The Belgian Specialized Real Estate Investment Fund (B-SREIF)
Lately the Belgian Government has been working on several measures to attract foreign investors to invest in real estate in Belgium.
One of the long-awaited measures is the creation of the Belgian specialized real estate investment fund (B-SREIF)1 besides the current B-RREC2 and the B-REIT3 . It is expected to be one of the most flexible investment regimes in Europe.
On 3 August 2016 the Program Act II amending the Act of 19 April 2014 on Alternative Investment Funds and their Managers (AIFM Act) to provide for the creation of the B-SREIF was adopted. The Program Act II also contains the tax provisions applicable to the B-SREIF as well as the amended tax provisions applicable to the B-RREC and B-REIT.
The Royal Decree on the implementation of the B-SREIF and of its regulatory framework has been published in the Belgian Official Gazette of 18 November 2016 and has entered into force on 28 November 2016.
The B-SREIF is a new real estate investment structure dedicated to professional and/or institutional investors. The B-SREIF intends to meet the need of the professional and institutional investors to manage and control their real estate investment, its return and the risks associated in a rather flexible way. The aim of the B-SREIF is to act as:
- a pan-European platform for real estate investment, so not only in Belgium but also abroad; and
- a structure to hold and organize real estate assets for companies willing to split their activities.
This new investment vehicle will take the form of an unlisted company in which the investors may hold a majority stake. The B-SREIF will be incorporated for a limited duration of maximum 10 years extendable with successive periods of maximum 5 years each upon the unanimous decision of an extraordinary general meeting to prevent winding up in case of economic downturn. It will also benefit from a flexible, less stringent and competitive regulatory framework as compared to the B-RREC and B-REIT:
- The shares can be held by a sole investor (in such case the B-SREIF will fall outside the scope of the AIFM Directive)
- Minimum corporate capital of EUR 1,200,000.00
- Minimum total value of assets held by B-SREIF must be EUR 10,000,000.00
- Registration with the Belgian Ministry of Finance
- No supervision of the Belgian Financial Services and Markets Authority
- No (risk) diversification requirement
- Application of IFRS accounting standards
- No maximum debt percentage.
The B-SREIF falling within the scope of the AIFM Directive will benefit from the European passport.
The B-SREIF can only invest in real estate, term as defined by the implementation decree which covers any right on real estate. The B-SREIF cannot hold Belgian real estate indirectly. Any indirect investment through a subsidiary will have to be followed by a restructuring process within a 24 month period to ensure that the investment is held directly. The B-SREIF cannot act as a real estate developer. The asset managers of the B-SREIF should be subject to the supervision of the Belgian Financial Services and Markets Authority. Like the B-RREC and B-REIT, at least 80% of the net income of the B-SREIF must be distributed to its shareholders each year.
The B-SREIF is subject to a similar tax regime as the B-RREC and B-REIT, but will be more favourable to foreign investors and/or foreign investments. The tax benefits of the B-SREIF are as follows:
- Subject to the Belgian corporate income tax on a minimal tax base, i.e. excluding rental income, capital gains, dividends or interest received in relation to Belgian and non-Belgian real estate
- Part of dividend income derived from foreign real estate and /or paid to foreign shareholders may benefit from dividend withholding tax (DWT) exemption
- Benefits of double tax treaties
- Effective taxation limited to 1.7% on dividend distributed by the B-SREIF to Belgian corporate investors as far as relating to part of income derived from foreign real estate
- Avoidance of cash trap
- An exit tax at a rate of 16.995% on unrealized capital gains on Belgian real estate assets entering the B-SREIF regime via a restructuring process or contribution.