1、 Tax Issues at Year End for Real Estate Investors 2022/2023An overview of year-end tax considerations and important issues in real estate taxation in 26 tax systems worldwideKey Tax Issues at Year End for Real Estate Investors 2022/2023 2IntroductionInternational tax regimes are diverse,complex and

2、variant,and are usually full of fixed dates,terms and deadlines.These dates,terms and deadlines need to be observed carefully in order to avoid penalties and to receive certain tax reliefs or exemptions.At year end these obligations become even more difficult to understand and fulfil,particularly fo

3、r real estate investors with investments in numerous countries.This publication gives investors and fund managers an overview of year-end tax considerations and important issues in real estate taxation in 26 tax systems worldwide.Furthermore,it highlights what needs to be considered in international

4、 tax planning and the structuring of real estate investments.Please note that the list of year-end tax considerations is not exhaustive.This content is for general information purposes only,and should not be used as a substitute for consultation with professional advisors.We hope that you will find

5、Key Tax Issues at Year End for Real Estate Investors 2022/2023 a useful reference and source of information.We would be pleased to assist you with any further requests relating to your specific circumstances.November 2022Jeroen Elink Schuurman Dr Michael A.MllerIntroductionKey Tax Issues at Year End

6、 for Real Estate Investors 2022/2023 3ContentsList of abbreviations.4Europe.91 Belgium.92 France.143 Germany.184 Ireland.215 Italy.266 Latvia.297 Luxembourg.338 Poland.419 Portugal.4510 Spain.5011 Sweden.5312 The Netherlands.5713 Turkey.5914 United Kingdom.64Asia Pacific.671 Australia.672 India.723

7、Japan.774 Korea.795 Malaysia.806 New Zealand.857 Philippines.908 Taiwan.95America.1001 Argentina.1002 Brazil.1053 Canada.1094 United States.114Contacts.118ContentsKey Tax Issues at Year End for Real Estate Investors 2022/2023 4List of abbreviationsList of abbreviationsAE associated enterpriseAIF alt

8、ernative investment fundAIFM Alternative Investment Fund ManagerAIMI Portuguese additional real estate municipal taxAMT alternative minimum taxATAD Anti-Tax Avoidance DirectiveBAT business activity taxBCRA Banco Central de la Repblica Argentina(Argentine Central Bank)BCT Business continuity testBEAT

9、 Base Erosion Anti-Abuse TaxBEPS base erosion and profit shiftingBIR Bureau of International RevenueBMT Book minimum taxCbCR country-by-country reportingCET contribution conomique territorialeCFC controlled foreign companyCFE cotisation foncire des entreprisesCGT capital gains taxCIR Corporate inter

10、est restrictionCIT corporate income taxCOFINS contribuition for social security financing or contribuio para o financiamento da seguridade social (contribution for social security financing)CMN Conselho Monetrio Nacional(National Monetary Council)CRA Canada Revenue AgencyKey Tax Issues at Year End f

11、or Real Estate Investors 2022/2023 5List of abbreviationsCSLL contribuio social sobre o lucro lquido (social contribution on net income)CVAE cotisation sur la valeur ajoute des entreprisesDST documentary stamp taxDTT double tax treatyEBITD earnings before interest,tax and depreciationEBITDA earnings

12、 before interest,tax,depreciation and amortisationECJ European Court of JusticeEEA European Economic AreaEIA Energy Investment AllowanceESG environmental,social and governanceFAIA Fichier dAudit Informatis de lAdministration de lenregistrement et des domaines(computerized tax audit file from the Lux

13、embourg VAT authorities)FATCA Foreign Account Tax Compliance ActFII Fundo de Investimento Imobilirio(Brazilian REIT)FIIS fonds dinvestissement immobilier spcialis (Belgian real estate investment fund)FIP Fundo de Investimento em Participaes (Brazilian equity investment funds)FPI foreign portfolio in

14、vestorsFTA French Tax AuthoritiesFTC French Tax CodeFY fiscal yearGAAP Generally Accepted Accounting PrinciplesGAAR general anti-abuse ruleGDP gross domestic productGIFT Gujarat International Finance Tec-CityGST goods and services taxGVBF gespecialiseerd vastgoedbeleggingsfonds(Dutch for FIIS)Key Ta

15、x Issues at Year End for Real Estate Investors 2022/2023 6List of abbreviationsGVV gereglementeerde vastgoed vennootschap(Dutch for SIR)IBTA Income Basic Tax ActIFSC International Financial Services CentreIFSCA International Financial Services Centres AuthorityIIT individual income taxIFRS Internati

16、onal Financial Reporting StandardsIMI imposto municipal sobre imveis (Portugues real estate municipal tax)IMU Italian local property taxIOF imposto sobre operacoes financeiras(financial transaction tax)IPO initial public offeringIPTU imposto sobre a Propriedade Predial e Territorial Urbana (Brazilia

17、n real estate tax)IRAP Italian regional production taxIREF Irish real estate fundIRES imposta sul reddito delle socit(Italien corporate income tax)IRPJ imposto sobre a Renda da Pessoa Jurdica (Brazilian corporate income tax)IRS Internal Revenue ServicesITA Income Tax ActITBI Imposto sobre Transmisso

18、 Intervivos de Bens Imveis (Brazilian real estate transfer tax)ITC input tax creditITCMD Imposto sobre a Transmisso Causa Mortis e Doao de Bens e Direitos(Brazilian state tax)ITR Imposto sobre a propriedade territorial(Brazilian rural land tax)JDA joint development agreementLVIT land value increment

19、al taxMDR mandatory disclosure rulesMIA milieu-investeringsaftrek(Dutch environmental investment allowance)MIT managed investment trustKey Tax Issues at Year End for Real Estate Investors 2022/2023 7List of abbreviationsMLI Multilateral Convention to Implement Tax Treaty Measures and Prevent Base Er

20、osion and Profit Shifting(Multilateral Instrument)MNE multinational enterpriseMoF Ministry of FinanceNCST list of non-cooperative states and jurisdictionsNFE net financial expensesNo numberNOL net operating lossNRCGT non-resident capital gains taxNWT net wealth tax OECD Organisation for Economic Co-

21、operation and DevelopmentPAIF Property Authorised Investment FundPCG practical compliance guidelinesPE permanent establishmentPIS Programa de Integrao Social (Brazilan Employees Profit Participation Program)PIT personal income taxPSE Philippine Stock ExchangePTC Premium Tax CreditQ QuarterQIPs Quart

22、erly Instalment Payments in UKRAIF Reserved alternative investment fundsRERA Real Estate(Regulation and Development)ActRE real estateREIT real estate investment trustRET real estate taxRETT real estate transfer taxRPT real property transfer taxROS Revenue Online ServiceKey Tax Issues at Year End for

23、 Real Estate Investors 2022/2023 8List of abbreviationsRR revenue regulationsRUSF resource utilisation support fundSEBI Securities and Exchange Board of IndiaSEC Securities and Exchange CommissionSEZ Special Economic ZonesSIF specialized investment fundsSIR societ immobiliere reglementee (Belgian re

24、gulated real estate company)SOCIMI sociedades annimas cotizadas de inversin en el mercado inmobiliario(Spanish REIT)SPV special purpose vehicleSTT securities transaction tax,stock transaction taxTIVUL tax on the increase in value of urban landTMK tokutei mokuteki kaisyaTP transfer pricingUBO ultimat

25、e beneficial ownerVAT value-added taxVAMIL Willekeurige afschrijving voor milieu-investeringen (Dutch Random depreciation of environmental investments scheme)WHT withholding taxYA year of assessmentKey Tax Issues at Year End for Real Estate Investors 2022/2023 9Europe BelgiumEurope1 BelgiumSince fin

26、ancial year 2020,the nominal rate is 25%and the crisis tax has been abolished.Small and medium-sized enterprises(SMEs)are subject to a rate of 20%since 2018 for the first bracket of EUR 100,000 in profit.Unless a company pays its Belgian corporate income taxes by means of timely tax prepayments,a su

27、rcharge of 6,75%will be due on the final corporate tax amount.If tax prepayments are made,a credit(bonification)will be granted which can be deducted from the global surcharge.A uniform withholding tax(WHT)rate of 30%on interest,dividends and royalties is applicable.However,WHT reductions/exemptions

28、 exist under Belgian domestic tax law,either by implementation of the European Parent-Subsidiary or Interest and Royalties Directive or in other specific situations(such as for dividends paid by the Belgian specialised real estate investment fund or Belgian regulated investment companies to non-resi

29、dent investors(WHT of 0%)to the extent the income originates from foreign real estate income,interests paid to credit institutions located in the EEA or in a country with which Belgium has concluded a double taxation treaty(0%)etc.).To benefit from the exemption/reduction,it is now more than ever ke

30、y that the receiving entity qualifies as the beneficial owner of the income.In its recent decisions,the Court of Justice of the European Union concluded that a broad interpretation of this notion should be followed(so-called Danish cases).In this context,particular attention should be paid to the up

31、per-tier structure of a Belgian company(e.g.substance,back-to-back structures,etc.)so as to avoid any successful challenging of Belgian WHT exemption.One should carefully consider the impact of the MLI(see below).Note in this respect that since mid-2020,the Belgian tax authorities have increased the

32、 number of tax audits on passive income payments such as dividends and interest and related WHT exemptions.Belgian WHT may also apply in case of a share capital decrease(or share premium reimbursement)by a Belgian company.The latter will indeed be deemed to have distributed a dividend on a prorata b

33、asis,depending on the existence of distributable reserves.Formalities will in any case need to be properly and timely fulfilled.Companies should be prepared to defend the compliance of their tax positions(incl.the appropriate and relevant functional level of substance and beneficial ownership of all

34、 companies involved with respect to any Belgian WHT reduction/exemption they are claiming).Corporate income tax rateTax advanced paymentsWithholding taxKey Tax Issues at Year End for Real Estate Investors 2022/2023 10On 26 June 2019 Belgium ratified the MLI as adopted by more than100 jurisdictions t

35、o efficiently update their treaties network with some measures to prevent base erosion and profit shifting(e.g.one of the principal purposes of entering into the specific transaction or arrangement was not to obtain the treaty benefit concerned).Upon the fulfilment of the condition of reciprocity of

36、 ratification of the covered tax agreements,in Belgium,the MLI is applicable at the earliest since 1 January 2020 for withholding tax purposes and,in principle,since tax periods starting on or after 1 April 2020 for other tax purposes.Dividend distributions between corporations are generally 100%tax

37、 exempt under the so-called dividend received deduction.Certain conditions are to be met,i.e.the recipient of dividends holds at least 10%of the nominal capital of the distributing corporation(or acquisition value of minimum EUR 2.5m)for a period of at least one year and subject-to-tax conditions sh

38、ould be met at the level of the distributing company.Since 2018,an exemption from capital gain tax on shares exists in the hands of a Belgian company to the extent that the abovementioned conditions are met.It will be key to monitor whether all conditions to benefit from the exemption for dividend r

39、eceived/capital gains on shares are duly and timely complied with.Since 1 January 2019,net borrowing costs must satisfy the so-called 30%EBITDA rule to be tax deductible.This rule however only applies to loans granted after 17th of June 2016(grandfathering clause)as well as loans granted previously,

40、and which were fundamentally modified after this date(except with respect to certain loans for which the debt/equity ratio of 5/1 still applies(i.e.loans concluded prior to 17 June 2016 without fundamental modification(grandfathering rule)as well as loans which beneficial owner(s)are related to comp

41、anies located in a tax haven).The Belgian 30%EBITDA rule applies to both intragroup loans and bank loans(certain loans are however specifically excluded by Belgian tax legislation).Exceeding borrowing costs(net basis computation,incl.payments economically equivalent to interest)will be deductible up

42、 to the highest amount of 30%tax EBITDA or EUR 3m(=de minimis rule EUR 3m to be allocated across Belgian group entities via specific allocation keys).Disallowing exceeding borrowing costs can be carried forward without a time limit.It is possible to transfer deduction capacity to another Belgian gro

43、up entity.This must be analysed in conjunction with the consolidation regime(see below).The taxable basis of certain companies(i.e.,regulated real estate companies(SIR/GVV)and real estate investment funds(FIIS/GVBF)does not include net borrowing costs in accordance with the 30%EBITDA limitation rule

44、,if any.The 30%EBITDA rule needs to be monitored in detail and should be kept in mind going forward,for the calculation of tax provision.Its impact should be carefully analysed(notably in presence of Belgian groups)together with the potential applicability of the consolidation regime(see below).Mult

45、ilateral Instrument(MLI)Dividend and capital gains tax exemptionDeduction of interest expensesEurope BelgiumKey Tax Issues at Year End for Real Estate Investors 2022/2023 11Since the financial year 2019,anti-hybrid rules have been introduced within Belgian tax law in line with the Anti-Tax Avoidance

46、 Directive(ATAD)I and II.These rules cover not only situations where Belgium is immediately involved in a hybrid mismatch but also imported mismatch situations.More particularly,payments made in the context of an imported hybrid mismatch are disallowed for tax purposes to the extent they(in)directly

47、 finance expenses that are deductible at the level of certain foreign taxpayers without any income corresponding to that cost being however included in the taxable income of the beneficiary(unless,of course,an equivalent adjustment is made in one of the jurisdictions involved).This measure may very

48、well turn the spotlight on certain financing instruments being used notably in a Luxembourg context.Under certain conditions(incl.90%direct shareholding between the companies(or via EEA parent),affiliation for at least five successive calendar years)Belgian companies can,since 2019,offset their prof

49、its against tax losses of another Belgian affiliated company.Only the consolidated tax base is then subject to corporate income tax.Note that SIR/GVV and FIIS/GVBF are excluded from this possibility.In order to benefit from this new system of tax consolidation,the group companies concerned have to c

50、onclude a group contribution agreement that meets certain conditions.Based on current Belgian tax law,tax losses can be carried forward indefinitely as long as the company is not formally liquidated or dissolved.Under certain circumstances(e.g.,change of the control not meeting legitimate or economi

51、c needs),the tax authorities are entitled to forfeit the carried-forward tax losses of the company.Since 2018,a new order of deduction applies.Non-taxable elements,dividends received deduction of the year,patent income deduction and investment deduction(the last one,since 2019)are fully deductible.O

52、ther tax attributes(e.g.tax losses carried forward)can only be claimed on 70%of profits exceeding the EUR 1m threshold.The remaining 30%of profits are fully taxable at the above new rate.Note that this basket rule does not apply to losses incurred by SMEs starters.In the case of a change of control(

53、including in case of an internal group restructuring),the application of the Belgian change of control rules should be carefully analysed and the need of requesting a ruling on the availability of the losses should be assessed.The deferred taxation regime allows(provided certain conditions are met)c

54、apital gains on real estate to be taxed in proportion with the depreciation booked on the qualifying asset(s)(located in EEA member countries)in which the realisation proceeds have been reinvested in due time(period of five years for buildings).When selling real estate and applying the deferred taxa

55、tion regime it is important to properly monitor the time frame for reinvestment and tax formalities.Anti-hybrid mismatchTax consolidationTax losses carried forwardDeferred taxationEurope BelgiumKey Tax Issues at Year End for Real Estate Investors 2022/2023 12In case the Belgian Tax Authorities manag

56、e to demonstrate(the objective element of)a tax abuse and the taxpayer is not able to justify the choice for his legal act or legal acts by(a)sound non-tax motive(s),the Belgian tax authorities may tax the transaction.Tax abuse is defined as a transaction in which the taxpayer places himself out of

57、the scope of this provision of Belgian tax law or a transaction that gives rise to a tax advantage provided by a provision of Belgian tax law whereby getting this tax advantage would be in violation with the purposes of this provision of Belgian tax law and whereby getting the tax advantage is the e

58、ssential goal of the transaction.In the presence of a tax abuse,the taxpayer still has the possibility to provide the counterproof.The impact of the anti-abuse measure on real estate transactions(e.g.share deals,split sale structures)should be analysed on a case-by-case basis.Generally,all related-p

59、arty cross-border payments have to comply with the arms length principle.Failure to present appropriate documentation to the tax administration might result in the non-acceptance of group charges and penalties for tax purposes.The arms length principle should be duly followed and documented.Since 1

60、January 2019,the new legislation allowing VAT to be applied to rent is applicable.This regime provides the following new possibilities:Option to apply VAT(in a B2B context)to the rental of newly constructed or newly renovated buildings after 1 October 2018.Application of VAT for short-term leases(ma

61、ximum six months)in a B2B context.Simplification of the conditions to apply VAT to the rental of(old or new)warehouses(only 50%of the building must be used for warehousing purposes).Unlike most other EU member countries,Belgium has already implemented reporting requirements for cross-border tax arra

62、ngements.Since 1 January 2021,there is a thirty-day turnaround period to report to domestic tax authorities.In other words,reportable cross-border arrangements must in principle be reported within 30 days of there having been made available for implementation,being ready for implementation or the fi

63、rst step in their implementation was taken(whichever occurs first).General anti-abuse ruleTransfer pricingVAT on rentDAC 6Europe BelgiumKey Tax Issues at Year End for Real Estate Investors 2022/2023 13The Belgian government reached an agreement at the end of October 2022 on the 2023 Belgian federal

64、budget(no official draft text is yet available).The following important tax measures are notably being envisaged:VAT deduction methodology As from 1 January 2023 all companies deducting input VAT based on the real use methodology will have to notify the VAT authorities-in the past a formal request a

65、nd approval from VAT authorities was necessary.The notification obligation also applies to mixed taxpayers that already apply the real use methodology,these latter will have until June 2023 to fulfill this obligation.This will concern actors in many industries(financial services,real estate,holdings

66、 and private equity).Basket limitation rule forfeiting use of tax deduction The so called basket limitation rule forfeiting some available tax attributes(inc.carried-forward tax losses)is likely to be modified.Indeed,it is likely that the use of tax assets will be reduced from 70%to 40%(above the 1m

67、 threshold).This measure should be temporary,until the global minimum tax system(also known as Pillar 2)is implemented.Notional interest deduction The notional interest deduction(granting of a tax deduction for costs of capital,in accordance with a deemed interest on equity)will possibly be abolishe

68、d as from financial years closing per 31 December 2022.The interest rate was however negative for large companies since the financial year 2020.Procedural elements Starting from the financial year 2022,a set of new specific procedural tax rules will enter into force.These rules find their origin wit

69、hin the broader framework of measures against tax fraud and will have a great impact on the assessment and examination deadlines in the area of income taxes.Namely,the latter will be significantly prolonged(i.e.,from three to,notably,(i)four years for late tax returns,(ii)six years for so called sem

70、i-complex tax returns(e.g.,tax returns notifying payments to tax havens,withholding tax returns(wherein an exemption/reduction is requested),etc.)and even(ii)ten years for complex tax returns(e.g.,tax returns containing a hybrid-mismatch,).Other periods are also being extended(e.g.,investigation by

71、the Belgian tax authorities,claim period for Belgian taxpayers).Belgian tax law changes should be constantly monitored.Recent tax changesEurope BelgiumKey Tax Issues at Year End for Real Estate Investors 2022/2023 14Europe France2 FranceThe French list of non-cooperative states and territories(NCST)

72、was amended on 2 March 2022 and includes:(i)based on the French criterion:British Virgin Islands,Anguilla,Seychelles,Panama,Vanuatu;and(ii)based on the EU list:Fiji,Guam,American Virgin Islands,Palau,American Samoa,Samoa and Trinidad and Tobago.Unfavorable French tax treatment applies to certain tra

73、nsactions in NCST or with entities located in NCST,based on their classification above(i or ii).In respect of NCST listed in(i)in the paragraph above,the French regulations provide inter alia that interest and dividends from French entities paid to entities located in a NCST or paid in a bank accoun

74、t located in a NCST are subject to a withholding tax of 75%;and capital gains on shares in a French non-real estate company derived by an entity located in a NCST are subject to a withholding tax of 75%.For fiscal years beginning on or after 1 January 2022,the standard CIT rate is set at 25%(i.e.eff

75、ective CIT rate of 25.825%taking into account the additional 3.3%contribution assessed on CIT exceeding EUR 763k for companies with a turnover in excess of EUR 7,63m).Moreover,a reduced rate of 15%is applicable to small and medium-sized enterprises(with a turnover below EUR 7,63m)up to a taxable pro

76、fit of EUR 38,120.Dividends paid by a French corporation to a non-resident shareholder are subject to a 25%WHT,unless a tax treaty provides for a lower rate or the EU Parent-Subsidiary Directive applies.Under the Directive,dividends paid by a French corporation to qualifying EU parent companies are

77、exempt from WHT.On 21 October 2019,the French Government adopted a Ministerial Order(hereafter the Order)transposing into French law the EU Council Directive 2018/822/EU on cross-border tax arrangements(also known as DAC 6 or EU MDR)in force since 25 June 2018.Pursuant to the EU Council Directive 20

78、18/822/EU regarding mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements,intermediaries and taxpayers fall in the scope of new reporting obligations with respect to cross-border tax planning arrangements that meet certain hallmarks.

79、The provisions of the Order were scheduled to be effective as of 1 July 2020 with specific transitional measures applicable to arrangements implemented between 25 June 2018 and 30 June 2020.Due to the COVID-19 pandemic,the 2020 amending finance bill implemented a six months extension of the deadline

80、s for reporting and exchanging information under DAC 6.French Tax Authorities(FTA)have published their definitive guidelines regarding DAC 6 provisions on 25 November 2020.List of states or territories defined as NCSTStandard corporate income tax rateDomestic withholding(WHT)rate on dividendsDAC 6Ke

81、y Tax Issues at Year End for Real Estate Investors 2022/2023 15The 2020 finance bill transposed the measures to combat hybrid mismatches set forth by Directive EU 2016/1164 dated 12 July 2016(so-called ATAD I Directive)and Directive EU 2017/952 dated 29 May 2017(so-called ATAD II Directive),the latt

82、er being in line with the works of the OECD as part of the Action Plan against BEPS.Article 212 I,b of the French tax code(FTC)(which conditioned tax deductibility of interest paid to a related party to the taxation of such interest at a rate exceeding 25%of the French CIT rate)was repealed and new

83、provisions were introduced in Articles 205 B to 205 D of the FTC.These provisions aim at neutralising asymmetrical tax effects(deduction/non-inclusion,double deduction)caused by certain so-called hybrid mismatches resulting from differences in qualification of certain financial instruments and/or en

84、tities or in the attribution of payments.Four categories of hybrid mismatches were identified in the 2020 finance bill:hybrid mismatches resulting from payments in relation with financial instruments;hybrid mismatches resulting from differences in the allocation rules of payments made to hybrid enti

85、ty or establishment;hybrid mismatches resulting from payments made by a hybrid entity to its beneficiary or payment made between the head office and the establishment(or between two establishments or more);double deduction effects.Expenses paid in the context of a hybrid mismatch would not be tax de

86、ductible in France if not included in the taxable basis of the beneficiary of the payment.These rules apply to financial years beginning on or after 1 January 2020,except for the provisions relating to reverse hybrids,which will apply to financial years opening on or after 1 January 2022.The FTA pub

87、lished their guidelines in December 2021.The territorial economic contribution(contribution conomique territoriale or CET)is made of two components:the companies land contribution(cotisation foncire des entreprises or CFE);andthe companies added value contribution(cotisation sur la valeur ajoute des

88、 entreprises or CVAE).The CET is capped according to the value-added produced by the company.In the hypothesis where the CET exceeds 2%of the produced added value,the excess may be subject to a rebate.Moreover,establishments created as from 2021 may be exempted of CFE and CVAE during a three-year pe

89、riod subject to local authorities ruling.CVAE is payable by the landlord of the property that is let,and the landlord will be taxable,based on the value-added derived from the rental activity.CVAE will be payable by the landlord of the property if their turnover exceeds EUR 500k.The 2021 finance bil

90、l provided for a decrease of 50%of the CVAE rate,which goes from 0.25%for turnover of EUR 500k to 0.75%(instead of 1.50%)for turnover exceeding EUR 50m(excluding VAT).ATAD II,including hybrid mismatches with third countriesContribution conomique territoriale(CET)CVAEEurope FranceKey Tax Issues at Ye

91、ar End for Real Estate Investors 2022/2023 16A sale and lease back is a transaction whereby a company owner of a property sells it to a credit institution that leases it immediately after to the seller under a financial lease agreement.If these transactions already benefit from a preferential regime

92、 in terms of registration fees(benefiting from the reduced rate,pursuant to Article 1594 F quinquies,H of the FTC),the law did not(no longer)provide for any preferential regime in terms of capital gains taxation.In order to facilitate the refinancing of companies affected by the consequences of the

93、COVID-19 pandemic,and to enable these companies to meet their increased cash requirements,the 2021 finance bill provided for the reinstatement of a mechanism for spreading the capital gain on the sale of a property in the context of a sale and lease back transaction(Article 39 novodecies of the FTC)

94、.Under these provisions,capital gain realised upon the sale of a property can be taxed over the financial lease agreement period,without exceeding 15 years.The spreading of the capital gain is only allowed if the lessee allocates the property to his commercial,industrial,liberal craft or agricultura

95、l activity.These provisions do not apply to properties allocated by the transferring companies to the management of their own assets,unless:The property is rented by the transferring company to a related company.The acquiring company uses the property for its commercial,industrial,craft,liberal prof

96、ession or agricultural activities.These measures apply to sales of properties performed between 1 January 2021 and 30 June 2023,preceded by enforceable promise to sell executed between 28 September 2020 and 31 December 2022.In the absence of special tax provisions,the revaluation difference generate

97、d by the free revaluation of assets performed by a company constitutes,from a tax standpoint,taxable income at the standard CIT rate pursuant to Article 38,2 of the FTC.Article 238 bis JB of the FTC allows companies to defer taxation of the revaluation difference occurring during the financial year

98、in which the revaluation is carried out,in respect of revaluation made during a financial year closed between 31 December 2020 and 31 December 2022.The tax neutralisation is differentiated according to whether the revalued assets are depreciable or not.Taxation of the revaluation difference relating

99、 to non-depreciable fixed assets is deferred until their subsequent disposal,whereas the revaluation difference relating to depreciable fixed assets is spread over time(i.e.15 years for buildings,plantations,fixtures and fittings of land plots depreciable over at least the same period of time;and fi

100、ve years for other fixed assets).As from FY 2021,3%tax returns have to be filed electronically via a dedicated platform on the website of the FTA.In order to do so,each entity required to file a 3%tax return have to be registered with the FTA in order to obtain an identification number called SIRET

101、allowing it access to the 3%tax platform.Property sale and lease-backRevaluation of fixed assetsThe 3%tax on French real estateEurope FranceKey Tax Issues at Year End for Real Estate Investors 2022/2023 17Such registration must be made through the completion,signing,and filing of an official French

102、form 15928*02 called Dclaration EE0(EE0 form)per entity to be registered.As a reminder,the 3%tax on French real estate applies to all French and foreign entities at large(i.e.including entities with no separate legal personality)which directly or indirectly own one or more real properties located in

103、 FranceThe tax is assessed on the fair market value of the French real estate,as at 1 January of each year,in proportion to the direct or indirect interest in the French real estate.The 3%tax applies to entities whose real estate assets in France represent more than 50%of overall assets of French as

104、sets(the French assets test).French properties that are allocated to a professional activity(i.e.other than a pure real estate activity)are not included for purposes of computing the 50%ratio including where the professional activity is carried out by a related party(ex:property rented to a related

105、party of the lessor who uses it for its own commercial or industrial business).All entities of a chain of ownership between the French estate and the ultimate shareholders are jointly liable for the payment of the 3%tax whenever the latter is due.Exemption cases do exist,some are automatic and the o

106、thers are conditional.Generally,filing a 3%tax return on a yearly basis is required to benefit from a conditional exemption.French tax law provides the companies with the possibility to offset the tax losses of a financial year on the profits from the previous financial year(i.e.carry-back mechanism

107、).The option for the carry-back can only be exercised for the tax losses recorded during the relevant financial year.These tax losses can only be carried back against the profits of the previous financial year,up to the lowest amount between the said profit or EUR 1m.The tax losses that could not be

108、 carried back can be carried forward under the usual condition.Carry back mechanismEurope FranceKey Tax Issues at Year End for Real Estate Investors 2022/2023 18Europe Germany3 GermanyThe statutory corporate income tax rate is 15.825%(including 5.5%solidarity surcharge.The trade tax rate varies betw

109、een 7.0%and 21.0%,depending on the local municipality in which the business operations are carried out.The overall tax rate for a German corporation thus ranges between 22.825%and 36.825%.Dividend distributions between corporations are generally 95%tax exempt.However,the 95%tax exemption is only gra

110、nted where the recipient of dividends inter alia holds at least 10%of the nominal capital of the distributing corporation at the beginning of the calendar year.Capital gains received by corporations upon selling the shares in other corporations are 95%tax exempt.Since 1 January 2019 this generally a

111、lso includes capital gains derived by selling shares in foreign corporations which assets directly or indirectly consists more than 50%of German real estate.If the shareholder is a foreign resident corporation,the capital gains are 100%tax exempt according to case law of the German Federal Fiscal Co

112、urt.Currently,there is no minimum holding requirement.Consider restructuring shareholding before distributing dividends(and selling shares).Foreign corporate shareholders may claim a tax refund if they were taxed upon selling shares in other corporations.Share capital repayments received by a German

113、 shareholder from a foreign corporation are generally treated as a taxable dividend in Germany.However,share capital repayments may not be qualified as taxable dividends but as repayment of shareholder equity upon application.Such application has to be filed up to the end of the calendar year follow

114、ing the calendar year in which the share capital repayment has been received.Apply for equity qualification of share capital repayments received in 2021 before 31 December 2022.Gains of a German permanent establishment from the sale of land and buildings need not be taken to income immediately but m

115、ay be deducted from thecost of replacement premises.For gains from the sale of land and buildings which do not belong to a German permanent establishment no rollover relief is available.However,the taxation of capital gains reinvested in another EU member country may be deferred and spread over five

116、 years.The application for tax deferral has to be made up to the end of the financial year in which the land or building has been sold.Apply for tax deferral on capital gains for EU land and buildings sold in 2022 before 31 December 2022.Where an entity is not able to limit its net interest to below

117、 the EUR 3m threshold,other escape clauses(non-group escape clause or group escape clause)might be applicable.According to the group escape clause,interest expenses paid in 2023 may be fully deductible only where the equity ratio of the German business equals or is higher than that of the group(2%to

118、lerance)as at 31 December 2022.It should be verified whether the equity of the tax paying entity equals that of its group.If it stays below the quota of the group by more than 2%,additional equity may be injected in order to ensure interest deductibility in 2023.Tax ratesDividend and capital gains t

119、ax exemptionShare capital repaymentsRollover reliefInterest capping rulesKey Tax Issues at Year End for Real Estate Investors 2022/2023 19According to tax accounting rules,an impairment to a lower fair market value may be waived.In a loss situation,impairment may be waived to avoid an increase of ne

120、t operating losses.Net operating losses of a partnership are allocated to a limited partner only up to the amount of its equity contribution.Inject equity before year end in order to benefit from losses exceeding the current equity contribution.Any direct or indirect transfer of more than 50%of shar

121、es/interests(or similar measures,e.g.in the course of restructurings)may lead to a total forfeiture of losses and interest carried forward at the German entitys level.Exemptions may apply for tax privileged restructurings and where the entity continues to perform the same business as prior to the sh

122、are transfer(restrictive requirements).Currently a case is pending at the German Supreme Court to determine whether the loss forfeiture rules are unconstitutional.The upcoming decision by the Supreme Court may have retroactive effect.It is strongly recommended to explore structuring alternatives whe

123、re you intend to reorganise your investment structure.All tax assessments for years in which a harmful share transfer has occurred should be kept open.Investments relying on no trade tax due to the non-existence of a German permanent establishment,or a preferential trade tax regime under the extende

124、d trade tax deduction,must fulfil strict requirements.The requirements of the extended trade tax deduction must be met for a complete fiscal year.It should be verified whether the requirements are met from 1 January 2023 onwards(if the fiscal year equals the calendar year)in order to mitigate trade

125、tax on income derived in 2023.In the case of declining profits,an application can be made to reduce current income and trade tax prepayments.Cash flow models and profit forecasts should be checked in order to improve liquidity by applying for tax prepayment reductions and/or refunds.General substanc

126、e requirements need to be met by foreign corporations receiving German income in order to be recognised by the German fiscal authorities.This inter alia may ensure the deductibility of interest expenses borne in connection with German investments.Where(constructive)dividends are distributed by a Ger

127、man corporation to a foreign shareholder,the foreign shareholder must fulfil strict substance requirements in order to benefit from a dividend withholding tax exemption/reduction.It should be ensured that the tightened German substance requirements are met.Generally,all related-party cross-border pa

128、yments have to comply with the arms length principle.Failure to present appropriate documentation to the tax administration might result in the non-acceptance of group charges and penalties for tax purposes.The arms length principle should be duly followed and documented.Net operating losses(NOL)pla

129、nningNOL planning for partnershipsLosses carried forwardTrade tax statusTax prepaymentsSubstance requirementsTransfer pricingEurope GermanyKey Tax Issues at Year End for Real Estate Investors 2022/2023 20The acceptance of a tax group is subject to strict observation of certain legal requirements.The

130、 profit transfer agreement needs to be registered with the commercial register before 31 December 2022 in order to become effective for the fiscal year 2022.If companies do not obey the requirements during the minimum term of five years,the tax group will not be accepted from the beginning.Special p

131、recautions need to be taken regarding tax groups for VAT and RETT purposes as there are different legal requirements.Where a tax group shall be established in future,the profit transfer agreement needs to be drafted properly and registered in time.For vacant buildings and buildings rented at low ren

132、ts land tax up to 50%is refunded upon application of the landlord.Apply for land tax 2022 refund before 1 April 2023.In the course of the land tax reform the tax base will be aligned to the fair market value as at 1 January 2022.The reformed land tax will be levied for the first time on 1 January 20

133、25 on this new tax base.According to the intention of the legislator this increase in tax base should not lead to an increase in land tax burden.Based on an opening clause the Federal States can levy land tax according to other valuation methods.Consider new filing requirement from 2022 onwards(curr

134、ent filing deadline 31 January 2023)and changing land tax burden from 2025 onwards.Federal states have the right to set the real estate transfer tax(RETT)rate themselves instead of applying the uniform federal RETT rate of 3.5%.Only in Bavaria and Saxony the rate of 3.5%applies.The other federal sta

135、tes have increased their RETT rate up to 6.5%.Future increases are expected.In particular,Hamburg and Saxony will increase their RETT rate to 5.5%for RETTable transactions after 31 December 2022.From July 2021 onwards the RETT rules for share transfers have been tightened resulting in a larger numbe

136、r of share transfers becoming subject to German RETT.Monitor potential increase of RETT rates in federal states.Proper timing is necessary to mitigate increased RETT rates.Furthermore,it is strongly recommended to explore structuring alternatives where you intend to transfer shares in your investmen

137、t structure.Germany has implemented reporting requirements for cross-border tax arrangements in July 2020.Report cross-border tax arrangements within 30 days in order to avoid fines of up to EUR 25,000.German tax law is subject to continuous changes.Currently,there are a number of tax amendment acts

138、 in the legislative process which impact taxation of real estate investments(inter alia a tax exemption for small photovoltaic plants,an increase of the depreciation rate for new residential buildings to 3%p.a.and an increase of real property tax values for inheritance and gift tax).Consider and con

139、stantly monitor planned German tax law changes.Tax groupLand tax refundLand tax reformReal estate transfer tax(RETT)DAC 6Planned tax changesEurope GermanyKey Tax Issues at Year End for Real Estate Investors 2022/2023 21Europe Ireland4 IrelandRental income profits are subject to corporation tax at th

140、e rate of 25%where the real estate asset is held through an Irish company.Previously,where the asset was held by a non-resident the rental profits were subject to income tax at a rate of 20%but as of 1 January 2022,non-resident landlords now fall within the remit of Irish corporation tax which is le

141、vied at a rate of 25%.A deduction for interest is only allowed in computing the rental profits for the year where the money borrowed has been used on the purchase,improvement or repair of the property which generates the rental income.As of 1 January 2019,a 100%interest deduction is restored for qua

142、lifying residential lettings.There is no limit on the deductibility of interest on borrowed money used to purchase,repair or improve commercial property.Landlords must ensure that residential properties are registered with the Private Residential Tenancies Board in order to obtain an interest deduct

143、ion.Deductions against rental income are generally allowable where the expense directly relates to costs associated with a rental business and are not considered capital in nature.Tax depreciation is available on plant and equipment at an annual rate of 12.5%of the cost over eight years.On the acqui

144、sition of a property,an analysis of the plant and machinery element of the purchase price should be undertaken and documented as evidence of the cost eligible for capital allowances.Where items of plant and equipment are deemed to be energy-efficient,the entire allowance can be claimed in the year i

145、n which the expenditure is incurred,Excess allowances over rental income profits can be carried forward as a loss to offset against future rental income.Buildings which qualify as industrial buildings e.g.,factories,hotels,nursing homes etc.may be able to avail of capital allowances at an annual rat

146、e of 4%of the cost over 25 years.Consideration will need to be given to the possibility of a clawback of capital allowances on the disposal of real estate assets where the proceeds received exceed the tax written down value of the asset.Rental payments made by a lessee to a non-resident landlord are

147、 subject to a withholding tax of 20%which the lessee must pay to the Irish Revenue Commissioners.Non-resident landlords should appoint an Irish collection agent to collect the rents from the lessee in order to avoid Irish withholding tax.Taxation of rental incomeInterest deductionsOther allowable de

148、ductionsCapital allowancesWithholding tax on rentKey Tax Issues at Year End for Real Estate Investors 2022/2023 22Interest payments made by an Irish resident company to a non-resident are generally subject to Irish withholding tax of 20%.The Irish resident company is obliged to withhold the tax from

149、 the interest payment and pay it directly to the Irish Revenue Commissioners.A number of exemptions are available under the Irish tax legislation.Investors making interest payments to non-resident lenders should ensure appropriate exemptions are available before paying interest gross to lenders.Dist

150、ributions made by an Irish resident company are generally subject to withholding tax at a rate of 25%.A number of exemptions are available under the Irish tax legislation subject to having the appropriate declarations in place.Companies making dividend payments should ensure appropriate documentatio

151、n is in place before paying dividends gross to shareholders.A non-resident will be subject to capital gains tax in Ireland on the disposal of Irish specified assets.Land(including tenements,hereditaments,houses and buildings,land covered by water and any estate,right or interest in or over land)situ

152、ated in the state is considered to be an Irish specified asset.Additionally,shares in a company which derives the greater part of its value from land are also considered to be Irish specified assets.A disposal of such shares by a non-resident would also be within the scope of Irish capital gains tax

153、.A vendor who is disposing of an Irish specified asset where the consideration exceeds EUR 500,000(or EUR 1m where the asset is residential property)should obtain a Form CG50A from the Irish Revenue Commissioners to avoid any withholding tax.If the vendor does not obtain the Form CG50A,the purchaser

154、 is obliged to withhold 15%of the purchase price and pay it directly to the Irish Revenue Commissioners.An Irish tax resident company is obliged to pay its corporate income tax liability and file its corporation tax return within nine months of the end of its accounting period.If that date is later

155、than the 23rd day of the month,the corporation tax return must be filed by the 23rd day of the month.A non-resident landlord is now also liable to corporation tax and as such it is obliged to pay its corporate income tax liability and pay its return by the 23rd day of the 9th month following the end

156、 of its accounting period.Stamp duty applies to the conveyance of real estate assets and is payable by the purchaser.The rate of duty is 7.5%on the acquisition of commercial property and 1%on residential property up to a value of EUR 1m and 2%on the excess over EUR 1m.Interest withholding taxDividen

157、ds withholding taxDisposals by non-residentsTax filing obligationsStamp dutyEurope IrelandKey Tax Issues at Year End for Real Estate Investors 2022/2023 23Furthermore,Irish legislation contains anti-avoidance provisions which apply the higher stamp duty charge to certain conveyances or transfers of:

158、Shares(in Irish and non-Irish incorporated companies)Shares/units in Irish real estate funds(IREFs)Interests in foreign collective investment schemesInterests in partnershipsthat derive their value or the greater part of their value,directly or indirectly from Irish non-residential land and building

159、s.The 7.5%stamp duty charge will only apply where:a.The transfer results in a change in the person or persons having direct or indirect control over the real estate assets listed above,andb.It would be reasonable to consider that the real estate assets concerned:1.Were acquired by the company,IREF o

160、r partnership with the sole or main objective of realising a gain from its disposal;2.Were or are being developed by the company,IREF or partnership with the sole or main object of realising a gain from its disposal when developed;or3.Were held as trading stock by the company,IREF or partnership.The

161、 rules apply not only to conveyances or transfers of shares/units/partnerships interests that are caught under the above provisions,but also to contracts for the sale of any such shares/units/interests which might otherwise not be stampable.A new 10%stamp duty rate in respect of purchases of 10 or m

162、ore residential houses applies to purchases of relevant residential units from 20 May 2021.A residential unit will be considered a relevant residential unit where it is part of a bulk purchase of 10 or more residential units,or where the buyer has bought at least 9 other residential units in the 12

163、months preceding the current purchase.Residential units in apartment blocks are not liable to the new 10%rate.Stamp duty does not apply to moveable plant and machinery which can pass by delivery.Upon the acquisition of Irish property,an analysis should be performed to determine the amount of the pur

164、chase price which relates to moveable plant and machinery.This amount should be clearly identified in the contract for sale.Rental losses can be carried forward and used to offset the tax liability on rental profits which may arise in a future period.There is no time period in which the losses must

165、be used i.e.they can be carried forward indefinitely.Losses on the disposal of real estate property can be carried forward and set off against future capital gains.A restriction applies to gains made on development land.Only losses incurred on disposals of development land can be offset against gain

166、s made on the disposal of development land.Losses carried forwardEurope IrelandKey Tax Issues at Year End for Real Estate Investors 2022/2023 24Where VAT has been charged on the acquisition of property,it may be necessary to charge VAT on the rental payments due from the tenant in order to avoid a c

167、lawback of any VAT reclaimed on the purchase of the property.VAT is only chargeable on commercial properties and cannot be charged on residential lettings.A landlord who leases out a mixture of commercial and residential properties can only reclaim VAT on expenses incurred in relation to the commerc

168、ial properties.For dual use expenses(i.e.,expenses relating to a mixture of commercial and residential properties),a recovery rate must be calculated to determine the proportion of the VAT which can be reclaimed on such expenditure.The recovery rate applicable to dual use expenses must be calculated

169、 each year and must be a true representation of the mixture of the commercial and residential properties to which the expenditure applies.Local property tax is only chargeable on residential properties and is generally payable by the owner of the premises.The local property tax for 2022 is calculate

170、d based on the market value of the property as at 1 November 2021.Landlords should check that the local property tax on any premises registered to them is fully paid as this may impact the landlords ability to obtain a tax clearance certificateTax clearance certificates can now be obtained online th

171、rough Revenue Online Service(ROS).A request is submitted online and tax clearance can be provided immediately where the taxpayer is compliant under all tax heads.An access number is provided to the taxpayer who can then give this to tenants/licence applicant authorities etc.where required in order t

172、o avoid withholding tax being applied to payments.Irish transfer pricing legislation endorses the OECD Transfer Pricing Guidelines and adopts the arms length principle.The rules apply to domestic and international arrangements entered into between associated persons,involving the supply or acquisiti

173、on of goods,services,money,or intangible assets,and relating to trading activities within the charge to Irish corporation tax at the trading rate of 12.5%.Under Irish rules,the Irish tax authorities have the power to recompute the taxable profit or loss of a taxpayer where income has been understate

174、d or where expenditure has been overstated as a result of non-arms length transfer pricing practices.There is,however,an exemption available for small and medium sized enterprises.Irelands domestic transfer pricing rules are in line with the 2017 OECD Guidelines with the rules applying to certain no

175、n-trading transactions,enhanced documentation requirements and the use of a substance over form provision which provides Irish Revenue with the ability to disregard and recharacterise a transaction in certain circumstances.Finance Act 2021 introduced exclusions for bona fide non-trading Ireland to I

176、reland transactions from the scope of transfer pricing which apply to chargeable periods commencing on or after 1 January 2022.Finance Act 2021 also legislated for the authorised OECD approach for the attribution of income to a branch of a non-resident company operating in the State.Value-added tax(

177、VAT)Local property taxTax clearance certificatesTransfer pricingDAC 6Europe IrelandKey Tax Issues at Year End for Real Estate Investors 2022/2023 25Irish legislation transposed the EU Directive on the mandatory disclosure of certain cross border arrangements(known as DAC 6)into the Irish tax code.Th

178、e new provisions align very closely with the Directive and operate in addition to Irelands domestic mandatory disclosure regime which was introduced with effect from 2011.The 30-day period for reporting to the Irish Revenue Commissioners commenced on 1 January 2021.The Irish anti-hybrid rules,brough

179、t into force via Irish Finance Act 2019,apply with effect from 1 January 2020 and implement the requirements of EU ATAD II.The rules broadly deny deductions or impose tax on transactions between associated entities where there is an element of hybridity in the transaction or due to the form of the p

180、ayor/payee.Finance Act 2021 saw the completion of Irish anti-hybrid rules through the introduction of rules to deal with reverse hybrids.Where a reverse hybrid mismatch arises,the rules provide for a neutralising mechanism whereby the income of the reverse hybrid entity will be subject to Irish corp

181、oration tax,“as if the business carried on in the State by the entity was carried on by a company resident in the State.Ireland has introduced interest limitation legislation that had effect from 1 January 2022.The rules impose a cap on interest deductions to no more than 30%of EBITDA where a compan

182、y has over 3 million of an interest expense.Anti-hybrid legislationInterest limitation rulesEurope IrelandKey Tax Issues at Year End for Real Estate Investors 2022/2023 26Europe Italy5 ItalyFor corporate income tax(IRES)purpose,interest expenses(even those capitalized on assets)are deductible within

183、 the limit of interest revenues and,subsequently,within the limit of 30%of the fiscal EBITDA.The fiscal EBITDA derives from the accounting EBITDA(as per P/L),adjusted according to the same provisions used to compute the IRES taxable base.Interest expenses that exceed such limits can be carried forwa

184、rd to be deducted in the following fiscal years,without time limitations,but only up to the amount of the interest revenues and 30%fiscal EBITDA of any following year(the latter,net of the interest expenses excess of the same year).Any“unused”30%fiscal EBITDA can be carried forward and used to incre

185、ase the 30%fiscal EBITDA of the following 5 years.In case,in a year,interest revenues exceed interest expenses,such excess may be carried forward without any time limitation.As a temporary provision adopted with the enactment of ATAD rules in the Italian income tax system,interest expenses concernin

186、g facilities executed before 17 June 2016 whose amount or duration has not varied after that date,can be deducted by using the 30%(accounting)EBITDA excesses not yet used up to 2018 and carried forward.This specific portion of the EBITDA can be carried over indefinitely(as in the previous system),bu

187、t it can be used only to deduct interest expenses on the facilities stated above(contrarily,out of this circumstance,any EBITDA excess existing at 2018 year-end is definitively lost).However,it has been confirmed that interest expenses that have been generated by loans/debts guaranteed by mortgages

188、on real estate up for lease are still not subject to the interest capping rule.Pursuant to law,the benefit of such exclusion is applicable only to companies which carry on“actually”and“prevalently”real estate activity.This is met if the following conditions are fulfilled:The greater part of the tota

189、l assets is formed by the fair value of properties up for lease;At least 2/3 of the revenues derive from building rentals and leases of business which is made prevalently by buildings.These rules do not apply to partnerships,which can fully deduct interest expenses.Evaluate the impact of the interes

190、t capping rule,especially with regard to capitalized interest and carried forward EBITDA.Check if the stated asset test and revenues test are fulfilled to take benefit from full deduction of interest on mortgage loans concerning properties up for lease.Shareholders debt waivers are taxable for IRES

191、purposes in the hands of the Italian subsidiary to the extent its accounting value,as booked in the subsidiarys general ledger,exceeds its related tax value in the hands of the shareholder.For this purpose,the shareholder has to communicate in writing to the Italian subsidiary the tax value of its c

192、redit waived.In absence of such communication,the entire accounting value of the waived debt is subject to IRES.In case of shareholders debt waivers,obtain the shareholders communication to prevent(or limit)the raising of a taxable contingent income in the hands of the Italian subsidiary.Interest ca

193、pping ruleShareholders debt waiversKey Tax Issues at Year End for Real Estate Investors 2022/2023 27For corporate income tax(IRES)purpose,tax losses can be carried forward without any time limit,as follows:Tax losses incurred in the first three years of activity(provided that they derive from the la

194、unching of a new activity)can be used to entirely offset future taxable income;Tax losses incurred in subsequent years can be used to offset only 80%of the taxable income of any following year.The remaining 20%must be taxed according to the ordinary rules(IRES rate:24%).It is possible to combine the

195、 use of the two kinds of tax losses to reduce/offset the taxable income as much as possible.The tax losses carried forward may be limited in case of:(i)transfer of shares representing the majority of voting rights in the companys general meetings(“change of control”),if also the change of the busine

196、ss activity from which such tax losses derived intervenes in the year of transfer or in the preceding or subsequent two years(exceptions exist);or(ii)in case of tax neutralreorganizations(e.g.,mergers,spin-offs).Check if there are any tax losses that can be carried forward and define their regime of

197、 carry-forward.The“passive”(or“non-operative”)company legislation postulates that if an“expected minimum”amount of revenues(calculated as a percentage of the average value of the fixed assets over a three-year period)is not reached(“operative test”)the company is deemed to be“non-operative”,with the

198、 consequence that taxation for both corporate income tax(IRES)and regional production tax(IRAP)will not follow the ordinary rules,but will be based on an“expected minimum”taxable income,calculated as a percentage of the value of the fixed assets owned(such minimum income cannot be offset by tax loss

199、es carried forward).This rule applies also to partnerships.For companies which are deemed as“non-operative”the IRES rate is increased by 10.5%(therefore,from 24%to 34.5%).Other implications for“non-operative”companies may include limitations to the tax losses carry-forward and to the VAT credits ref

200、und/offset.Check the impact of the“operative test”and of this special legislation.The Italian tax law explicitly states that an Italian permanent establishment of a foreign entity(e.g.,a branch)must have a congruous capital dotation(free capital)for tax purposes(it may be also a notional dotation,ma

201、de by way of treating as undetectable the relevant portion of interest accrued on the financing by the head office).Such capital dotation has to be determined according to the OECD guidelines,taking into account the specific features of the branch(i.e.,business activity and related risks and assets

202、used to perform it).The quantification capital dotation has direct impact on the calculation of the deductible interest expenses.In case of an Italian branch,check if its capital dotation(also in the form of the head office not bearing interest financing)can be considered congruous,in light of asset

203、s and risks owned by/attributed to the branch.Tax loss carry-forwardPassive company legislationCapital dotation of Italian branches of foreign entitiesEurope ItalyKey Tax Issues at Year End for Real Estate Investors 2022/2023 28The setup of a transfer pricing(TP)documentation according to certain pa

204、rameters allows avoidance of tax penalties in case of assessment on transfer pricing matters carried out by Italian tax authority(penalties range from 90%to 180%of the higher tax).The existence of such documentation has to be declared in the annual income tax return.Map the intra-group transactions

205、and evaluate the tax penalty profile of TP policies not fully compliant with the arms length criteria and act accordingly.Local Property Tax(IMU)paid over“instrumental”buildings(these being non-residential buildings,directly used in the companys business therefore subject to depreciation)benefits fr

206、om a progressive increase of its deductibility for IRES purpose,reaching the full deductibility in FY2022.This provision is precluded to real estate assets for sale(inventory)and those that do not pertain to the companys business.Consider the increased IMU deductibility for real estate lease compani

207、es.Since 2015 it is possible to enact the so-called“horizontal”tax consolidation for corporate income tax(IRES)purpose:the domestic tax group regime can therefore include also resident“sister”companies,i.e.,companies which are not controlled(even indirectly)by the domestic consolidating entity,provi

208、ded that all the subjects falling in the tax group perimeter are subject to the common control of an EU based company.In case of non-Italian EU group,if the foreign controlling company does not have a permanent establishment in Italy,it can designate the entity in the tax group perimeter which will

209、act as consolidating entity.In case the group has more Italian companies,consider if the tax consolidation regime is feasible and may allow tax efficiencies or other benefits.Transfer pricing documentary requirementsDeductibility of local property tax(IMU)on“instrumental”buildingsDomestic tax group

210、regime extended to“sister”companiesEurope ItalyKey Tax Issues at Year End for Real Estate Investors 2022/2023 29Europe Latvia6 LatviaSince tax losses can be utilized by the end of 2022,review the possibilities to distribute profit in dividends to utilize tax loss.More details are provided in the par

211、agraph Losses carried forward.As of 1 January 2023,thin capitalisation rules should be reapplied after a 2 years stand by period to interest payments exceeding a specified amount.More details are provided in the paragraph Deductibility of interest payments.If relevant,consider options for improving

212、equity before the 2022 year end in order to improve deductibility of interest next year.As of 1 July 2021,stamp duties to be paid for registering ownership rights in the Land Register have changed significantly.Namely,stamp duties per immovable property are determined as follows:For alienation of re

213、al estate(RE)on the basis of a contract is 2%of the RE value if ownership rights are transferred to a legal entity.For alienation of RE on the basis of a contract is 1.5%of the RE value if ownership rights are transferred to an individual.Investment of RE into the share capital of a company is 1%of

214、the RE value invested into the share capital.Stamp duty is paid by the entity which acquires the ownership rights.In cases where RE ownership rights are obtained as a result of reorganisation,the new owner does not have to pay stamp duty.The rental income received by non-resident is subject to 5%wit

215、hholding tax(WHT).Up to now the application of corporate income tax(CIT)Act to income from the sale of a real estate differed for Latvian residents and non-residents.Sale of real estate by non-residents would be subject to 3%WHT on gross proceeds.This tax must be either withheld by the Latvian purch

216、aser or,in case the transaction is between two non-residents,declared and paid by the non-resident seller.CIT Act allows non-residents from EU or double tax treaty(DDT)countries to pay 20%on profit from such sale,on condition that the company can justify the acquisition costs by documentary evidence

217、.This tax must also be withheld on a non-resident companys proceeds from the sale of particular real estate or shares in a Latvian or foreign company if Latvian real estate represents more than 50%of the companys asset value(whether directly or indirectly through participation in one or more other L

218、atvian or foreign entities)in the tax period the sale is made,or in a previous tax period.The taxation of dividends is made on the companys level.The CIT rate is 20%applicable to the taxable base.However,before applying the statutory rate,the taxable base should be divided by a coefficient of 0.8.As

219、 the taxable base is increased by the coefficient,the effective CIT rate is 25%.Matters to be aware of Stamp dutiesSale of real estate/rental incomeTaxation of dividendsKey Tax Issues at Year End for Real Estate Investors 2022/2023 30CIT exemption:Flow through dividends would be exempt from CIT prov

220、ided that they are received from CIT taxpayer or tax has been withheld at source state.In addition,some anti-avoidance provisions would apply aimed at offshore entities or artificial structures.Review your dividend payment policy in order to benefit from the new tax reform(e.g.profits paid out of re

221、tained earnings up to 31 December 2017 are not a subject to CIT.However,if the shareholder is an individual personal income tax(PIT)rate of 20%is applicable).In line with the CIT Act the income arising on the disposal of shares constitutes CIT taxable base.At the same time,CIT Act provides the relie

222、f determining the reduction of the taxable base in case of a disposal of direct participation shares held for at least 36 months(i.e.three years).Mentioned relief is not applicable to the shares held in the companies established in black-listed jurisdictions.Please note there are specific rules for

223、the sale of real estate company shares by non-residents.If relevant,please take into account that income gained on disposal of shares held for 3 years or more may be used in order to reduce CIT taxable base.The CIT Act does not include the concept of tax losses.Transitional rules stipulate that the

224、tax losses can be utilised by the companies during five financial years(beginning in 2018)by deducting an amount equal to 15%of the total loss brought forward from CIT calculated on dividends for the financial year.However,such deduction is capped at 50%of the amount of CIT charged on dividend for t

225、he financial year.Review the possibilities to utilise tax losses carried forward by the end of 2022.CIT is payable on the increased interest payments.The allowable interest shall be calculated applying two methods.If both methods are applicable,the higher of the two amounts calculated which exceed t

226、he calculated threshold should be added to the CIT taxable base.There are a number of exemptions from above rules,e.g.qualifying loans from credit institutions do not fall under the mentioned regulation.If relevant,consider options for improving equity before years end in order to improve deductibil

227、ity of interest next year.Where a share exchange takes place(one kind of shares being exchanged for another kind),payment of PIT is postponed and is due when the individual sells the shares acquired through exchange.Currently,tax authorities accept only one round of share for share exchange.Provisio

228、ns for bad debts do not become a subject to CIT if debts are repaid during a 36-months period.If a company made provisions up to 31 December 2021 and the debtors are going through insolvency proceedings,the recovery period may be extended to 60 months.Opportunities to recover bad debts should be con

229、sidered to decide how much provision for bad debts is necessary.Sale of shares and securitiesLosses carried forwardDeductibility of interest paymentsExchange of sharesProvision for bad debtsEurope LatviaKey Tax Issues at Year End for Real Estate Investors 2022/2023 31Bad debts must comply with certa

230、in criteria listed in the CIT Act in order not to constitute the CIT taxable base,when written off.All related-party cross-border payments as specified in the Taxes and Duties Act must comply with the arms length principle.Failure to present appropriate documentation to the tax administration might

231、result in the non-acceptance of group charges and penalties for tax purposes.The arms length principle should be duly followed and documented.Companies have to pay annual real estate tax(RET).Generally,the RET is between 0.23%of the cadastral value.The exact rate is determined by each municipality.I

232、n accordance with The National Cadastre of Real Estate Act the cadastral values will change once every two years if the property market or factors affecting the value of an area have changed.Consider the RET payments taking into account the available exemptions and possible changes in cadastral valu

233、e.According to VAT Act sale of unused real estate and development land attracts the standard VAT rate.Under VAT Act,development land is defined as a piece of land that is covered by a permit issued under construction law for building development,engineering communications or access roads.Input VAT i

234、ncurred upon construction works,renewal,rebuilding or restoration is recoverable if the building is intended to be used for taxable transactions.The taxable person should follow the deducted input VAT for 10 ten years,that is,follow whether the actual use of real estate is not different from the pla

235、nned one and no adjustment of the deducted input tax is required.There might be claw-back provision,if a real estate previously acquired with VAT has been further sold as used within the meaning of VAT.It means that the seller is liable to repay a proportion of Input tax previously recovered.Option

236、to tax allows a registered taxable person to charge VAT on supplies of used real estate transactions.This option is available only where property is registered with Latvian tax authorities and sold to a registered taxable person.Make sure that VAT for the sale of real estate has been applied correct

237、ly.The VAT grouping facility helps related companies reduce their administrative burden and improve cash flows,as their mutual transactions no longer attract VAT.A single VAT return can be filed covering all group companies.This especially benefits group companies with both taxable and exempt suppli

238、es and companies that have extensive sales outside Latvia.Consider the option of creating a VAT group.Write-offs for bad debtsTransfer PricingReal estate taxValue-added tax(VAT)legislation regarding sale of real estate in LatviaVAT groupingEurope LatviaKey Tax Issues at Year End for Real Estate Inve

239、stors 2022/2023 32Reverse-charge VAT is applied to construction contracts signed after 31 December 2011.Make sure that reverse-charge VAT has been applied correctly.If you have not registered a legal entity or a branch in Latvia,consider if your business operations have created a permanent establish

240、ment(PE),which requires a CIT compliance in Latvia.Consider the requirements for registering a PE in Latvia.Management and consulting fees paid to non-residents are subject to a 20%WHT.However,WHT may be eliminated under provisions of the respective tax treaty.In order to apply for a more favorable

241、tax regime,the non-resident has to provide the payer with a tax residency certificate.Given the fact that settlements are often made at year end,the Latvian payer should obtain this certificate from the income recipient to ensure income is not taxed before the submission deadline of the last CIT ret

242、urn(i.e.20 January of the following year).Permanent establishmentsManagement feesEurope LatviaReverse-charge VAT on construction servicesKey Tax Issues at Year End for Real Estate Investors 2022/2023 33Europe Luxembourg7 LuxembourgThe aggregate income tax rate for 2020 is 24.94%for entities register

243、ed in Luxembourg City:Standard corporate income tax rate is 17%for taxable income exceeding EUR 200,001.Companies with a tax base of less than EUR 175,000 benefit from a reduced corporate income tax rate of 15%.Companies with a tax base between EUR 175,000 and EUR 200,001 are subject to a corporate

244、income tax of EUR 26,250 plus 31%of the tax base above EUR 175,000;Municipal business tax is also levied at a rate generally varying from 6.75%to 10.50%depending on where the company is located(the municipal business tax rate is 6.75%if the company has its registered office in the Luxembourg City).L

245、uxembourg undertakings are also contributing to the Luxembourg employment fund for 1.19%of their taxable income(i.e.7%rate assessed on the 17%income tax).Tax losses incurred before 1 January 2017 may be carried forward indefinitely by the company that has incurred them.Tax losses incurred as from FY

246、 2017 may be carried forward for a maximum period of 17 years.Tax losses cannot be carried back in Luxembourg.Companies resident in Luxembourg are subject to an annual Net Wealth Tax on their unitary value(net asset value)to be determined as at 01.01 of each calendar year.The following rates are app

247、licable:for a unitary value up to and including EUR 500m:0.5%;for a unitary value exceeding EUR 500m:0.05%on the portion of the unitary value above EUR 500m and EUR 2.5m(i.e.EUR 500m at 0.5%).Some exemptions are available under the Luxembourg participation exemption regime(e.g.shares in certain comp

248、anies)or by virtue of the applicable Double Tax Treaties(e.g.real estate located abroad).The tax liability can in principle be eliminated or reduced if a specific reserve,equal to five times of the tax is created before the end of the subsequent year and maintained for the following five years.A min

249、imum NWT charge applies for all corporate entities having their statutory seat or central administration in Luxembourg.Such entities for which the sum of their fixed financial assets,transferable securities and cash at bank(as reported in their commercial accounts presented in the standard Luxembour

250、g form)exceeds 90%of their total gross assets and EUR 350,000,are subject to a minimum NWT charge of EUR 4,815.All other corporations might be subject to a minimum NWT ranging from EUR 535 to EUR 32,100,depending on the amount of their total assets as shown in the balance sheet.There is no withholdi

251、ng tax on interest.Corporate tax rateLosses carried forwardNet Wealth Tax(NWT)Minimum Net Wealth TaxKey Tax Issues at Year End for Real Estate Investors 2022/2023 34Generally,dividends are subject to 15%withholding tax unless the conditions of the Luxembourg participation exemption regime are fulfil

252、led or more favorable tax treaty rates are available.Liquidation proceeds paid by a Luxembourg company are not subject to withholding taxes in Luxembourg.Director fees related to seating at the board are usually subject to a 20%withholding tax.The new Bill(n7666)presenting the Budget for 2021 and is

253、sued by the Luxembourg Government on 14 October 2020 proposes the introduction of a new tax,termed a Real Estate Levy(“prlvement immobilier”).It will apply to Luxembourg investment fund vehicle which is regulated under the 2007 specialised investment fund(“SIF”)regime,or the 2016 reserved alternativ

254、e investment fund(“RAIF”)regime,or Part II of the 2010 UCI regime and has its own legal persona and owns directly(or indirectly through one or more entities that are regarded as tax transparent under Luxembourg principles)real estate assets that are sited in the Grand Duchy of Luxembourg.The Real Es

255、tate Levy is to apply to the gross(but VAT-exclusive)amount of rental income deriving(directly or through tax transparent entities)from Luxembourg real estate assets and the net amount of gains on disposal deriving from such assets(directly or through tax transparent entities,either on disposal of t

256、he real asset by a transparent entity or disposal of the interest in the tax transparent entity owning the Luxembourg real estate)on or after 1 January 2021,and is charged at a rate of 20%.Real Estate Levy due on income or gains arising or realised in a calendar year must be reported to the tax auth

257、orities no later than 31 May of the following calendar year,and the Levy due must be paid no later than 10 June of the following calendar year.Returns of Real Estate Levy due must be accompanied by an auditors certificate confirming that the amount being subject to the levy is computed in accordance

258、 with the provisions of the legislation.On 30 March 2020 the Luxembourg government issued a Bill(n7547)setting out the draft legislation that disallows tax deduction of interest or royalties paid or due to related parties,if these are corporate entities established in countries that are“black-listed

259、”as being“non-cooperative”for tax purposes.Once the legislative process is completed the Bill should apply as from 1 January 2021.Withholding TaxReal Estate LevyPayments to EU“black-listed”countries Europe LuxembourgKey Tax Issues at Year End for Real Estate Investors 2022/2023 35VAT Grouping implem

260、ented in Luxembourg The VAT grouping legislation has been introduced in Luxembourg with effect from 31 July 2018(via Law no.671 of 6/08/2018).Some of the feature of the VAT group include:Enhances consolidation for VAT purposes;Is an optional regime,choice is left to the taxpayer,but all-in or all-ou

261、t,limited opt-out possibilities;Only Luxembourg resident companies and a local branch of a foreign company can join.Applicable for any sector/industry but the three following links need to exist simultaneously:Financial links;Economic links and Organizational links.Members cannot be part of more tha

262、n one VAT group;Must be set up for at least 2 calendar years.Although this is a new regime in Luxembourg,VAT groups are already used in other jurisdictions as a way to mitigate irrecoverable VAT costs and cash flow effects on intra-group charges.VAT and Transfer Pricing The Luxembourg VAT law has be

263、en amended(via Law no.671 of 6/08/2018)to implement Article 80 of the EU VAT Directive with effect from 31 July 2018.This law aims at avoiding VAT loss by allowing the VAT authorities to disregard consideration agreed between related parties to retain the open market values under the following situa

264、tions:When the consideration for a supply has been underestimated while the purchaser has a limited recovery right;When the consideration for an exempt supply has been underestimated while the supplier has a limited recovery right andWhen the consideration for a supply has been overestimated while t

265、he supplier has a limited recovery right.Directors Fees Since 1 January 2017,directors fees paid to directors(private individuals)are subject to 17%VAT,based on the Circular issued on 30 September 2016.Since 1 January 2017,increase of the enforcement powers of the VAT authorities:Personal liability

266、of the delegated administrators,directors and de jure or de facto managers is engaged in case of VAT underpayments/late payments/non-compliance with VAT law if it can be proved that they failed in the performance of their duties.General increase of penalties.VATEurope LuxembourgKey Tax Issues at Yea

267、r End for Real Estate Investors 2022/2023 36FAIA requirement The Luxembourg VAT Authorities may require certain VAT taxpayers to provide all the information necessary for their audit on an electronic structured audit file(the so-called Fichier dAudit Informatis de lAdministration de lenregistrement

268、et des domaines FAIA).As a general rule and based on the guidance from the Luxembourg VAT Authorities,this FAIA file can be requested to(1)VAT registered entities under the normal regime and that are subject to the Luxembourg Standard Chart of Accounts and(2)which perform more than 500 transactions

269、per year.These requests are more and more frequent and the affected companies should ensure that they are able to generate the file and can provide it when requested since failure to provide may attract penalties.On 18 December 2018,the Luxembourg Parliament voted for Bill(n7318)(the Law),implementi

270、ng ATAD I in Luxembourg domestic law.The Law was published on December 21st 2018 and entered into force on 1 January 2019.The Law covers the following measures:Interest limitation rulesThe Law sets out new interest deduction limitation rules restricting deduction of exceeding borrowing costs up to a

271、 higher of i)30%of the taxpayers EBITDA or ii)EUR 3m.Exceeding borrowing costs not deductible in a tax period may be carried forward without time limitation.Interest capacity which cannot be used in a given tax period may be carried forward for five years.The Law also provides for a grandfathering t

272、o be applied to any loans granted to a Luxembourg company before 17 June 2016 and to the extent that these loans have not been modified since this date and will not be modified afterwards.Borrowing costs arising from long-term infrastructure projects(where the project operator,borrowing costs,assets

273、 and income are all in the European Union)are also excluded from the scope of the interest limitation rules.Controlled foreign company rules(CFC)The Law sets out new CFC rules targeting non-distributed income of CFCs arising from non-genuine arrangements,which have been put in place for the essentia

274、l purpose of obtaining a tax advantage.If a CFC is identified,the Luxembourg company may have to include totally or partially the non-distributed income earned by the CFC entity/-ies following a functional analysis.General anti-abuse rule(GAAR)The Law aims at modernizing the existing general anti-ab

275、use rule as provided by the Adaptation Law.Under the Law,there is an abuse of law if the legal route which,having been used for the main purpose or one of the main purposes of circumventing or reducing tax contrary to the object or purpose of the tax law,is not genuine having regard to all relevant

276、facts and circumstances.Anti Tax Avoidance Directive(ATAD)IEurope LuxembourgKey Tax Issues at Year End for Real Estate Investors 2022/2023 37Exit tax rules(applicable as from 1 January 2020)The Law modifies the existing exit taxation rules and amends the existing taxation deferral rules to provide f

277、or a payment of tax in installments over five years.The payment of the Luxembourg tax arising on the gains upon transfer of assets outside Luxembourg in any of the circumstances listed in ATAD may be made in installments over a period of five years.However,this is possible only where the transfer is

278、 to an EU Member State,or an EEA State with which Luxembourg has an agreement on the recovery of taxes.On 19 December 2019,the Luxembourg Parliament voted to approve the law implementing the EU Anti Tax Avoidance Directive regarding hybrid mismatches with third countries(“ATAD 2”)into Luxembourg dom

279、estic law(the“ATAD 2 Law”).The Law generally follows the text of ATAD 2 rather closely,adapting it mainly to integrate with the structure and terminology used in the Luxembourg Income Tax Law.The ATAD 2 Law applies to tax years starting as from 1 January 2020,with the additional“reverse hybrid”measu

280、res that comprise Article 9a of ATAD 2 applying from the 2022 tax year,i.e.to tax years closing in 2022.For taxpayer having a tax year diverging from the calendar year,this means that Article 9a of ATAD 2 may apply to them already in 2021.The ATAD 2 Law aims at preventing“deductions without inclusio

281、n”and“double deductions”caused by“hybrid mismatch”tax treatments.A“hybrid mismatch”may be defined as the difference in the legal characterization of a financial instrument(e.g.debt in the jurisdiction of a payer and equity in payees jurisdiction)or an entity(i.e.tax transparent in one jurisdiction b

282、ut opaque from another jurisdictions perspective).The provisions of the ATAD 2 Law apply whenever there is a hybrid mismatch under:(i.)a structured arrangement or(ii.)between associated enterprises or(iii.)between a head office of an entity and a permanent establishment or(iv.)between two or more pe

283、rmanent establishments of the same entity or(v.)in cases of dual tax residence.Essentially any link,where there is a 50%or more right to votes,capital ownership or profits,causes two entities,or an individual and an entity,to be associated enterprises(except in relation to payments under a financial

284、 instrument-here a threshold of 25%is sufficient to create an associated relationship).In relation to the acting together concept,the Law deals specifically with investors(either physical persons or entities)in an investment fund that own,directly or indirectly,less than 10%of the shares or units of

285、 the fund and are entitled to less than 10%of the profits of that fund.Unless demonstrated otherwise,any such investor in a fund is not to be regarded as acting together with any other investor.This means that in these circumstances any such less than 10%investor should not be associated with the fu

286、nd vehicle,and as a consequence also not be associated with the entities the fund vehicle controls.Anti Tax Avoidance Directive(ATAD)IIEurope LuxembourgKey Tax Issues at Year End for Real Estate Investors 2022/2023 382022 reverse hybrid mismatchesWith effect as from the 2022 tax year,Luxembourg tran

287、sparent partnerships will become liable to corporate income tax in relation to net income,to the extent that such income is not otherwise taxed under the Luxembourg domestic tax law or the laws of any other jurisdiction,provided one or more associated non-resident entities i)holding in aggregate a d

288、irect or indirect interest in 50%or more of the voting rights,capital interests or rights to a share of profit in the Luxembourg partnership ii)consider the Luxembourg partnership to be a taxable person.The ATAD 2 Law confirms that,while the Luxembourg partnership will be considered as a tax residen

289、t for corporate income tax purposes,it will be exempt from Net Wealth Tax.In line with the exclusion provided for in ATAD 2,collective investment vehicles are out of the scope of this provision.For the purpose of this rule,collective investment vehicles are defined as an investment fund or vehicle t

290、hat is widely-held,holds a diversified portfolio of securities and is subject to investor-protection regulation in the country in which it is established.The Commentary to the ATAD 2 Law clarifies that this definition includes undertakings for collective investment in the sense of the Law of 17 Dece

291、mber 2010,specialised investment funds(SIFs)covered by the Law of 13 February 2007,reserved alternative investment funds(RAIFs)covered by the Law of 23 July 2016,and other alternative investment funds(AIFs)not falling within the above categories but covered by the Law of 12 July 2013(implementing th

292、e EU AIFM Directive)relating to managers of alternative investment funds although only to the extent that such AIFs are widely-held,hold a diversified portfolio of securities and are subject to investor-protection regulations.DAC 6 provides for a mandatory disclosure of certain cross-border arrangem

293、ents by intermediaries or relevant taxpayers to the tax authorities and mandates automatic exchange of this information among EU Member States(taking place every quarter).As a result,intermediaries who provide their clients with complex cross-border financial schemes may be obliged to report these s

294、tructures to their tax authorities.Similar reporting obligations may apply to fund promoters.On 21 March 2020,the Luxembourg Parliament voted to approve the Bill(n7465)implementing the EU Directive into local law.This DAC 6 Law is applicable since 1 July 2020.The first reportable transactions will h

295、owever be those whose first implementation step occurred between 25 June 2018 and 1 July 2020(transitory period).According to the DAC 6 Law,the relevant information would then have to be reported to the Luxembourg tax authorities by intermediaries(or relevant taxpayers)by 31 August 2020.However,on 2

296、2 July 2020,the Luxembourg Parliament voted to approve the draft bill(n7625),which was published in the Memorial on 24 July 2020 to enact the extension of reporting deadlines,in accordance with the provisions of the Directive 2020/876 adopted on 24 June 2020.According to the Law of 24 July 2020,the

297、final deadline for filing arrangements linked to the transition period is postponed to 28 February 2021.In addition,the date for the beginning of the period of 30 days for reporting by intermediaries(or relevant taxpayers)on reportable cross-border arrangements for which the first step of implementa

298、tion occurs between 1 July 2020 and 31 December 2020(the“post-transition”period)is changed from 1 July 2020 to 1 January 2021.DAC 6-Disclosure for certain cross-border arrangementsEurope LuxembourgKey Tax Issues at Year End for Real Estate Investors 2022/2023 39Investment structures should be analys

299、ed by intermediaries or relevant taxpayers to identify potential reportable cross-border arrangements and to assess any reporting obligations towards the Luxembourg or foreign tax authorities based on the applicable local law.And even if,based on the local assessment,no reporting is required,a prope

300、r documentation would be crucial and might serve as a proof for DAC 6 compliance.Disclosure obligations As from 2017 tax return,the following TP related information would need to be disclosed:if the Luxembourg company engages into transactions with related parties;if the Luxembourg company opts for

301、the simplification measure stated in section 4 of the 2017 TP Circular(L.I.R.n 56/1 56bis/1 of 27 December 2016).As from the 2018 tax return,Luxembourg entities are required to indicate in their tax return whether they have performed any transaction.Development concerning Country-by-Country(CbCR)rep

302、orting A grand-ducal regulation has been issued on 18 March 2019(the Mmorial A N 163),amending the revised grand-ducal regulation published on 13 February 2018.In case the ultimate parent is resident in a jurisdiction that is not listed in the mentioned regulation,a CbC report will have to be filed

303、either by a“surrogate entity”resident in a jurisdiction listed in the grand-ducal regulation or by an affiliate in Luxembourg.Exceptions may apply,on a case-by-case basis,if countries mentioned in the regulation have CbC reporting obligations but starting from a different fiscal year.In case of CbC

304、reporting and notifications finalised before the regulations,MNE groups shall review them to ensure they have been done in compliance with the list of exchanging jurisdictions listed in the regulations.The grand-ducal regulations only indicate that exchange of information will take place from Luxemb

305、ourg to each of the other jurisdictions listed.It is important to note that there are jurisdictions,which are exchanging CbC reports with Luxembourg,although Luxembourg may not be exchanging with such countries,i.e.so-called non-reciprocal jurisdictions.In case MNE groups have the ultimate parent co

306、mpany in such jurisdictions,the Luxembourg tax authorities may not accept that those groups can satisfy their CbC reporting obligations by using a Luxembourg group entity as a surrogate entity filing in Luxembourg.OECDs Chapter X On 11 February 2020 the OECD issued its final report on“Transfer Prici

307、ng Guidance on Financial Transactions”.The Report addresses general guidance to the application of the arms length principle,as well as specific issues relevant to treasury functions(i.e.,intra-group financing,cash pool structures,and hedging),issues linked to financial guarantees,and captive insura

308、nce and reinsurance arrangements.Transfer PricingEurope LuxembourgKey Tax Issues at Year End for Real Estate Investors 2022/2023 40We would recommend taking a look at the inventory of TP documentation currently in place supporting the arms length nature of the existing intra-group financing transact

309、ions and revisit such analyses in light of the clarifications conveyed in new Chapter X of the OECD TP Guidelines.Over the past few years,we have noticed an emerging trend in various jurisdictions where portfolio companies are located,that tax administrations tend to challenge the actual substance o

310、f foreign holding companies.According to Luxembourg income tax laws,a company is considered to be resident in Luxembourg,and therefore fully taxable therein,if either its registered office or central administration is located in Luxembourg.To avoid the risk of challenge by other tax authorities,it i

311、s usually recommended that it can be evidenced that a Luxembourg company is effectively managed and controlled in Luxembourg and that minimum substance exists in Luxembourg(e.g.bookkeeping,phone line,etc.).In particular,with respect to the day-to-day management it is recommended to have at least one

312、 local director in charge of the day-to-day management with a real decision power(to be assessed in light of the decision power of the foreign directors).Transfer pricing requirements related to the substance have been reinforced and highlight the need to have a majority of the board of directors ta

313、x resident in Luxembourg and that the personnel is sufficiently qualified to control the transactions performed.Substance in LuxembourgEurope LuxembourgKey Tax Issues at Year End for Real Estate Investors 2022/2023 418 PolandPolish DealA significant number of amendments to the Polish Corporate Incom

314、e Tax(CIT)Act(as well as other tax acts,including the Value Added Tax(VAT)Act and the Tax Ordinance)called Polish Deal came into force as of 1 January 2022.However,since that time some of the new provisions were already modified and corrected(with the most recent corrections signed by the president

315、at the end of October 2022).Accordingly,we present below the up-to-date information on the key provisions within the Polish Deal,which should be taken into account by real estate investors.Tax depreciation write-offs recognised in relation to buildings cannot be higher than depreciation write-offs m

316、ade for accounting purposes.In practice this may mean that if a given entity does not depreciate the building for accounting purposes(but rather revaluates this property to its fair market value)tax depreciation of such a building should be excluded.Subject to certain accounting/business/legal consi

317、derations,a change of the accounting policy from the revaluation approach into depreciation approach may be possible(thus,allowing to retain the deductibility of the depreciation write-offs for tax purposes).As a side note,the tax depreciation is specifically excluded in relation to residential buil

318、dings and apartments(irrespective of their accounting treatment).It is not clear how these provisions could apply to premises in technically non-residential buildings which formally do not constitute apartments,but are used e.g.for short-term lease purposes.The threshold limiting the deductibility o

319、f debt financing costs since 2022 should be understood as 30%EBITDA or PLN 3m(whichever is higher).Until recently the above was not clear but-based on the prevailing interpretation(supported also by the judgements of the administrative courts,however not accepted by the tax authorities)-the above li

320、mit should rather be calculated as 30%EBITDA plus PLN 3m.As such,the change applicable as of 2022 may significantly limit the deductibility threshold for the taxpayers.The amendments contain certain changes to the WHT“pay-and-refund”mechanism for foreign payments with the aggregated amounts exceedin

321、g PLN 2m per year.According to the current wording of the law,the WHT pay-and-refund mechanism applies only to interest,dividend and royalties payments to related parties.As such,other payments(e.g.service payments or payments to non-related entities)should not be currently captured by this mechanis

322、m.Additionally,the definition on the“beneficial owner”was slightly changed(in particular,with respect to understanding the criterion of conducting actual business activity).Changes within the so-called“Polish Deal”introductionTax depreciation of the real estate assetsEBITDA-based deductibility limit

323、ation of debt-financing costsWithholding tax(WHT):Pay-and-refund mechanism/WHT special rulingsEurope PolandKey Tax Issues at Year End for Real Estate Investors 2022/2023 42Moreover,as of 2022 the special formal ruling on the applicability of preferential WHT regime can be obtained not only in relati

324、on to WHT exemptions resulting from the directives of the European Union(i.e.Parent-Subsidiary Directive and Interest-Royalties Directive),but also in relation to the WHT exemptions or reduced WHT rates resulting from the respective double tax treaties.Additionally,the amendments specifically impose

325、 on the tax remitters higher standards of“due diligence”in relation to payments to related parties.Initially,the“Polish Deal”reform package included a new concept intending to exclude from tax deductible costs so-called“hidden dividends”,i.e.certain payments made for the benefit of shareholder(or en

326、tities related to shareholder/taxpayer)which could be seen as aimed at replacing dividends.It was expected that these rules may enter into force as of 2023.However,it was ultimately decided that the provisions in this respect were deleted from the law(i.e.they do not exist now and are not expected t

327、o be reintroduced).In 2022 the new provisions regarding“diverted profits tax”were introduced.This tax can be imposed 19%on“diverted profits”understood as certain costs(such as intangible services,royalties,debt financing cost or payments for transfer of functions,assets or risks)incurred directly/in

328、directly-for the benefit of related entities(provided that certain conditions are met).As a“safe harbour”mechanism,the“diverted profits tax”should not apply if the above costs are incurred for the benefit of a related entity subject to taxation on its worldwide income in the EU/EEA(assuming that thi

329、s entity conducts a genuine and material business activity).The provisions regarding“diverted profit tax”are complex and will be further modified as of 2023.The applicability of this tax should be analysed on a case-by-case basis.Based on the current wording of the Polish CIT Law,a kind of“minimum C

330、IT on buildings”is already applicable to the real estate companies(as a percentage of the property value).However,since 2022,a new type of“general minimum CIT”was introduced as applicable to all taxpayers declaring tax losses or relatively low income(NZD 100m(higher thresholds apply for certain Aust

331、ralian investors and investors from member countries of certain free trade arrangements);oracquire an interest in sensitive land(for example,residential land,marine or coastal land,farm land,historic or heritage land or areas adjacent to reserves or water).An increase in an existing 25%ownership or

332、control interest past certain threshold limits will also be captured.As part of an application to the Overseas Investment Office is required to receive consent to acquire an interest in sensitive(but not residential)land.Among other things,the overseas investor must identify the benefit(s)that the p

333、roposed investment brings to NZ.It is important to note the different consent requirements for different types of land.For more information,refer to www.linz.govt.nz/overseas-investment.A national security and public order call-in power has also been added to the regime.The call-in power requires overseas persons to notify the Overseas Investment Office of certain investments in“Strategically Impo