment in real estate is not tax transparent for capital gains tax-exempt investors, for example, pension funds.

Taxation of capital gains

An LLP is tax transparent except for capital gains tax-exempt investors (for example, pension funds, personal pension schemes and charities).

Investment syndicate trust

The trust is regarded as tax transparent provided it is not a collective investment scheme.

Taxation of capital gains

Each investor is regarded as entitled to a share of profits corresponding to their beneficial entitlement under the trust. Accordingly, the trust is ignored for capital gains tax purposes and individual beneficiaries are subject to capital gains tax in relation to their proportion of the gains from the sale of property.

The tax treatment of the investors in the syndicate trust as described above is dependent on the trust not being regarded as a collective investment scheme. This means all decisions which could affect the financial return of the investors in relation to the property must be taken by the investors rather than being delegated to the manager or administrator of the trust or to the trustees (thereby giving investors the necessary day to day control over the trust property required by statute).

Property unit trust

Taxation of current income in the UK

Property unit trusts are normally subject to income tax but income can be offset against loan costs and running expenses to minimise tax exposure. Income tax can also be reclaimed by investors in an exempt unauthorized unit trust.

Taxation of capital gains

The unit trust is exempt from capital gains tax either by virtue of Financial Conduct Authority (FCA) authorized status or the trust’s status as not resident in the UK (of which Scotland forms part). With a dedicated unit trust for UK pension fund investors only (known as an exempt unauthorized unit trust scheme), the trustee will not be liable to capital gains tax where the unit holders are all UK tax authority registered pension schemes or UK registered charities.

Limited company and public limited company

Any UK-incorporated company, any non-UK-incorporated company and any public limited company which is UK resident because it is managed and controlled in the UK, is subject to corporation tax on its worldwide income and gains, subject to applicable reliefs under a relevant double-tax treaty. A non-UK resident company is subject to corporation tax on its income and gains from any trade or business carried on through a branch or agency in the UK.

Ukraine

Ukraine

Corporate vehicles incorporated in Ukraine are recognized as tax residents and are therefore taxed on their worldwide income. The standard corporate profit tax rate is 18 percent.

Taxable supplies of goods/services are normally subject to 20 percent VAT.

Legal entities and individuals pay property tax in respect of real estate assets. Property tax applicable to real estate consists of:

  • Immovable property tax (which applies to residential and non-residential immovable property other than land), and
  • Land payment (which applies to land owned or leased by the taxpayer)

The rates of immovable property tax are set by municipalities and for residential and commercial property may not exceed (per sq. m of the area of the property) 1.5 percent of the statutory minimum salary, effective on 1 January of the tax year.

Municipalities are free to decide on whether to set immovable property tax for particular vicinity and on the rate to apply subject to the mentioned cap (ie 1.5 percent).

The taxable value for immovable property tax includes the total area of residential/non-residential property.

Immovable property tax on individuals is assessed by tax authorities. Legal entities self-assess the tax and file the relevant tax return annually.

Land payment consists of:

  • Land tax (which applies to land owners), or
  • Land rent (which applies to lessees of land from state or municipal authorities)

The value for land tax purposes is:

  • The ‘normative’ valuation of the land (where a normative valuation has been carried out in the region where the relevant property lies). The tax in this case is determined as a percentage of the normative valuation, or
  • The area of the plot (where a normative valuation has not been carried out in the relevant region). The amount of tax payable is calculated as the area of the relevant plot multiplied by a fixed rate per sq m of land set for that region. Increasing rates may apply depending on the location, zoning and other characteristics of a plot of land

The amount of land tax in regions with an established normative valuation cannot exceed the following thresholds (irrespective of where the property is located):

  • 3 percent of the normative valuation of the plots of land (general rule)
  • 1 percent of the normative valuation for plots in common use
  • 1 percent of the normative valuation of the agricultural plots (but not less than 0.3 percent of the normative valuation)
  • 12 percent of the normative valuation of plots of land which are in what is known as ‘special permanent use’

The amount of land tax applicable to plots of land which are located outside developed areas and which have not undergone normative valuation cannot exceed 5 percent of the normative valuation of a standard unit of arable land established for the relevant region (oblast). For agricultural land plots which are located outside developed areas and which have not undergone normative valuation land tax cannot be less than 0.3 percent and cannot exceed 5 percent of the normative valuation of a standard unit of arable land established for the relevant region.

The amount of land rent is stipulated in the lease contract between the lessee and state/municipal state authority. The land lease contract is subject to registration.

The law stipulates that land rent cannot be less than the amount of land tax for respective plot and more than 12 percent of the normative valuation.

Land tax is assessed annually for the following year and is paid monthly by the owners or users of land. Land rent is also paid monthly.

Withholding tax may also apply to outgoing cross-border payments (dividends, interest, etc) at the standard rate of 15 percent unless otherwise stipulated by a relevant double tax treaty.

United States

United States

US limited partnership

For US federal income tax purposes, a limited partnership is a pass-through entity. Thus, the limited partnership itself does not pay any US federal income tax. Instead, the income and loss of the limited partnership is passed to the partners who each report their share of income and loss on their tax returns. The taxable income passed to the partners retains its character; thus, if the partnership sells an appreciated capital asset that it has held for 12 months, each partner will be allocated capital gain (currently taxed in the US at more advantageous capital gains rates) from that sale. If the partnership has rental income, each partner will be allocated ordinary income. Note that some states charge a separate flat tax on limited partnerships owning real estate in their state.

US limited liability company

For US federal income tax purposes, an LLC is a pass-through entity. Thus, the LLC itself does not pay any US federal income tax. Instead, the income and loss of the LLC is passed to the members who each report their share of income and loss on their tax returns. The taxable income passed to the members retains its character; thus, if the LLC sells an appreciated capital asset that it has held for 12 months, each member will be allocated capital gain (currently taxed in the US at more advantageous capital gains rates) from that sale. If the LLC has rental income, each member will be allocated ordinary income. Some states (such as California) impose an entity-level tax on LLCs.

US general partnership

For US federal income tax purposes, a general partnership is a pass-through entity. Thus, the general partnership itself does not pay any US federal income tax. Instead, the income and loss of the general partnership is passed to the partners who each report their share of income and loss on their tax returns. The taxable income passed to the partners retains its character; thus, if the partnership sells an appreciated capital asset that it has held for 12 months, each partner will be allocated capital gain (currently taxed in the US at more advantageous capital gains rates) from that sale. If the partnership has rental income, each partner will be allocated ordinary income.

Zimbabwe

Zimbabwe

Property unit trust

Property unit trusts are subject to capital gains tax which is levied on the capital gain arising from the disposal of a specified asset, which will include any marketable security, such as unit trusts.

Limited company

By virtue of a company’s separate legal personality, it is individually liable for corporate tax. Its income is taxed in its own name as tax on profits, and then subject to withholding tax when distributed to shareholders. Shareholders are subject to tax on the dividend distributed to him. The company itself is taxed on its profits. However, corporates are subject to double taxation in that they are taxed at a corporate level and then again upon the distribution to its shareholders.

Where remuneration is paid to a director, the Companies Act [Chapter24:03] states that it is unlawful for such remuneration to be paid free of any taxation in respect of income, or otherwise calculated by reference to or varying with the amount of such taxation or with the rate of taxation on incomes.

The distribution of dividends to shareholders is subject to non-resident withholding tax at the rate of 10% for dividends from listed shares and 15% for other dividends, unless an applicable tax treaty reduces the tax to a lower level.

Companies can offset or reduce tax as provided by Section 15 of the Capital Gains Tax Act.

Public limited company

The position is the same as that for limited companies described above.