Real estate and investment trusts

Execution of Real Estate Transactions

When it comes to real estate acquisitions, there are many legal and tax considerations. Firstly, conducting a brief or comprehensive legal and tax due diligence is crucial, especially if the real estate is not purchased directly but through shares in a real estate entity. Additionally, (purchase) agreements need to be drafted. Furthermore, the implications of value-added tax or real estate transfer tax must be taken into account. Sometimes, the purchase of real estate or a real estate entity requires prior legal or tax structuring, such as ensuring maximum tax interest deduction.

HVK Stevens can support your company or investment fund in every phase of the real estate transaction.

Fiscale Tax Valuation of Real Estate

When your company owns a property, you can depreciate it until its tax book value reaches the so-called tax floor value. This leads to reduced income or corporate tax payments for your company. Additionally, there may be situations where the value of the real estate itself has decreased due to developments in the real estate market. If there is a substantial and lasting decline in value, it’s possible to make a fiscal write-down on the real estate, which can result in further tax savings. In this case, it might lead to the tax floor value being exceeded. Fiscal depreciations will then be suspended until the tax book value, after revaluations, rises above the floor value again.

The tax experts at HVK Stevens can assist your company in optimizing the tax valuation of real estate within your business or investment fund.

Project development

If your (real estate) business or property fund, purchases real estate with the purpose of redeveloping or transforming, we advise you to thoroughly map out in advance what the consequences will be for the levying of VAT and transfer tax. After all, VAT is charged on the – sometimes considerable – costs of transformation. The answer to the question of whether this VAT constitutes costs in the project operation, depends on the nature of the transformation and the future use of the transformed property. In this respect, each transformation stands alone.

If the transformation of the real estate leads to the creation of a new manufactured good, then a subsequent resale of the real estate is VAT taxed (but exempt from transfer tax). VAT on the transformation costs is then deductible. HVK Stevens assists many clients in this so-called “renewal discussion” with the tax authorities.

Even if and insofar as the transformed property is let with VAT, the VAT on the transformation costs is in principle deductible. HVK Stevens assists developers in making a reliable VAT forecast.

If, on the other hand, the transformed property is let to private individuals, the starting point will be an exempt use and the VAT on the transformation costs will normally not be deductible. However, the lease can be designed in such a way that VAT may be deductible after all.

The fiscal reinvestment reserve

When your company or investment fund proceeds with the sale of real estate, you can avoid immediate corporation tax being levied on the realised book profit. By forming a reinvestment reserve, this taxation can be postponed. Forming a reinvestment reserve is subject to a large number of conditions. For example, the company or fund must in principle make its reinvestment in no later than the third financial year after the year of sale. The company or fund must also always have the actual intention to reinvest the sale proceeds during that period and must always be able to make that intention plausible to the Tax Authorities. In practice, the existence of a (realistic) reinvestment intention is often discussed with the tax authorities.

HVK Stevens has a multidisciplinary real estate team including tax experts, lawyers and civil-law notaries. The real estate team of HVK Stevens is therefore able to draw up and implement real estate advice.