REALWorld Law

Taxes

Income from a real estate investment

What types of income can be expected from ownership of real estate?

Angola

Angola

Income is predominantly from rentals or capital gains whenever the property is sold.

Australia

Australia

Income is generally received by the corporate vehicle from rentals. However, profits from developing and/or trading land can also be taxed as income (as opposed to capital gains).

Generally, if the real estate is held by a company, then investors can expect to receive dividends. Alternatively, if the property is held through flow through or tax-transparent entities (such as certain trusts and partnerships) then the income derived from the real estate (eg rentals and trading profits) generally flow through to the investors.

Belgium

Belgium

Typically, rental income from letting out premises. In addition capital gains might accrue on the sale of the property.

Bosnia-Herzegovina

Bosnia-Herzegovina

Depending on the type of real estate, income can be generated either from produce in the case of agricultural land (usufruct) or from leasing out the premises.

Canada

Canada

The typical type of income from real property is rent. Other types of income related to, if not actually from, real property could include property management fees, fees for facilities on the property (eg fitness clubs), and fees for associated services (eg laundry, food preparation or delivery).

China

China

Income is predominantly from rentals. Profits from developing or trading land can also be taxed as income (as opposed to capital gains).

Croatia

Croatia

Rental income can be generated by leasing offices or flats. Income may also be generated from the cultivation of land.

Czech Republic

Czech Republic

This could be income from leasing the real estate and from further transfers onwards. Ownership constitutes for every owner not only a right to possess the real estate and a right to dispose of it, but also a right to use and reap profits from it, for example in the form of receiving rents from the property.

Denmark

Denmark

Income is generated by rent or from concession fees depending on the type of contract which applies.

France

France

Dividends can be expected from real estate ownership through a company.

Germany

Germany

The income from ownership of real estate includes income from trade or business (Einkünfte aus Gewerbebetrieb), leasing income (Einkünfte aus Vermietung und Verpachtung) or other income (sonstige Einkünfte).

The categorization of a foreign investor's income depends on his activities in Germany.

The income of an investor is generally categorized as leasing income or other income (ie capital gains from the sale of the property).

In the scenarios below, however, the income of an investor will qualify as income from trade or business:

  • Investment via a German corporate vehicle
  • Investment via a partnership if all the partners are corporations and the partnership is managed by its general partners and/or third parties only
  • Where the investor provides significant extra services in addition to the real estate, and
  • Where the investor sells more than three real estate assets (this may include interests in real estate holding partnerships and real estate funds) within a period of five years, or the sale of the real estate occurs within a short period of time following the construction of the building (ie approximately five years after the completion of construction)

The income of a foreign corporate investor is generally categorized as income from trade or business.

Hong Kong

Hong Kong

Property can be rented out, which would produce rental income.

Hungary

Hungary

Generally, real estate can be rented or sold to generate income.

Ireland

Ireland

Direct investment

Rental income can be generated from letting commercial/residential real estate. In certain circumstances part of the premium received in respect of the grant or assignment of a lease is subject to income tax (the remainder is subject to capital gains tax).

Rental income is taxed at the rate of 20 percent where held by a non‑resident person not carrying on a trade in Ireland through a branch or agency.

Irish Limited Liability Company

Rental income can be generated from letting commercial/residential real estate. In certain circumstances part of the premium received in respect of the grant or assignment of a lease is subject to corporation tax (the remainder is subject to capital gains tax).

Rental income is taxed at the rate of 25 percent where held by a company which is resident in the jurisdiction or a non‑resident company carrying on a trade here through a branch or agency.

Italy

Italy

An investor may derive income from letting property, either directly or by means of dividends or distributions made by a corporate vehicle or fund.

Japan

Japan

In a direct acquisition, income is predominantly received from rental income or TBI funded by rental income.  In other structures, income is distributed to offshore investors as dividends.

Netherlands

Netherlands

Investors can expect to receive rental income or gains related to the disposal of real estate.

Nigeria

Nigeria

The most common income from ownership of real estate are rental payments by made by tenants, lessees and licensees of the property and capital gains or profits arising from the sale of the property.

The owner of property will also derive income from the business operations conducted within the property whether providing hotel, hospitality, leisure, recreational and such facilities that permitted users pay a fee.

Norway

Norway

Under Norwegian domestic tax law income from real estate located in Norway is taxable in Norway, regardless of where the landowner is domiciled. The tax rate is 22%. This right to tax at source is not subject to adjustment by double-taxation agreements.

For indirect investment through a corporate entity, the net rental income from real estate in Norway is subject to general corporate income tax at the rate of 22%.

Poland

Poland

Among other things, rent if the real estate is leased, income from advertisements if they are located on the real property or on the elevation of buildings located on such property, and income from parking spaces if they are located on the real property.

Portugal

Portugal

Rents and the profit from sales of property (that can be treated as profit or capital gain) are the types of income that can be expected from ownership of real estate.

Romania

Romania

The income to be expected from ownership will consist of either rent (under a lease, usufruct, superficies rights) or profit generated from sale of the property.

Russia

Russia

Shareholders in the Russian entity are entitled to the profit derived from the use or leasing of the real estate and capital gains arising from the disposal of their shares.

Slovak Republic

Slovak Republic

Income from leasing or subleasing the real estate.

Spain

Spain

Income can be generated from the ownership of real estate through:

  • Leasing the property, either wholly or partially
  • Granting rights in rem related to the property (ie beneficial interest, use of rooms)
  • Assigning rights attached to the property (ie the right to enter and use common areas such as terraces or parking spaces)
  • Letting of facilities in a hotel (eg conference rooms or parking spaces)
Sweden

Sweden

Typically, any income will be the rental income from letting out premises. In addition capital gains may be made when the property is sold.

Thailand

Thailand

Rental/lease income and capital gains can be expected from the ownership of real estate in Thailand.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

Rental income.

United Arab Emirates - Dubai

United Arab Emirates - Dubai

Rental income.

UK - England and Wales UK - England and Wales

UK - England and Wales

Income is predominantly from rentals. Profits from developing or trading land can also be taxed as income (as opposed to capital gains).

UK - Scotland

UK - Scotland

Income is predominantly from rentals. Profits from developing or trading land can also be taxed as income (as opposed to capital gains).

Ukraine

Ukraine

Typically, the income from ownership of real estate consists of rental income.

Shareholders or participants in companies which generate income from real estate are entitled to receive a share of the company's profits (dividends), including those from leasing or selling real estate. Profits are distributed by way of a dividend repayment.

United States

United States

Taxable net income (ie the excess of income over deductions) derived from the ownership and operation of real property is treated as ordinary income and is subject to federal income tax at graduated rates. Under current law, the maximum income tax rate on ordinary income is 35 percent for corporations and 39.6 percent for individuals. As of 2013, US individuals, estates and trusts are potentially subject to an additional tax known as the Net Investment Income Tax (NIIT), which applies at a rate of 3.8 percent on the lesser of net investment income (including, amongst other items, gain from the sale of investment real estate) or the amount by which modified adjusted gross income exceeds a statutory threshold (ranging from US$125,000 – US$250,000 depending on filing status); non-resident aliens, however, are not subject to the NIIT.

Zimbabwe

Zimbabwe

Income can be generated from the ownership of real estate through:

  • Leasing the property, either wholly or partially
  • Granting rights in relation to the property (eg beneficial interest or use of rooms)
  • Assigning rights attached to the property (ie the right to enter and use common areas such as terraces or parking spaces)
  • Letting of facilities in a hotel (eg conference rooms or parking spaces)