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Boris Bergemann

Taxation projects impact European real estate industry

Following the financial crisis, we have seen frequent changes within the local tax systems. Boris Bergemann (Head of Transaction Structuring, Europe) explains the two major developments at European and OECD level which will have a major impact on tax planning for the European real estate industry going forward, and outlines the challenges ahead for anyone lacking the relevant expertise.

Following the financial crisis, we have seen frequent changes within the local tax systems. Boris Bergemann (Head of Transaction Structuring, Europe) explains the two major developments at European and OECD level which will have a major impact on tax planning for the European real estate industry going forward, and outlines the challenges ahead for anyone lacking the relevant expertise.

The Common Consolidate Corporate Tax Base (“CCCTB”) and the OECD project on Base Erosion and Profit Shifting (“BEPS”) are long term projects that aim to:

(i) implement a common corporate tax system within Europe, championed by Germany and France as the front runners
(ii) restrict the possibility of tax arbitrage within the member states
(iii) prevent “double non-taxation” scenarios
(iv) implement better reporting and transparency of country-based tax information.

Additionally, several European member states have increased tax rates and taxable bases, or applied existing tax rules in a more pro-fiscal manner, in order to pay back government debt. As a result of this, we are more frequently witnessing changes in taxation regimes.

In light of these changes, existing fund and investment structures need to be reviewed and if necessary, adjusted. The impact of tax on investment returns will increase and tax structuring will not be a playing field for arbitrage within the legal frameworks anymore. Instead, tax frame works will need to be understood and applied from a rather more conservative point of view. This will require corresponding resources and the relevant ‘know-how’ of dealing with complex matters such as accounting, legal, regulatory and tax knowledge with administration and operation expertise; areas in which we see Henderson being well placed.

Going forward, whilst lower ‘after tax’ returns will likely become more accepted by the real estate industry, it will be interesting to focus on the benefits of regulatory arbitrage for institutionally regulated investors.

Boris Bergemann

Boris Bergemann

Head of Transaction Structuring

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