Today, most politicians’ agendas do not include helping the property sector with new laws. Governments have their work cut out with the rescue of the large banks.
The UK property sector is still lobbying hard to get the empty rate taxes reversed, but this is not an issue for the government at all. The German government does not signal an interest to improve laws governing the real estate investment trust (REIT) that were introduced two years ago. It was hoped that the G-REIT would help to fill the state coffers, but the REIT has been a failure and politicians do not see any need for improvement. The picture is pretty similar in Italy.
The only glimmer of hope is that some governments are softening or postponing already-announced measures that would bring even more trouble to the already battered industry.
Few favours for property investors
Unsurprisingly, this year is marked by an absence of lots of legal changes affecting property investors. In Bulgaria, Italy, Romania and Norway, legislators are trying to generate more state revenue through changes to land transfer taxes, pushing investors to use share deal structures rather than asset deals.
To prevent this, in future, legislators will treat share deals with underlying real estate transfers the same way as they treat direct property investments, expects Olaf Schmidt, who is EMEA head of real estate at law firm DLA Piper.
Other countries, such as Romania and the Czech Republic, are looking at making it easier to launch tax-efficient property funds within these countries. The governments hope that the money stays in the country and does not disappear to tax havens such as Luxembourg and the Channel Islands.
The plans of the Czech Republic and Romania come at a time when the public mood in western Europe is turning against tax havens. Last month, Gordon Brown, the UK’s prime minister, called for a global crackdown on tax havens. “We want the whole of the world to take action,” Brown said at a press conference. “That will mean action against regulatory and tax havens in parts of the world which have escaped the regulatory attention they need. The changes we make will have to apply to all jurisdictions around the world.”
Brown is not alone. Other politicians, including US president Barack Obama, have chimed in. Switzerland seems to be on the top of everybody’s hit list. Luxembourg is under pressure too, but has said it will relax its secrecy rules the day Switzerland does it.
The irony, of course, is that the UK has been a great host for the offshore industry. Some believe that the current backlash is all about rhetoric and political gains. “We get these discussions [about clamping down on offshore jurisdictions] every so many years,” says Oliver Hoyng, commercial director of Equity Trust, which structures cross-border property ownership.”Many offshore jurisdictions have concluded agreements with the OECD on the clampdown of harmful tax practices covering exchange of information and transparency.
“Moreover, taxation is not the main driver for the use of these offshore jurisdictions for a broad range of investors anyway. So increased scrutiny won’t apply to these investors,” he adds.
Property investors may not see big legal or tax changes shortly, but there are numerous smaller changes that they need to be aware of. This survey lists the most important changes across Europe in various countries.
