REALWorld Law

Corporate vehicles

Types of vehicle

What types of corporate vehicle to hold real estate assets are available to investors in this country?

Angola

Angola

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.

Argentina

Argentina

Below we detail some of the most common types of corporate vehicles used for real estate investment in Argentina:

  • Corporation (Sociedad Anónima; SA): An SA is an option for larger real estate investments, as it allows for broad ownership and the issuance of shares. These types of corporate vehicles are subject to specific corporate governance and reporting requirements, such as appointing local directors whose term of office doesn’t exceed three fiscal years, preparing financial statements and filing them with the Public Registry of Commerce. It can be formed with one or more shareholders.
  • Limited Liability Company (Sociedad de Responsabilidad Limitada; SRL): An SRL is an option for smaller real estate investments due to its flexibility, simpler administrative procedures, and fewer regulatory requirements compared to an SA, such as appointing local directors with a term in office for unlimited time, preparing financial statements and not having to file them with the Public Registry of Commerce, if they’re not included in the provisions of Article 299 of the General Corporations Law No. 19,550. An SRL has a more closed ownership structure, with partners or members rather than shareholders. It can only be formed with two or more partners.
Australia

Australia

The main types of corporate vehicle available to investors are:

  • Australian companies (proprietary or public)
  • Branches of a foreign corporation, in which case the registered proprietor of the real estate will be the foreign corporation
  • Partnerships or limited liability partnerships, in which case the registered proprietor will be the individual or general partner(s)
  • Trusts (unit or discretionary), in which case the registered proprietor will be the trustee
Belgium

Belgium

On 1 January 2020, the new Companies and Associations Code entered into force in Belgium. This new Code has thoroughly reformed company law in Belgium, which has led to the reduction of the number of possible legal forms for a company to four big categories:

  • the private limited company (besloten vennootschap);
  • the public limited company (naamloze vennootschap);
  • the cooperative company (coöperatieve vennootschap); and
  • a partnership (maatschap) (which can take the form of a general partnership (vennootschap onder firma) or limited partnership (commanditaire vennootschap)).

The most common company forms in Belgium for holding real estate under the old law were the private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) and the public limited company (naamloze vennootschap). Both company types have been reformed as a result of the new legislation. The private company with limited liability was transformed into the private limited company. The public limited company kept its name.

The private limited company and the public limited company are still the most commonly used company forms for holding real estate, with the public limited company form being intended for larger companies.

The cooperative company form is now limited to real cooperative purposes in the sense of the ICA cooperative principles. Under the new law, this is interpreted strictly and the sanction is judicial dissolution if the conditions are not met. These conditions will often not be met in the case of holding real estate and therefore this form of company will only rarely be used for holding real estate, except when one wants to establish a social B-REIT (see below).

It is also legally possible to invest indirectly through a partnership, but 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 last amended by the law of 28 April 2020, 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:

  1. placing real estate at the disposal of users;
  2. as the case may be, owning real estate in accordance with the provisions of the law of 12 May 2014; and
  3. participating in DBF(M)(O) contracts (ie Design, Build, Finance, Maintain and/or Operate contracts), concessions and other forms of public-private partnerships, and which is licensed by the FSMA (the Belgian Financial Services and Markets Authority).
  4. the long-term development, management, setting up, operation or provision of:
    (i) storage facilities for the transport, distribution or storage of electricity, gas, fossil or non-fossil fuel and energy and related goods;
    (ii) utilities for the transport, distribution, storage or purification of water;
    (iii) installations for the generation, storage and transport of renewable or non-renewable energy; and (iv) waste and incineration facilities.

A B-REIT is either:

  1. publicly traded (a public B-REIT);
  2. ‘institutional’, ie an unlisted joint venture real estate investment fund or company set up by a public B-REIT, controlling the fund, on the one hand, and by one or more qualified institutional or professional investor(s), or natural persons (provided that the minimum subscription amount is provided for in a Royal Decree) on the other hand; or
  3. serving a 'social purpose' (a social B-REIT), ie, active in real estate infrastructures that are required in the social sector (ie, hospitals, schools etc) and set up by non-professional investor(s), complying with certain conditions, on the one hand, and by one or more qualified investor(s) on the other hand.

The real estate investment fund differs from a B-REIT as follows:

  • A B-REIT is an operational company which is managed in the company's interest (which is broader than the exclusive interest of the shareholders) whereas a real estate investment fund is a collective investment vehicle which is managed exclusively in the interests of its shareholders.
  • A B-REIT has a commercial purpose: placing real estate at the disposal of third party users whereas a real estate investment fund brings together capital for investment purposes.
  • A B-REIT is managed according to a business strategy whereas a real estate investment fund is managed according to an investment strategy.

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:

  • professional clients and eligible counterparties in the meaning of the Markets in Financial Instruments Directive (MiFID); and
  • eligible investors "on request", ie legal entities that have registered with the FSMA to qualify as eligible investors. The possibility of voluntarily registering as an eligible investor with the FSMA makes the B-REIF accessible to an even larger group of potential investors.

European long-term investment funds (“ELTIFs”)

Introduced in 2015 by Regulation (EU) 2015/760, the European long-term investment funds (ELTIFs) are authorized and regulated alternative investment funds (AIFs) with a focus on private market investments. ELTIFs are the only type of funds dedicated to long-term investments that can be distributed on a cross border basis within the European Union to both professional and retail investors. The ELTIF regulation was recently amended1 to enhance the attractiveness of ELTIFs as go-to vehicles for cross-border regulated infrastructure, real-estate, and private equity financing from both retail and professional investors.

Real assets (being defined as assets that have an intrinsic value due to their substance and properties) fall within the scope of Eligible Investments in which an ELTIF may invest. Such real assets include immovable property, such as communication, environment, energy or transport infrastructure, social infrastructure, including retirement homes or hospitals, as well as infrastructure for education, health and welfare support or industrial facilities, installations, but also assets, including intellectual property, vessels, equipment, machinery, aircraft or rolling stock. Investments in commercial property, facilities or installations for education, counselling, research, development, including infrastructure and other assets that give rise to economic or social benefit, sports, or housing, including housing for senior residents or social housing, should also be deemed to be eligible investments in real assets due to the capacity of such assets to contribute to the objective of smart, sustainable and inclusive growth.

An ELTIF can be incorporated under any company form as exists in Belgium (ie (i) the private limited company (besloten vennootschap); (ii) the public limited company (naamloze vennootschap); (iii) the cooperative company (coöperatieve vennootschap); and partnership (maatschap) (which can take the form of a general partnership (vennootschap onder firma) or limited partnership (commanditaire vennootschap)).


1 Regulation (EU) 2023/606 amending Regulation (EU) 2015/760 as regards the requirements pertaining to the investment policies and operating conditions of European long-term investment funds and the scope of eligible investment assets, the portfolio composition and diversification requirements and the borrowing of cash and other fund rules which entered into force on 9 April 2023 and will start to apply on 10 January 2024.

Bosnia-Herzegovina

Bosnia-Herzegovina

Four types of structure are available to the real estate investor:

  • Limited liability companies

  • Joint-stock companies

  • Unlimited partnerships

  • Limited partnerships
Brazil

Brazil

Any type of corporate vehicle may hold real estate assets, such as corporations (Sociedades Anônimas), limited liability companies (Sociedades Limitadas) and real estate investment funds (FIIs). The vehicle to be adopted may vary depending on the objectives and strategy of the investment.

It’s important to note that if the corporate vehicles are controlled by a majority of foreign investors, they may be considered foreign companies for the purpose of the restrictions applicable to acquisition and rental of rural real estate properties by foreign persons, pursuant to Brazilian Federal Law No. 5.709/71, Brazilian Federal Law No. 8.629/93 and Brazilian Federal Law No. 6.634/79.

Canada

Canada

The main types of corporate vehicle are:

  • Federal or provincial corporations
  • Foreign corporations that have proven corporate existence and/or registered federally or provincially
  • 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.
China

China

FIE in the PRC typically takes the form of either a Sino-foreign joint venture (JV) or a wholly foreign-owned enterprise (WFOE).

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.

Colombia

Colombia

In Colombia, the following societies could be used as SPVs:

  • Commercial companies: Limited Liability Company (Ltda); Stock Company (SA); and Simplified Joint Stock Company (SAS).
  • Branch of a foreign company, which are those incorporated under the law of another country and with their principal domicile abroad. However, it is necessary to clarify that they do not have independent legal personality from their principal company, neither the capacity to act beyond the principal.
  • Trusts constituted through the signing of a trust agreement.
Croatia

Croatia

Types of corporate vehicle are:

  • Limited liability company (društvo s ograničenom odgovornošću – doo)
  • Public limited liability company (dioničko društvo – dd)
  • Public partnership (javno trgovačko društvo – jtd)
  • Limited partnership (komanditno društvo – kd)
  • Closed-end real estate investment fund (zatvoreni investicijski fond s javnom ponudom za ulaganje u nekretnine)
Czech Republic

Czech Republic

Czech law recognises four types of Czech corporate vehicles and three European forms, as follows:

  • limited liability company (společnost s ručením omezeným – s.r.o.)
  • joint stock company (akciová společnost – a.s.)
  • unlimited partnership (veřejná obchodní společnost – v.o.s.)
  • limited partnership (komanditní společnost – k.s.)

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.

Besides these forms of Czech-based corporations, a foreign company may set up a permanent establishment in the Czech Republic in the form of a registered branch of the foreign company. Such branch is registered with the Company Register and does not possess legal personality.

Denmark

Denmark

The types of corporate vehicles are:

  • partnership (Interessentskab);
  • public limited company (Aktieselskab);
  • private limited company (Anpartsselskab);
  • limited partnership (Kommanditselskab); and
  • limited partnership company (Partnerselskab).

It is necessary to register all types of corporate vehicles with the Danish Business Authority.

France

France

Types of corporate vehicle are:

  • SCI (société civile immobilière) – real estate civil company
  • SNC (société en nom collectif) – partnership
  • SARL (société à responsabilité limitée) – limited liability company
  • SA (société anonyme) – stock corporation
  • SAS (société par actions simplifiée) – simplified stock corporation
  • SCPI (société civile de placement immobilier) – real estate civil investment company
  • SIIC (société d’investissement immobilier cotée) – listed real estate investment company
Germany

Germany

There are various investment vehicles that can be used for real estate investments in Germany. The two main corporate vehicles are:

  • Gesellschaft mit beschränkter Haftung (GmbH), a limited liability company
  • Aktiengesellschaft (AG), a German stock corporation

Additionally, there are collective investment vehicles:

  • real estate investment trusts (REIT)
  • Immobilien Sondervermögen, or real estate funds

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.

German corporate vehicles need to be registered in the German transparency register (Transparenzregister), disclosing its ultimate beneficial ower (UBO) within the meaning of German law. The UBO-requirements are very detailed any subject to individual review. Generally, a natural person holding more than 25% of the shares or voting rights in a legal entity or exercising control in a comparable manner or, if another legal entity holds more than 25% of the capital or voting rights of a legal entity (or exercises control in a comparable manner), the natural person who can exercise decisive influence on the ‘parent entity’ is considered a UBO. In case there is no UBO within the meaning of German law, management of the legal entity is considered as fictitious UBO and needs to be registered in the transparency register.

Hong Kong, SAR

Hong Kong, SAR

The main types of corporate vehicle available to investors are:

  • Companies (private or public)
  • Branches of a foreign corporation
  • Partnerships
  • Trusts
Hungary

Hungary

Five types of corporate vehicle can be used for real estate investments in Hungary:

  • A limited liability company (korlátolt felelősségű társaság, abbreviated as kft), being the default corporate vehicle for real estate investments
  • A company limited by shares (részvénytársaság, abbreviated as zrt or nyrt)
  • A limited partnership (betéti társaság, abbreviated as bt)
  • An unlimited partnership (közkereseti társaság, abbreviated as kkt)
  • A real estate investment fund
Ireland

Ireland

There are various types of vehicle available, including:

  • An Irish company
  • A regulated Irish Collective Asset-management Vehicle
  • A regulated investment company with variable capital
  • An unregulated partnership
  • A Real Estate Investment Trust
Italy

Italy

In the main, three types of corporate vehicle are used for investments in real estate in Italy:

  • the società a responsabilità limitata (Srl)
  • the società a responsabilità limitata semplificata (Srls); the Srls was introduced in January 2012 and significantly reformed in the summer of 2013, and
  • the società per azioni (SpA)
Japan

Japan

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.

Netherlands

Netherlands

Three types of corporate vehicles are commonly used for foreign real estate investments in the Netherlands: the co-operative (Cooperatie), the limited liability company (Besloten vennootschap met beperkte aansprakelijkheid) and the public limited company (Naamloze vennootschap).

In addition, these latter two entities can qualify as fiscal investment vehicles in order to benefit from a special tax regime. The Dutch government, however, intends to prohibit the direct investment in Dutch real estate by fiscal investment vehicles as per 1 January 2025, effectively abolishing the special tax regime for holding of Dutch real estate assets.

Other vehicles often used to make indirect investments in the Netherlands are the Limited Partnership (Commanditaire Vennootschap) and the mutual fund (fonds voor gemene rekening).

New Zealand

New Zealand

There are a range of corporate vehicles available to foreign investors looking to hold commercial property in New Zealand, including:

  • Limited liability companies
  • Partnerships
  • Limited partnerships
  • Discretionary Trusts
Nigeria

Nigeria

Real estate investments are commonly made using limited liability companies, in spite of their tax inefficiencies. This vehicle is tax transparent, and the company income tax rate payable by the company is usually dependent on the income of the company. Collective Investment Schemes in Nigeria, however, 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:

  1. Private Limited Liability Company
  2. Public Limited Liability Company
  3. Real Estate Investment Trust
  4. Limited Liability Partnership
  5. Limited Partnership
  6. Real Estate Investment Company
Norway

Norway

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 private limited company (aksjeselskap/AS), and
  • The public limited company (allmennaksjeselskap/ASA)

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.

Poland

Poland

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 certain partnerships 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 changes related to taxation of investment fund and introducing General Anti-Avoidance Clause, any tax structure to be implemented shall adjust to new regulation.

Three types of corporate vehicle can be used for investing in real estate: the limited liability company (Spółka z ograniczoną odpowiedzialnością, sp. z o.o.), the joint stock company (Spółka akcyjna, S.A.) and the  simple joint stock company (Prosta Spółka akcyjna, P.S.A.).

Portugal

Portugal

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.

Romania

Romania

Commercial companies may be set up in one of the following forms:

  • An unlimited partnership
  • A limited partnership
  • A joint-stock company
  • A partnership limited by shares
  • A limited liability company

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.

Slovak Republic

Slovak Republic

There are five types of corporate vehicle which may be used for investment in real estate in the Slovak Republic:

  • Limited liability company
  • Joint-stock company
  • Unlimited partnership
  • Limited partnership
  • Simple joint-stock company[1]

[1] Please note that in January 2021, the Ministry of Justice of the Slovak Republic submitted a legislative intention for inter-ministerial consultations, which includes, inter alia, a proposal to abolish this type of corporate entity.

Spain

Spain

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 limitadaSL) 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.

Sweden

Sweden

Several types of corporate vehicle are used for real estate investments, including limited liability companies (aktiebolag), partnerships (handelsbolag), or partnerships with limited liability (kommanditbolag).

Thailand

Thailand

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.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

(a) Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

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.

(b) Within the Abu Dhabi Global Market free zone

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”.

United Arab Emirates - Dubai

United Arab Emirates - Dubai

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.

Within the Jebel Ali Free Zone Authority

In the Jebel Ali Free Zone Authority (JAFZA), offshore companies can be set up and wholly owned by foreigners.

UK - England and Wales UK - England and Wales

UK - England and Wales

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:

  • limited partnerships;
  • limited liability partnerships;
  • investment syndicate trusts;
  • property unit trusts (both on and offshore);
  • limited companies;
  • public limited companies;
  • real estate investment trusts (REITs); and
  • property authorised investment funds (PAIFs)
UK - Scotland

UK - Scotland

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:

  • Limited partnerships
  • Limited liability partnerships
  • Investment syndicate trusts
  • Property unit trusts (both on and offshore)
  • Private limited companies
  • Public limited companies
  • Real estate investment trusts (REITs)
  • Property authorized investment funds (PAIFs)
United States

United States

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.

On 1 January 2024, the Corporate Transparency Act (CTA) came into effect, requiring certain non-exempt business entities (known as “reporting companies”) to file information on their “beneficial owners” with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The CTA also requires filing information about “company applicants” for entities formed on or after 1 January 2024, which may include executives, law firm personnel, and corporate filing and maintenance company employees. The CTA requires any “reporting company” to complete and submit disclosure forms to FinCEN, including the identity of any “beneficial owner” of the company. A “reporting company” is a corporation, limited liability company or other entity created by filing a document with a secretary of state or similar office under the laws of a state in the United States. This includes foreign companies registered to do business in the United States. FinCEN has established 23 types of exemptions from being a reporting company. These include governmental authorities, certain types of banks and bank holding companies, broker dealers, investment advisors and other investment companies registered with the SEC, insurance companies, large corporations and certain “pooled investment vehicles”. Determining whether an entity qualifies for an exemption will require a close reading of the text of each exemption and related definitions. Reporting companies created before 1 January 2024 must file by 1 January 2024. Reporting companies formed on or after 1 January 2024 must file within 90 days of formation. Reporting companies that lose an exemption must file within 30 days of losing the exemption. Individual states, including New York, have enacted or may enact similar legislation requiring disclosures regarding beneficial owners of business entities.

Zimbabwe

Zimbabwe

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 Constitution of Zimbabwe 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, either individually or in association with others.

Furthermore, the Constitution does not 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 in terms of the Deeds Registries Act [Chapter 20:05] 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:

  • Unit Trusts;
  • Limited companies; and
  • Public limited companies