Taxes

Routes for investment

How can investment in real estate by an individual/organization/company be set up?

Angola

Angola

Asset deals and share deals are the two ways in which an individual or a company can invest in real estate. When foreign investment is involved compliance with the terms of the Private Investment Law is paramount.

Australia

Australia

Individuals/organizations/companies can invest in Australian real estate either directly or indirectly via the ownership of membership interests in an interposed entity holding the Australian real estate. The indirect investment in Australian real estate can be via an Australian or foreign entity.

Belgium

Belgium

Investments in real estate in Belgium can be carried out via a direct acquisition from abroad, a direct acquisition from abroad through a local permanent establishment or an indirect acquisition through a local company.

Several types of corporate vehicles can be used for investment in real estate in Belgium by an indirect acquisition through a local company. A closed limited liability company (besloten vennootschap met beperkte aansprakelijkheid, BVBA/société privée à responsabilité limitee, SPRL) and a limited liability company (naamloze vennootschap, NV/société anonyme, SA) are the most commonly used.

Bosnia-Herzegovina

Bosnia-Herzegovina

Foreign investors can acquire real estate in Bosnia and Herzegovina either directly or indirectly through the use of a corporate vehicle. Although direct acquisition of real estate is possible, due to the extensive administrative obligations and the requirement for reciprocal rights to exist between the foreign investor's country and Bosnia and Herzegovina, in practice this does not often happen. Indirect acquisition through the purchase of shares in existing companies or the establishment of a new company in Bosnia and Herzegovina is the normal practice.

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

  • Limited liability companies 
  • Joint stock companies 
  • Limited partnerships, and 
  • Unlimited partnerships

Real estate ownership is regulated in the same way under all four types of structure. 

Canada

Canada

An individual/organization/company may invest in Canadian real estate either directly or indirectly through any of many different legal entities including corporations, unlimited liability companies, general and limited partnerships, limited liability partnerships, and trusts (including real estate investment trusts). The owner may be a Canadian resident or a foreign individual or entity.

China

China

For real estate acquisitions that are not for self-use, foreign investors must establish a Foreign Invested Enterprise (FIE), specifically set up for the proposed investment project.

As with foreign investment generally in the PRC, real estate investment is subject to a system of multi-tiered approvals. The establishment of a real estate FIE requires approval from the relevant local government and the Ministry of Commerce ("MOFCOM") or its local counterpart and must be filed with central MOFCOM, and the acquisition process may involve approval from the Land Administration Bureau and Real Estate Administration Bureau where relevant. In addition, investors will need approval from the State Administration of Foreign Exchange (SAFE) to enable settlement into Renminbi of foreign funds for the proposed acquisition.

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 World Trade Organization (WTO), WFOEs have become the preferred FIE structure in most unrestricted industries.

Croatia

Croatia

Investors wishing to invest in real estate in Croatia can do so either through a direct acquisition of the real estate or indirectly, through the acquisition of a Croatian corporation.

Direct acquisition of real estate assets by foreign investors other than EU residents (individuals or legal entities) is subject to reciprocity (ie it is permitted as long as Croatian citizens are allowed to acquire real estate in the investor's home country) and subject to written consent from the Ministry of Justice. Agricultural land and forests cannot generally be acquired by foreigners, unless an international agreement provides otherwise.

Four types of corporate structure are available to real estate investors:

  • 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)

Real estate ownership is regulated in the same way under all these types of structure.

Czech Republic

Czech Republic

There are several possible routes for real estate investment in the Czech Republic, including a direct acquisition of real estate (an asset deal), an indirect acquisition via a corporation (a share deal), an acquisition via a partnership and a purchase of an enterprise or its branch office. No specific conditions for organizations or companies apply to investment in real estate. On 1 May 2011 the seven year transitional period during which temporary restrictions applicable to agricultural land and forest ended and, from this date, European Union rules regarding the free movement of capital apply to real estate acquisitions in the Czech Republic.

Investors may be interested in investing through special funds, known as Real Estate Funds or Funds for Qualified Investors. A Real Estate Fund brings together domestic and foreign investors, whose scope of business comprises the acquisition, operation and transfer of real estate for profit. These funds are subject to legal limitations and the supervision of the Czech National Bank, mainly because they are intended for public investment. On the other hand, a Fund for Qualified Investors attracts finance only from a limited range of "Qualified Investors" (ie financial institutions, such as banks, insurance companies, pension companies, etc) and, therefore, the Fund is not subject to such strict limitations and supervision. The Fund governs itself through its statute.

Besides asset deals, real estate may also be acquired through a share deal.

Asset deals involve the sale of the real estate directly; any profit from the sale, as well as any property transfer profit, is taxed. The buyer acquires ownership of the property and, at the same time, the seller loses it by virtue of registration in the Cadastral Register – this is a time-consuming process and, in the meantime, questions of insurance and responsibility for maintenance of the real estate may arise.

On the other hand, in the case of a share deal, a share in the company that owns the real estate is transferred. After the transfer, the legal owner of the real estate – the company – remains unchanged but, because the major share in the company is owned by the buyer, the real estate will, for practical purposes, be owned by that person. An advantage is that the company may, subject to certain legally defined conditions, achieve various tax-exemptions, such as an exemption from paying VAT, property acquisition tax and even income tax. The procedure of transferring property rights is much easier in a share deal, ownership of the shareholding passes by virtue of the share sale contract, which saves a significant amount of time as there is no need to implement the complicated procedure at the Cadastral Register that applies in the case of an asset deal.

Denmark

Denmark

Routes to investment are:

  • Direct acquisition by an individual or limited liability company/partnership
  • Direct acquisition by a foreign or local entity, and
  • Indirect acquisition through a limited liability company/partnership

Non-Danish companies and individuals, who have not been residents of Denmark for a period of at least five years need permission from the Ministry of Justice to buy real estate in Denmark. Special rules apply for nationals of EU or EEA Member States.

France

France

Investment in real estate occurs either through an asset deal or through a share deal.

Germany

Germany

Investors, whether individuals, organizations or companies, wishing to invest in German real estate have a number of options, including a direct acquisition of the real estate or an indirect investment through the purchase of shares in the corporate vehicle or interest in the partnership owning the real estate.

Foreign investors can acquire real estate directly from abroad either with or without a local permanent establishment. There are also collective investment vehicles such as real estate investment trusts (REITs) or (open-ended) real estate funds (Immobilien-Sondervermögen). Special tax regimes apply to these investment vehicles.

Hong Kong

Hong Kong

Please refer to the topic Corporate vehicles in Hong Kong, in particular the sub-topic Types of corporate vehicle for investment.

Hungary

Hungary

Either by direct acquisition of the real estate asset or indirect acquisition through a local company.

Ireland

Ireland

There are a number of options, including:

  • The direct acquisition of real estate
  • Indirect acquisition through the purchase of shares in a corporate vehicle that owns, possesses or exploits real estate, and
  • Through a collective investment entity, usually via a financial institution that invests in real estate, with individual units available to property investors
Italy

Italy

The structures available in Italy to an outside investor are:

  • a direct acquisition of real estate assets without a permanent establishment
  • a direct acquisition of real estate assets through an Italian permanent establishment
  • indirect acquisition through an Italian corporate vehicle, and
  • investment in a real estate investment fund or SIIQ (Società di Investimento Immobiliare Quotate, ie listed companies which invest in real estate).
Japan

Japan

Any individual, organization or company can acquire real estate existing in Japan.  The most common investment structures used by offshore investors are as follows:

Direct Acquisition

Direct acquisition by an offshore investor or an offshore special purpose company (SPC) is common.  In a direct acquisition, an offshore investor either directly or through an SPC acquires the target property or trust beneficial interest (TBI) in Japan.  Generally speaking, there are no restrictions on foreign direct investment in Japanese real estate.

Since the investor or SPC is located offshore, incorporation of an on-shore acquisition entity in Japan is not required.

GK

Indirect acquisition through a GK, which is an on-shore entity.  A godo-kaisha or GK is similar to a limited liability company under US law.  It allows more flexibility in regards to corporate governance and management decisions than a TMK (described below) or a conventional corporation (kabushiki-kaisha or KK).  Please note that a GK is not a pass-through corporation similar to a US limited liability company, which can elect to become a disregarded entity.

No minimum capital is required for establishment of a GK.  A GK is established by way of a filing with the Legal Affairs Bureau and may be incorporated within approximately one month after the incorporation documents are executed.

GK-TK

A tokumei-kumiai (TK) is a form of partnership based on an agreement between a silent partner(s) (ie investors) (TK Partner(s) or tokumei-kumiai-in) and a GK (as the TK operator or eigyosha).  Under a GK-TK structure, a GK is established as a special purpose company whose sole purpose is normally to hold assets (eg fee property interests or TBI).

The incorporation process for a GK is straightforward as discussed above.  The TK agreement may be signed by the TK Partner(s) and a GK any time the parties desire but only after formation of the GK.  The TK agreement is not filed or made publicly available.

TMK

A tokutei-mokuteki-kaisha or TMK is a special purpose limited liability company that can only be used for the securitization of assets. 

Property rights can be securitized by a TMK through the issue of asset-backed securities (shisan-taio-shoken) to investors, usually in the form of equities or bonds.  Profits are distributed to investors by way of dividends on equities or interest on bonds, depending on the nature of the security issued to investors by the TMK.  Because of its special role as an investment vehicle for securitized assets and preferential tax features, TMKs are subject to stringent regulatory requirements.

No minimum capital is required.  A TMK may be incorporated within approximately one month.  However, in order for TMK to acquire target assets or to issue asset-backed securities, an asset liquidation plan must be filed.  It usually takes about three months for a TMK to be incorporated and become eligible to acquire assets.

Netherlands

Netherlands

An individual/organization/company can invest in real estate in the Netherlands by means of an asset deal, that is, acquiring the asset directly, or a share deal, that is acquiring the corporate vehicle or SPV which already owns the asset.

Nigeria

Nigeria

Rule 510 of SEC Rules and Regulations 2013 pursuant to Section 193 of the Investment and Securities Act, 2007 provides that investors can participate in real estate investment through a company incorporated for the purpose of acquiring interests in real estate or property development or, a Trust constituted for the purpose of investments in real estate and real estate related assets. The investor in the Nigerian real estate space has the discretion to determine the structures to adopt in considering investments in real estate. An individual or company may elect to directly acquire and control a real estate asset or choose to invest through other previous existing or new specifically setup corporate investment vehicles such as companies, cooperative societies, real estate investment trusts, partnerships, pension schemes etc. It is key that only juristic persons and going concerns are recognized as being able to own and invest, acquire title and interests in real property. Investors must give careful consideration to the particular structure adopted for any real estate investment as it will impact on the investors control and direction of the asset, benefits, liabilities and tax implications.

Norway

Norway

Investments in real estate in Norway can be carried out through direct acquisition from abroad, direct acquisition from abroad through a local permanent establishment, or indirect acquisition through a local company.

Poland

Poland

Individuals, organisations and companies may invest in real estate in Poland directly or through a corporate vehicle.

Portugal

Portugal

Investments in real estate can be performed individually or structured through vehicles such as commercial companies, real estate investment funds, property investment companies.

Romania

Romania

Investors may basically acquire property in Romania both directly by means of an asset deal or indirectly through a company by means of a share deal. Direct land acquisition by means of an asset deal by foreign entities is subject to some restrictions. Companies which have their registered headquarters in Romania are treated as Romanian companies irrespective of the citizenship of their shareholders and therefore they are not subject to these restrictions.

Russia

Russia

An individual/organisation/company can invest in real estate in Russia by means of an asset deal, ie acquiring the asset directly, or by means of a share deal, ie acquiring the corporate vehicle or SPV which already owns the asset.

Slovak Republic

Slovak Republic

Structures for investment include:

  • Direct acquisition of real estate (asset deal)
  • Acquisition via a partnership
  • Indirect acquisition via a corporation (share deal)
  • Purchase of an enterprise, or part of an enterprise, constituting a separate branch of a business
Spain

Spain

Asset deals and share deals are the two ways in which an individual/organization/company can invest in real estate in Spain. An asset deal can be a direct acquisition from abroad, a direct acquisition from abroad through a local permanent establishment, an indirect acquisition through a local holding company or an indirect acquisition through a local partnership.

Sweden

Sweden

  • Direct acquisition by an individual or limited liability company/partnership
  • Direct acquisition by a foreign or local entity
  • Indirect acquisition through an incorporated company (an 'AB')
  • Indirect acquisition through a partnership
Thailand

Thailand

An individual/organization/company may invest in Thai real estate either directly in his or its own name or indirectly through any one of many different legal entities, including corporations, limited partnerships, registered ordinary partnerships, property funds and REITs.

Under the Land Code, generally, foreigners are not allowed to own land freehold. However, under the Condominium Act, generally, foreigners may own condominium units. Also, a foreign individual or entity, is allowed to hold up to 49 percent of the investment units in a property fund having ownership or a leasehold interest in land or immovable property. The aforementioned also applies to REIT that invests in real estate in Thailand.

Please note that the establishment of a new property fund is no longer allowed under Thai law. However, the existing property funds are able to operate their businesses until the expiration of the fund.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

The ability to invest in property depends on the class of person/entity and location of the property.

UAE nationals

UAE nationals are individuals possessing UAE nationality and companies and establishments wholly owned by them.

UAE nationals can hold any land interest anywhere in Abu Dhabi.

The same rights are held by:

  • The UAE government and governments of other Emirates
  • The Abu Dhabi government and entities wholly owned by it

GCC nationals

GCC nationals are nationals of the member countries of the Gulf Co-operation Council, which are the Persian Gulf states of:

  • Bahrain
  • Kuwait
  • Oman
  • Qatar
  • Saudi Arabia
  • United Arab Emirates

and corporate entities wholly owned by them.

GCC nationals can hold any land interest within designated investment areas in Abu Dhabi.

Foreign individuals and corporate entities falling outside categories 1 and 2 above

Foreigners can hold the following land interests within 'designated investment areas' only:

  • Floors in buildings (but not the land itself)
  • Usufruct rights (rights of exploitation) lasting up to 99 years, and
  • Musataha rights (development rights) lasting up to 50 years (renewable by mutual consent for a further term of 50 years)

Also 'individuals, companies and parties to be specified by a decision by the Executive Council', can be afforded the same status as nationals for the purpose of the owning real estate. The Executive Council has so far only issued such decisions in respect of Sorouh Properties PJSC and Aldar Properties PJSC, thereby allowing them to hold land interests throughout Abu Dhabi notwithstanding that they have an element of foreign ownership.

United Arab Emirates - Dubai

United Arab Emirates - Dubai

This depends on the nationality of the investor. Only specific areas in Dubai are designated for 'foreign' ownership.

For land which is not designated for foreign ownership, only nationals of the United Arab Emirates (UAE) or any other country within the Gulf Cooperation Council (GCC), or companies wholly owned by them, can own real estate in such areas. The other GCC countries are the Kingdom of Saudi Arabia, Qatar, Kuwait, Oman and Bahrain.

For land which is designated for 'foreign' ownership, a person or company of any nationality can acquire an interest unlimited in time (ie freehold), usufruct or long leasehold interest (not exceeding 99 years). 

UK - England and Wales UK - England and Wales

UK - England and Wales

Individuals, companies or other organizations can invest in real estate in England and Wales through almost any type of vehicle. This includes investment through UK or non-UK companies, partnerships, unit trusts and pension schemes as well as direct investment by individuals.

However, the choice of structure and choice of vehicle will have significant tax and other consequences. It is also possible to invest in property collectively, for example through a property investment fund or a real estate investment trust (REIT).

UK - Scotland

UK - Scotland

Individuals, companies or other organizations can invest in real estate in Scotland through almost any type of vehicle. This includes investment through UK or non‑UK companies, partnerships, unit trusts and pension schemes as well as direct investment by individuals.

However, the choice of structure and choice of vehicle will have significant tax and other consequences. It is also possible to invest in property collectively, for example through a property investment fund or a real estate investment trust (REIT).

Ukraine

Ukraine

A foreign investor can invest in Ukrainian real estate either by directly purchasing the real estate (asset deal) or by purchasing a company holding the asset (share deal).

Asset deals

The advantages of asset deals include:

  • Anti-monopoly Committee approval is generally not required, and
  • There is no need to acquire any assets other than the real estate asset/relevant plot of land

The disadvantages of asset deals include:

  • VAT at 20% applies in most cases
  • 1 percent state duty is payable
  • 1 percent pension fund duty is payable (except on the acquisition of plots of land)
  • The tax authorities express approach that the direct ownership of Ukrainian real estate by non-resident as such leads to the creation of a permanent establishment (this position is disputable), and
  • It takes time to re-register the relevant title/rights to the plot of land

Share deals

The advantages of share deals include:

  • No state duty or pension fund charges are payable
  • There is no need to re-register the title/rights (for plots of land)
  • There is no need to re-issue the approvals and permits (if applicable), and
  • No VAT applies

The disadvantages of share deals include:

  • Anti-monopoly Committee approval may be required, and
  • In addition to the relevant assets, the buyer acquires the other assets and liabilities of the company
United States

United States

An individual/organization/company may invest in US real estate either directly or indirectly through any one of many different legal entities, including corporations, general and limited partnerships, limited liability companies, real estate investment trusts (REITs) and other types of trusts.

Zimbabwe

Zimbabwe

Individuals, companies or other organizations can invest in real estate in Zimbabwe through almost any type of vehicle. This includes investment through companies, partnerships, unit trusts and pension schemes as well as direct investment by individuals.

However, the choice of structure and choice of vehicle will have significant tax and other consequences. It is also possible to invest in property collectively, for example through a property investment fund.