REALWorld Law

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.

Argentina

Argentina

Investment in real estate occurs either through an asset deal or through a share deal and may be carried out by an onshore or offshore entity or trust.

Entities and trusts incorporated in Argentina must be registered and comply with the requirements set forth in the jurisdiction of incorporation. Registry must be completed on the Office of Corporations and on the Federal Tax Authority (AFIP).

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, BV/société à responsabilité limitee, SRL) and a public 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. 

Brazil

Brazil

The acquisition of real estate property can be carried out by means of an asset deal or a share deal. However, the deed by which the share deal is formalized must specify the real estate properties to be transferred to the buyer. In both cases, the acquisition is only completed once the deed by which the share deal or the asset deal has been formalized is registered with the relevant real estate registry office.

Investment in real estate can be made by various means:

  • the acquisition of full ownership of a property;
  • the acquisition of an interest in a co-ownership regime of a property (in this case, the party owns a percentage or part of the property, in a condominium regime known as condomínio civil);
  • the acquisition of a timeshare interest in a property (in Portuguese, multipropriedade);
  • the acquisition of an equity interest in a company that owns real estate;
  • the occupation of commercial or residential properties for a fixed indefinite period by means of various types of lease agreements (including built to suit agreement); usufruct; easement; or surface right.

Foreign investors are subject to restrictions on the acquisition of rural properties, whether by individuals or corporate entities, in accordance with Brazilian Federal Law No. 5.709/71 and Brazilian Federal Law No. 8.629/93, as well as restrictions on the acquisition of rural properties located at a distance of 150 km from Brazilian borders, requiring detailed analysis on a case-by-case basis.

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.

Temporary prohibition on non-Canadian purchases of Canadian residential property

Beginning 1 January 2023 however, non-Canadiansare prohibited from buying residiential property in Canada. The prohibition is anticipated to be in place for two years. A non-Canadian means generally:

(a) an individual that is neither a Canadian citizen nor resident in Canada;

(b) a corporation that is not incorporated in Canada; or

(c) a private corporation incorporated in Canada but that is controlled by a person described in (a) or (b).  

There are several exceptions such as, but not limited ‎‎to, temporary residents who satisfy certain conditions, refugees, diplomatic or consular purposes and ‎‎Non-Canadian individuals with Canadian spouses or common law partners. Furthermore, the prohibition ‎‎will not apply to agreements of purchase and sale which are entered into before 1 January 2023. Penalties for non-compliance include a fine of up to $10,0000 as well as the ‎‎forced sale of the residential property.‎

China

China

For real estate acquisitions that are not for self-use, foreign investors must establish a foreign-invested enterprise (FIE)for the proposed investment project.

The establishment of a FIE requires the reporting to the Ministry of Commerce (MOFCOM) or its local counterpart, and the registration with the State Administration of Market Regulation (SAMR) or its local counterpart.

Colombia

Colombia

No text yet.

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. However, the real estate acquisition tax has been cancelled in 2020. 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 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, SAR

Hong Kong, SAR

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 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 godo-kaisha (GK), which is an on-shore entity.  A 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 (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.

New Zealand

New Zealand

Individuals, companies, trusts, and partnerships can invest in New Zealand real estate either directly or indirectly through ownership of membership interests in an interposed entity holding the New Zealand real estate. The indirect investment in New Zealand real estate can be via a New Zealand or foreign entity.

Ultimately, the most effective tax structure for an individual will depend on their personal tax attributes (eg where they are tax resident) and their commercial objectives (eg buy and hold, buy and sell).

Nigeria

Nigeria

Under Nigerian Law, investors may 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 or real estate investment trusts. 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, organizations 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.

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 within the foreign ownership quota ie up to 49% of the total area of all units in such condominium building. Also, a foreign individual or entity, is allowed to hold up to 49% 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

The UK’s decision to leave the European Union is likely to cause some uncertainty. Fiscal consequences may include changes in Stamp Duty Land Tax (England), Land and Building Transaction Tax (Scotland) and Land Transaction Tax (Wales). There may well be some other changes. If you have a contact in DLA Piper, please do check the latest position with him or her.

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

The UK’s decision to leave the European Union is likely to cause some uncertainty. Fiscal consequences may include changes in Stamp Duty Land Tax (England), Land and Building Transaction Tax (Scotland) and Land Transaction Tax (Wales). There may well be some other changes. If you have a contact in DLA Piper, please do check the latest position with him or her.

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).

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, real estate investment trusts (REITs) 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 REIT.