The Belgian specialised real estate investment fund (FIIS/GVBF) has been in existence for two and a half years. Its first year wasn't immediately a great success with only 10 vehicles incorporated but in the last twelve months things have sped up.
Belgium now counts 64 vehicles and more are expected, particularly with the most recent changes provided by the law of 25 April 2019 which clarified the status for joint ventures and club deals, lowered the minimum capital requirements to be in line with the Belgian Companies and Associations Code (for NVs/SAs this is EUR 61,500) and provides a clarification of the supervision powers of the Belgian Ministry of Finance. It's fair to say that the FIIS/GVBF has been very successful and a welcome development for the real estate sector, which is expected to continue growing.
SREIF (FIIS/GVBF) - At a glance
The FIIS/GVBF, specifically designed for real estate investments that are made by one or more institutional and/or professional investors, intends to customise and control the real estate investments and related risk and return profiles.
- For institutional and professional investors investing in Belgian real estate directly, or in foreign real estate through direct or shared ownership (minimum asset value > EUR10m)li "Light' registration with Ministry of Finance
- No criteria re. risk diversification
- No limitations re. debt leverage
- IFRS accounting standards (so asset values can be marked to market value) – no cash trap
- Limited 10-year duration (renewable for consecutive five year periods) with obligation to distribute at least 80% of SREIF's net income
The tax regime allows real estate investments to be made as tax neutral as possible, and a real estate investment fund (REIF) is essentially exempt from tax on its investment income (rental income, capital gains, dividends and interests received) which also applies to the SREIF. Dividends distributions made by SREIF can benefit from withholding tax exemption or be reduced by the application of double tax treaties.
...but with an exit tax at a beneficial rate
Conversion of a regular real estate company into a SREIF or (de-)merging such a company into a SREIF will trigger a 12.75% (15% as of FY 2020) 'exit tax' that is based on the sum of all the SREIF's latent capital gains and tax-free reserves at time of registration.
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