Real estate
13:56 12 March 2018
Post by: WBJ

REAL ESTATE INVESTMENT: Taxes

Real estate transaction market responds to tax amendments

REAL ESTATE INVESTMENT: Taxes

BEPS, ATAD, EBITDA, MINIMAL CIT, VAT REFUND, SPLIT PAYMENT - These are terms that have frequently appeared in the context of recent Polish taxation amendments, which affected not only real estate transactions but also their structuring. The market has finally worked out the tools and mechanisms to facilitate the security of tax aspects in real estate transactions. Without doubt, there has been a visible shift from hitherto prevailing asset deals to other transaction types, such as share deals (acquisition of assets in a company) and enterprise deals (acquisition of an enterprise based on real estate assets). The market also expects the VAT split payment mechanism to be introduced into the Polish system, which will allow VAT risk value on some transactions to be reduced by eliminating a VAT sanction component.

A particular obstacle for investors in Poland is the transitional provisions, which may imply that more than one tax regime could be imposed simultaneously, particularly in the scope of “thin capitalization” restrictions, or the manner of loss utilization. Indeed, we can observe the increase in the scope complexity of DD tax reviews and tax contractual clauses. On the other hand, transaction structuring and the maintenance phase of real estate portfolios have been reduced by structures like debt-push-down, which, starting this year, do not allow investors to use a tax shield on interests. Luckily, this does not impede investors’ acquisition plans and the build-up of real estate supply by developers in Poland.

taxes

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