What types of corporate vehicle to hold real estate assets are available to investors in this country?
Foreign investors may opt to incorporate a limited liability company (either a limited liability company by quotas or a joint stock company, as detailed below). Angola has also a legal framework for investment funds which are also construed as vehicles for investment. However, although all the relevant statutes have been enacted with regard to this type of investment vehicle, there is no record with regard to the existence of same.
The main types of corporate vehicle available to investors are:
Several types of corporate vehicle can be used for investment in real estate in Belgium.
The closed limited liability company (besloten vennootschap met beperkte aansprakelijkheid, BVBA)/société privée à responsabilité limitee (SPRL), and the limited liability company (naamloze vennootschap (NV)/société anonime, (SA) are the most common for business purposes.
Although it is also legally possible to invest indirectly through a partnership, there are no specific investment structures for this. Corporate vehicles are normally used.
Indirect investment is also possible through collective investment vehicles or through regulated real estate investment companies. The law of 12 May 2014, as amended by the law of 22 October 2017, has created a separate vehicle for investing in real estate to be distinguished from a real estate investment fund, namely a regulated real estate investment company (B-REIT), ie a company incorporated for an unlimited period of time with the purpose of:
A B-REIT either:
The real estate investment fund differs from a B-REIT as follows:
A new type of real estate investment fund was introduced by virtue of the Royal Decree of 9 November 2016: the specialized real estate investment fund or B-REIF (gespecialiseerd vastgoedbeleggingsfonds or GVBF/fonds d'investissement immobiliers spécialisé or FIIS). The B-REIF is meant to be an alternative to the existing types of real estate investment vehicles, and more in particular to the aforementioned B-REIT. The B-REIF has a limited duration of maximum 10 years. It may be extended by unanimous shareholders' decision for successive periods of maximum five years each.
Shares of a B-REIF can only be held by “eligible investors”. There are two types of eligible investors:
Four types of structure are available to the real estate investor:
The main types of corporate vehicle are:
Partnerships generally cannot be registered as owner of land but a corporate or individual trustee can hold registered title to land for a partnership. For income tax purposes a foreign partnership may not be recognized.
Trusts can be registered as owners of property. These can be any type of trust including discretionary trusts, alter ego trusts and bare trusts. Usually with bare trusts, the trustee is registered as the owner and the terms of the trust are not disclosed.
Foreign investment in the PRC typically takes the form of either a joint venture (JV) or a wholly foreign-owned enterprise (WFOE). JVs were the first investment structure allowed and therefore were the most common vehicle for many years. Since the PRC began to liberalize its investment policies, and particularly after its accession to the WTO, WFOEs have become the preferred Foreign Invested Enterprise (FIE) structure in most unrestricted industries.
JVs and WFOEs each have their own benefits and disadvantages. Many foreign investors are attracted to the WFOE structure because it allows the foreign party to have complete control over the management of the enterprise, major financial decisions, and the use of intellectual property rights. JVs allow foreign investors new to the PRC to work closely with a local partner that may have significant contacts with the local business community, specific geographic or industry knowledge, and experience with government relations.
JVs can be either a Sino-Foreign Equity Joint Venture (EJV) or a Sino-Foreign Cooperative Joint Venture (CJV). In the past, the foreign party was required to provide at least 25% of the equity of a JV. Although JVs with foreign ownership of less than 25% are legally possible, the aggregate foreign equity interest in the JV must amount to 25% or more to enjoy certain kinds of preferential treatment.
Types of corporate vehicle are:
Czech law recognises four types of Czech corporate vehicles and three European forms as follows:
In addition, one of the European corporate vehicles which are regulated by EU law and the relevant national implementation legislation may be used, in particular the European Company or SE. The details of the legal regulation of these entities is outside the scope of this topic.
The types of corporate vehicles are:
It is necessary to register all types of corporate vehicles with the Danish Business Authority.
Types of corporate vehicle are:
There are various investment vehicles that can be used for real estate investments in Germany. The two main corporate vehicles are:
Additionally, there are collective investment vehicles:
The only partnership under German law that offers partners limited liability is the Kommanditgesellschaft (KG), a limited partnership with at least one general partner who has unlimited liability.
The main types of corporate vehicle available to investors are:
Five types of corporate vehicle can be used for real estate investments in Hungary:
There are various types of vehicle available, including:
In the main, three types of corporate vehicle are used for investments in real estate in Italy:
As mentioned above, an LLP is not popular for non-Japanese real estate investors.
Other than direct investment by a foreign investor, (i) TMK (tokutei-mokuteki-kaisha), (ii) TK-GK (tokumei-kumiai - godo-kaisha), (iii) real estate specified joint enterprise and (iv) real estate investment trust (‘J-REIT’) are popular for foreign investors' real estate investment in Japan.
For all the structures above, if certain requirements are met, distributions to investors from the vehicle may be deducted from the vehicle's taxable income.
Two types of corporate vehicles are commonly used for foreign real estate investments in the Netherlands: the limited liability company (Besloten vennootschap met beperkte aansprakelijkheid) and the public limited company (Naamloze vennootschap).
In addition, these two entities can qualify as fiscal investment vehicles in order to benefit from a special tax regime.
Another vehicle often used to make an indirect investment in the Netherlands is the Limited Partnership (Commanditaire Vennootschap).
Real estate investments are commonly made using limited liability companies, in spite of their tax inefficiencies. They are not tax transparent and the company income tax rate is 30%. However, Collective Investment Schemes in Nigeria appear to be an attractive form of investment due to the grant of tax concessions by the Government.
Investment in real estate may be made through the following structures:
Indirect investments in Norway can be made through limited liability corporate vehicles or partnerships. The two types of limited liability corporate vehicle relevant here are:
The only type of partnership that offers limited liability to partners under Norwegian law is the limited partnership (kommandittselskap/KS). This requires at least one of the partners to have unlimited liability (often a private limited company) but there is no limit to the number of limited liability partners.
Another type of partnership often used for real estate investment in Norway is the general partnership (ansvarlig selskap/ANS and ansvarlig selskap/DA) which does not offer limited liability to partners. As a general rule, all partners in an ANS have unlimited joint and several liability, while partners in a DA have pro rata liability.
Norwegian law does not recognize a collective investment vehicle as a separate legal entity. A real estate fund must therefore be set up using one of the corporate vehicles mentioned above.
A real estate fund may also be set up as a form of simple joint ownership between the investors, without using a corporate vehicle. By organizing the fund in this way investors can classify their investment as real estate and not shares. For some investors, such as insurance companies, whose investment activities are regulated by statute, this can be a significant advantage.
Direct investment, eg the purchase of real estate by a foreign entity, is allowed by Polish law, but in practice it is advisable to set up one of the following entities: a joint stock company, a limited liability company or an investment fund. Theoretically, it is also possible to invest through a partnership but due to unfavourable rules relating to partners’ liability, partnerships are rarely used for real estate investments.
Investment in real estate through a dedicated investment fund vehicle allows for efficient tax planning opportunities, since proper structuring allows income from rent and the sale of real estate to be free of income tax. However, due to recent changes related to taxation of investment fund and introducing General Anti-Avoidance Clause, any tax structure to be implemented shall adjust to new regulation.
Two types of corporate vehicle can be used for investing in real estate: the limited liability company (Spółka z ograniczoną odpowiedzialnością, sp. z o.o.) and the joint stock company (Spółka akcyjna, S.A.).
In Portugal, the corporate vehicles used to hold real estate assets are the Sociedade por Quotas (SQ), the Sociedade Anónima (SA) and the Sociedades de Investimento Imobiliário (SIIMO).
The SIIMO, a relatively new type of company, is effectively an incorporated form of collective investment structure, subject to the legal framework applicable to real estate investment funds. This type of corporate structure may assume the form of a SICAVI, a company limited by shares with variable share capital, or a SICAFI, a company limited by shares with fixed share capital.
Both types of companies are specially designed for ownership and management of real estate assets, being managed like real estate funds with constitutions subject to the regulation by the CMVM (the Portuguese Securities Market Commission).
Under law No. 16/2015, of 24 February 2015, the initial share capital required for a self-managed SIIMO, whether it is a SICAVI or a SICAFI, as a rule, is €300,000.
Commercial companies may be set up in one of the following forms:
Limited liability companies (LLCs) represent the overwhelming majority of real estate corporate vehicles currently operating in Romania. Compared to other business entity choices available, an LLC allows more flexibility, is quicker and cheaper to incorporate and has less stringent corporate governance requirements.
Two types of corporate vehicle are usually used for investment in Russia, including real estate investment:
Theoretically, it is also possible to invest through other types of legal entity, for instance, a partnership. However, such entities are rarely used for real estate investment in practice.
There are five types of corporate vehicle which may be used for investment in real estate in the Slovak Republic:
In Spain, there are two main types of corporate vehicle which are generally used for investment in real estate: the Limited Liability Company (sociedad de responsabilidad limitada – SL) and the public company (sociedad anónima – SA).
Foreigners can also invest by means of a Spanish branch of a Spanish or foreign company, a partnership or a collective investment vehicle.
Any participation in Spanish companies/vehicles, including the incorporation of the vehicles, must be reported to the Investments Register at the Ministry of the Economy once made through the official D1A forms, further to legal resolution issued by the Dirección General de Comercio Internacional e Inversiones on 27 July 2016. Only investments from tax havens must be reported in advance, through the official DP1 forms, although, once the investment has been reported, the investor can make the investment without waiting for an acknowledgement from the authorities.
Several types of corporate vehicle are used for real estate investments, including limited liability companies (aktiebolag), partnerships (handelsbolag), or partnerships with limited liability (kommanditbolag).
The most common form of corporate vehicle for investors to hold real estate assets in Thailand is a private limited company. Real Estate Investment Trusts ('REITs') and property funds registered with the Stock Exchange of Thailand ('SET') offer another vehicle for foreigners to invest in property in Thailand.
There are various types of company that can be used to hold real estate assets in Abu Dhabi. For a foreign investor, there are limits on the percentage of shares that one can own in companies incorporated in the UAE and any foreign shareholding (ie by a national other than those from the United Arab Emirates, Qatar, Kuwait, Bahrain, Oman and the Kingdom of Saudi Arabia) will mean that the real estate asset must usually be in an area designated for foreign investment. The most relevant types of corporate vehicle are limited liability companies, public joint-stock companies, and private joint-stock companies.
In the Abu Dhabi Global Market free zone, only two types of company can be established – private (with limited or unlimited liability) or public – although private companies can apply to the Registration Authority to become "investment companies", “restricted scope companies” or “cell companies”.
There are various types of company that can be used to hold real estate assets in Dubai. For a foreign investor, there are limits on the percentage of shares that one can own in companies incorporated in the UAE and any foreign shareholding (ie by a national other than the United Arab Emirates, Qatar, Kuwait, Bahrain, Oman and the Kingdom of Saudi Arabia) will mean that the real estate asset must be in an area designated for foreign ownership.
The most relevant types of corporate vehicle are: limited liability companies, public joint-stock companies, and private joint-stock companies.
In the Jebel Ali Free Zone Authority (JAFZA), offshore companies can be set up and wholly owned by foreigners.
Because a limited liability company incorporated in the UK (of which England and Wales form a part) is not tax transparent for UK tax purposes, it is unusual for non-UK investors investing in UK property to do so via a company incorporated in the UK, unless the investment is to be made through a UK Real Estate Investment Trust or the only investors are UK companies which pay corporation tax on their profits in the UK (in the last case a corporate joint venture is quite common). There is, however, no legal objection to investors acquiring shares in a UK incorporated company which owns land. There are some exceptions to this, for example, where individuals are seeking to invest in a land trading or development company if there are tax advantages to the individual investing in the unquoted company, including where the non-listed company has its shares traded on the Alternative Investment Market.
A further exception is a UK Real Estate Investment Trust. The use of non-corporate vehicles to hold UK real estate for investment purposes is far more common in the UK, particularly where the investment vehicle is designed to facilitate common investment in a portfolio of properties by investors of different types or even in a single large property.
The main types of vehicle available to investors are:
Because a limited liability company incorporated in the UK (of which Scotland forms a part) is not tax transparent for UK tax purposes, it is unusual for non-UK investors investing in UK property to do so via a company incorporated in the UK, unless the investment is to be made through a UK Real Estate Investment Trust or the only investors are UK companies which pay corporation tax on their profits in the UK (in the last case a corporate joint venture is quite common).
There is, however, no legal objection to investors acquiring shares in a UK-incorporated company which owns land. There are some exceptions to this, for example where individuals are seeking to invest in a land trading or development company if there are tax advantages to the individual investing in the unquoted company, including where the non-listed company has its shares traded on the Alternative Investment Market. A further exception is a UK Real Estate Investment Trust.
The use of non-corporate vehicles to hold UK real estate for investment purposes is far more common in the UK, particularly where the investment vehicle is designed to facilitate common investment in a portfolio of properties by investors of different types or even in a single large property.
The main types of vehicle available to investors are:
Ukrainian law provides for the following corporate vehicles:
A limited liability company is the best vehicle for real estate investment in Ukraine for the following reasons:
The most common vehicles used to hold real estate in the US are limited liability companies and limited partnerships. Both entities offer liability protection and both are pass-through entities for US federal income tax purposes, which means that the entity itself does not pay income tax; instead, the partners or members are taxed on their share of the profits. A general partnership is also a pass-through entity for US federal income tax purposes, but does not provide liability protection; thus, a general partnership might be utilized when all partners are themselves liability protection entities (such as limited liability companies).
The United States also recognizes corporations which may be ‘C corporations’ or ‘S corporations’ for US federal income tax purposes. ‘C corporations’ are not pass-through entities and thus are rarely used to hold real estate. ‘S corporations’ are pass-through entities, but ‘S corporations’ are not permitted to have entities or non-resident aliens as shareholders. For these reasons and because ‘S corporations’ have tax disadvantages that make them undesirable for holding real estate, those types of entities are not dealt with here.
Other vehicles used to hold real estate include land trusts (uncommon and typically used as an estate planning tool for wealth transfers; including minimizing taxes and the proper and efficient transfer of assets).
Finally, real estate may also be held by entities such as real estate investment trusts (REITs) or publicly traded partnerships. The governance and tax treatment of such entities are very complex.
The cost of setting up a legal entity can vary and depends on several factors. First, costs will depend on which of the 50 states is selected as the state of formation; each state has its own schedule of formation fees, annual fees and taxes. It is common in the US to form legal entities in Delaware (Delaware laws are often preferred); however, if the real estate is located in another state (usually the case), the Delaware entity will need to register (and pay applicable fees and taxes) in the state where the real estate is located.
Second, cost will depend on the terms of the governing documents for the legal entity; if there is only one investor, the governing documents are usually simple, but if there are multiple investors with varying interests, the governing documents can be complex, which will increase legal fees and costs. Finally, the state tax treatment of certain legal entities (such as limited liability companies) varies from state to state so that tax advice is often needed with regard to the choice of the appropriate legal entity.
The laws which govern a legal entity will be the laws of the state in which the legal entity is formed. Each state typically has a set of governing statutes for each of corporations, general partnerships, limited partnerships, and limited liability companies. Some states also permit real estate to be held through a land trust.
Note that a real estate investment trust or REIT is a US federal income tax designation for a corporation, trust or association which invests in real estate and functions to reduce or eliminate corporate income taxes. REITs are required to distribute 90 percent of their income, which may be taxable, into the hands of the investors, and have many other complex requirements. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks. Like other corporations, REITs can be publicly or privately held. Public REITs may be listed on public stock exchanges like shares of common stock in other vehicles.
Because there are no distinctions between local and foreign investors or their rights in respect of ownership of property, it is often not necessary for non-Zimbabweans to set up investments in real estate through a Zimbabwean registered entity.
Any person can hold real estate assets in Zimbabwe be it a business or an individual. The Deeds Registries Act [Chapter 20:05] states that every person has the right in any part of Zimbabwe to acquire, hold, occupy, use, transfer, hypothecate or dispose of all forms of property.
Furthermore, the Deeds Registries Act doesn't stipulate that only citizens of Zimbabwe can hold title in respect of title deeds and the owner of a title deed capable of registration is defined merely as any person, company or trustee.
However, from an investment structuring perspective, foreign investors who wish to invest in real estate through a corporate vehicle, may elect to do so.
The main types of vehicle available to investors are: