What are the main taxes associated with commercial real estate ownership and transfer of commercial real estate?

Real Estate (3rd edition)

Austria Small Flag Austria

Taxes Applicable to a Transaction
The applicable taxes for an asset deal are as follows:

  • land transfer tax ("Grunderwerbsteuer"): 3.5% of purchase price;
  • registration fee ("Eintragungsgebühr") for ownership: 1.1% of purchase price;
  • registration fee for mortgage: 1.2% of registered amount.
  • Property tax ("Grundsteuer"): very low amount, payable each quarter.

Share deals can invoke land transfer tax if at least 95% of shares of a corporation ("Kapitalgesellschaft") are acquired by one buyer (company or group company or escrow agent), or if at least 95% of shares of a private partnership ("Personengesellschaft") are acquired within a period of five years (also in case of different buyers), land transfer tax is triggered in the amount of 0.5% of the respective tax value of the real estate, which is normally below the asset value. It is customary that the aforementioned taxes (with the exception of the property gains tax) are borne by the buyer(s).

Brazil Small Flag Brazil

  • Real Estate Transfer Tax (ITBI):
    ITBI is a municipal tax levied on the transfer of real estate for consideration or related rights (except guarantee) at a rate that varies in accordance to the municipality where the real estate is located. The tax shall be calculated on the real estate market value, which shall be the higher between (i) the transaction declared value or (ii) the value of the property defined by the municipality.

    The Federal Tax Code and Federal Constitution establish that ITBI is not levied on the transfer of real estate or related rights (i) to pay up capital; or (ii) as a result of a merger, spin-off or termination of a company, except if one of the main activities of the buyer/new company is the acquisition and sale and/or lease of real estate.

    The tax must be paid by the acquirer of the property before the execution of the purchase and sale deed. In case of assignment of rights, the assignor is liable for the payment.

  • Inheritance and Donation Tax (ITD)
    ITD is a state tax applicable to the transfer of properties by inheritance or donation, whether urban or rural, which rate shall vary in accordance to the state where the real estate is located. The tax shall be calculated on the real estate market value, which may be revised by the state tax authority, and paid before the execution of the transfer deed.
  • Urban (IPTU) and Rural (ITR) Property Taxes
    IPTU and ITR are, respectively, local and federal taxes levied annually on urban and rural properties.
    The basis for IPTU is the real estate market value and the rate at which the tax is collected depends on the municipality. A tax payment slip with the amount due is annually issued by the Municipality.

    The basis for the ITR is the value of the rural land at rates that vary depending on the number of hectares and the level of use of the area. ITR requires the filing of an annual ITR tax return to the Brazilian Tax Authority in order to establish the amount due.

    Articles 130 and 131 I of the Brazilian National Tax Code, the purchaser is liable for past IPTU and ITR charges regarding the period of ownership of previous owners. It is, therefore, crucial to ascertain whether all previous charges of those taxes have been duly paid by the previous owners.

    Similarly to IPTU and ITR, other charges such as utilities and fire brigade tax are also frequently charged from the current owner, regardless if related to a period prior to the real estate acquisition.

  • Taxation of gains on Real Estate
    Brazilian individuals and non-residents (including foreign legal entities) are taxed by the capital gain tax, which is due when a good or right is transferred with profit, that is, when the sale price exceeds the price of the acquisition. There are some tax incentives for individuals who are tax residents in Brazil.
    For acquisitions since 1997, the tax base of capital gains of rural properties is subject to a different regime based on the market value indicated in the annual ITR tax return, which may be revised by the Brazilian Tax Authority.

    From a Brazilian legal entity perspective, the taxation is based on its tax regime (actual or deemed profit regime) and if the acquisition and sale of real estate transactions is part of its business purpose (taxed as ordinary income instead of capital gains). Corporate Income Taxes (IRPJ/CSLL) and taxes on gross revenues (Pis/Cofins) may apply, although the deemed profit method and tax planning are also available to reduce such tax impact.

  • IOF-exchange (transactions with foreign parties)
    Due to state monopoly regarding foreign currencies sale and acquisition, where an exchange agreement closed by a financial institution is mandatory, IOF-Exchange (the taxable event is the exchange of currencies) is a stamp alike tax used by Brazilian Government for non-tax purposes, i.e. to try to regulate the inflow and outflow of financial resources in Brazil. The Executive Power may change its tax rates by Decree (without Congress approval) with immediate effect after publishing it.

Cayman Islands Small Flag Cayman Islands

14.1 Subject to limited exemptions (some of which are at the discretion of the Minister of Finance), ad valorem stamp duty is payable on:

(a) the conveyance or transfer of any immovable property (freehold or leasehold):

(i) 7.5% of the higher of purchase price and market value, although concessions are available for Caymanian first time purchasers of lower value real property and any purchasers of lower value property in certain categories of new development; and
(ii) usually paid by the purchaser;

(b) the grant of a lease of any immovable property:

(i) if the term exceeds thirty years, the same duty as on a sale based on the full market value of the leasehold interest in the real property; or
(ii) if the term is thirty years or less:

(A) where any premium or other valuable consideration other than or in addition to rent is provided, the same duty as on a sale based on the amount of the premium; and
(B) where the consideration or any part of the consideration is rent:

(I) if the term is less than one year, 5% of the aggregate rent;
(II) if the term is one year or more, but does not exceed five years, 5% of the higher of average annual rent or market rent;
(III) if the term exceeds five years, but does not exceed ten years, 10% of the higher of average annual rent or market rent; or
(IV) if the term exceeds ten years, 20% of the higher of average annual rent or market rent; and

(iii) usually paid by the tenant;

(c) debentures and legal or equitable mortgages or charges of immovable or movable property within the Cayman Islands:

(i) in the case of a debenture or a legal or equitable mortgage or charge of immovable property within the Cayman Islands:

(A) where the sum secured does not exceed KYD300,000, 1% of the sum secured; or
(B) where the sum secured is more than KYD300,000 (whether initially or after a further advance), 1.5% of the sum secured;

(ii) in the case of a legal or equitable mortgage or charge of movable property within the Cayman Islands, 1.5% of the sum secured (subject a maximum charge of KYD500 where the security instrument is granted by a Cayman Islands exempted company, a Cayman Islands ordinary non-resident company, a Cayman Islands exempted trust or a body corporate incorporated outside of the Cayman Islands or the security is over shares in a Cayman Islands exempted company or a Cayman Islands ordinary non-resident company); and

(iii) usually paid by the borrower; and

(d) policies of insurance for property within the Cayman Islands:

(i) 2% of the cost of the new or renewed property insurance premiums; and

(ii) usually added to insurance premiums.

14.2 Subject to limited exemptions (some of which are at the discretion of the Minister of Finance), ad valorem share transfer tax is payable on the transfer or issue of equity capital in a land holding corporation at the rate of 7.5% of the proportionate value the entire land holding. A land holding corporation includes any partnership, foreign corporation, chartered corporation, mutual fund or incorporated company (but not a corporation sole or charitable corporation) holding any legal or beneficial interest (excluding interests created pursuant to bona fide security instruments) in landed property in the Cayman Islands (or interest in another land holding corporation). Landed property would include freehold interests in Cayman Islands real property and any leasehold interest where the original term exceeded thirty years.

14.3 In addition, most financial instruments and documents will attract a fixed rate of stamp duty in comparatively nominal amounts. Registrable instruments also attract relatively immaterial registration fees.

14.4 Subject to limited exceptions, real estate used for paid tourist accommodation attracts tax at 13% of the amount charged to each tourist.

14.5 There are no other domestic taxes or municipal rates currently payable on the occupation, acquisition, ownership or disposal of Cayman Islands real property or income deriving therefrom.

Cyprus Small Flag Cyprus

When the agreement of sale of immovable property is signed the agreement is stamped at the tax Authorities. It is usually the purchaser’s obligation to pay the stamp duty. The stamp duty is calculated as follows: when the purchase price is less than €5.000,00 no duty is paid. Duty of €1,5 for every 1000 euro on the first 170.000,00 euro is charged and for any amount above €170.000, the duty raises to Euro2 for every thousand euro. The stamp duty does not exceed the amount of Euro 20.000,00.

Upon tranfer and registration of the title into the name of the purchaser, the latter pays tranfer fees at the land registry. These fees are calculated on the value of the immovable property on the date of signing of the contract of sale. The value is determined by the valuation department of the land registry. The method of estimation is 3% on the first €85.000,00, 5% on any amount between €85.0001,00 to Euro 170.000.00 and 8% for any amount above €170.000,00.

Up to the end of 2016 an annual tax referred to as immovable property tax was payable on properties. This tax was being estimated on the 1980 value of the property. There is no such tax after 1/1/2017. Furthermore council tax or Municipality tax in accordance with the location of the property is charged by the local Authority. Furthermore, the sewerage board charges an annual charge on immovable properties. Usually, the Vendor pays these taxes and charges up to the completion date and from completion onwards they are paid by the purchaser.

If the Vendor sells the immovable property with a profit, capital gains tax is imposed. The capital gains tax is calculated by deducting from the selling price the cost of acquiring the property when the Vendor acquired it. Inflation is taken into consideration. The balance is the profit and is taxed at 20%. If the Vendor is a physical person, the first €25.629,00 of profit is exempted from tax in case of agricultural land and for other immovable property the first €17.086,00 of profit is exempted from tax. €85.430,00 of the profit is exempted from tax, when the private residence of the Vendor is sold. If the vendor is a dealer of land (developer, estate agent etc) income tax or corporation tax is charged instead of capital gains tax.

Value added tax is charged when the immovable property, which includes the land and the building, is sold before its first habitation. Vat is also charged on non-developed land when the sale transaction is considered as a financial activity. When the purchaser intents to use the property a main permanent residence in Cyprus, the Vat rate can be reduced to 5%.

Denmark Small Flag Denmark

Main taxes on commercial real estate are land tax (in Danish: grundskyld) and, depending on the municipality and the nature of the business carried out from the property, municipality charge (in Danish: dækningsafgift). The land tax is based on public valuations of the property in question. The municipality charge is imposed on commercial properties used for certain business purposes to cover expenses that the municipality has relating to the property. Each municipality decides whether to impose such charge.

Main taxes associated with the transfer of commercial real estate are property gains tax (in Danish: ejendomsavancebeskatning) and VAT in relation to certain new properties.

France Small Flag France

Main taxes associated with ownership are:

  • Real estate taxes: Owners of commercial real estate are liable for land taxes (taxes foncières) assessed by the local tax authorities and, in the Paris region, for tax on office and retail premises and parking areas. These taxes are, usually, re-invoiced to tenants.

  • Direct taxes: Corporate income tax applies to the taxable net income derived from the real estate at a maximum effective rate of 28.92% in 2020 (for taxpayers the turnover of which does not exceed € 250,000,000) progressively decreasing to 25.83% by 2022. A contribution on added value (cotisation sur la valeur ajoutée des entreprises, CVAE) at a rate of 1.4% to 1.5% (for turnover between € 10,000,000 and € 50,000,000) on a taxable basis broadly similar to the corporate income basis except for non-deductibility of interest expenses..
  • Indirect taxes: Landlords are entitled to elect for VAT on rent derived from the leasing of commercial real estate, which generally enables them to recover VAT incurred on theirs costs.
  • Other taxes: an annual 3% tax on the fair market value of the real estate may apply, unless the chain of ownership of the commercial real estate is disclosed to the French tax authorities.

Main taxes on asset sales are:

  • Registration duties: standard rate of circa 5.81% or 6.41% (commercial real estate in the Paris region) of the purchase price. Reduced rates apply to (i) acquisitions of building land and properties completed for less than five years, (ii) acquisitions with a commitment to resale within five years, and (iii) acquisitions with a commitment to carry our works resulting in the real estate being considered new. A real estate security contribution of 0.1% and notary's fees also apply to all transfers.
  • Value added tax (VAT): at 20% on transfers of building, land and real estate assets completed for less than five years. The sale of leased commercial real estate may in certain cases be treated as a VAT-free transfer of a going concern. If this regime does not apply, the seller may elect for VAT on the transfer or re-invoice the partial refund of VAT triggered by a VAT-exempt transfer to the purchaser.
  • Capital gains tax (CGT): standard rate of corporate income tax if the seller is a company, i.e. maximum effective rate of 28.92% in 2020 (for taxpayers the turnover of which does not exceed € 250,000,000), decreasing to 25.83% by 2022. Certain regulated vehicles (including the listed société d'investissement immobilier cotée (SIIC) and the real estate collective investment vehicle organisme de placement professionnel collectif immobilier (OPPCI) benefit from a corporate income tax exemption subject to distribution requirements.

Germany Small Flag Germany

Ownership: Land tax is payable to the local authority. Taxes vary depending on where the property is situated as land tax is a local tax.

Direct taxes: In general, letting and leasing of real estate is VAT exempt. However, the lessor is entitled to opt for the application of VAT with respect to a lease agreement if the property is used by the tenant for services and supply's which are subject to VAT.

Corporate income tax and trade tax (if the income is derived through a German permanent establishment) apply to income, profits and gains arising from the real estate. These will vary depending on whether the real estate is owned by an individual or entity, the nature of the entity and if they are resident in Germany.

Taxes on asset sales are:
Real Estate Transfer Tax (RETT): RETT is based on the purchase price for the property, and typically born by the buyer. The tax rates vary between 3.5% and 6.5% depending on the state where the property is located. In share deal transactions it may under certain conditions be possible to structure an acquisition RETT exempt. However, the German RETT rules for share deals are currently under discussion and will presumably be tightened in the near future.

Value Added Tax (VAT): At (currently) 19%. However, sale of real estate is in general exempt from VAT or may qualify as a VAT-free transfer of a going concern (i.e. a business that is operating and making a profit), depending on the facts. The seller can make an election to charge VAT (which invariably it would do to enable it to recover VAT it incurs in relation to services and supplies received with regard to the real estate).

Capital Gains Tax (CGT): (Currently) 15.825% corporate income tax (combined rate including solidarity surcharge) if the seller is a corporation. In addition, German trade tax may apply if the income is derived through a German permanent establishment; trade tax rates vary regionally, the effective trade tax rates presently range between 7% and approx. 17%. In case of individuals as sellers a progressive income tax rate is applied; the top rate amounts to 45% (plus solidarity surcharge and church tax (if applicable).

Greece Small Flag Greece

Real estate transfer tax
The transfer of the real estate title against consideration is subject to real estate transfer tax borne by the buyer at the rate of 3%. Municipal levies, at the rate of 3%, are calculated on the amount of the real estate transfer tax due.

The tax is assessed on the higher value between the agreed value and the “objective” value. The objective value is based on the zone values according to the formula provided by the Ministry of Finance. Upon fulfilment of certain conditions, the said tax can be reduced or not even be due.

VAT currently at 24%, instead of 3% transfer tax, is due on the transfer of “new buildings”, whose building permit is issued or renewed after 1.1.2006. Any building that has not been used is considered new. If the complete file for construction works was submitted to the City Plan Agency and a preliminary agreement and a contractor’s agreement were signed before 25.11.2005, VAT exemption may be granted, following a specific request to the tax authorities.

Airbnb properties rented to individuals for the short-term, are exempt from VAT provided that during the period of stay, the host (owner) does not provide additional services to guests similar to those offered in hotels.

Income tax on individuals
The gains arising from real estate transfer by individuals not engaged in business is subject to income tax according to an income or tax rates scale, which provides that income up to €12,000 is subject to tax at the rate of 15%, income between €12,001 and €35,000 is subject to tax at the rate of 35%, while income exceeding €35,000 is subject to tax at the rate of 45%.

Income tax on Greek legal entities
The Income Tax Law provides that Greek legal entities keeping double-entry accounting books are annually subject to corporate tax at the flat rate of 29% on their taxable income. Taxable income includes employment income, business income, income from capital and capital gains from the alienation of real estate and securities. Each category of income is taxed separately.

The distribution of dividends is subject to 15% withholding income tax. Specific rules provide for exemptions to dividend withholding. Capital gains tax upon the sale of real estate has been suspended until 31.12.2018.

Hungary Small Flag Hungary

Transfer tax
As a general rule, the buyer of the real estate shall pay transfer tax on the acquisition of real estate for consideration. The general tax rate is 4% up to HUF 1 billion (EUR approx. 3 million) of the market value of the real estate and 2% on the excess, however, the total payable transfer tax shall not exceed HUF 200 million (approx. EUR 605,000) per real estate (i.e. per topographical plot number).

Transfer tax shall also be payable for the acquisition of shares in a real estate holding company if the ownership ratio of the buyer reaches 75% of the company’s total shares. Shares of related parties and close relatives shall also be calculated for this threshold. The amount of transfer tax liability shall be calculated in respect of each real estate held by the company separately under the above rules. Real estate holding company is a company (i) in the balance sheet of which Hungarian real estate make up more than 75% of the value of total assets; or (ii) which owns more than 75% participation, directly or indirectly, in a company fulfilling the condition under (i).
Discounted transfer tax rate (flat 2%) may be applied for acquisition of real estate by real estate funds, credit institutions, real estate traders or REITs. The HUF 200 million cap of transfer tax liability does not apply in these cases.

Various exemptions from transfer tax are also available; for example, no transfer tax is payable if the transfer takes place between related parties, or by a preferred transformation, exchange of shares or transfer of business; in all cases subject to further conditions.

VAT
In general, the sale of real estate is exempt from VAT under the Hungarian VAT Act. However, the seller can opt for taxation, where such sales will be subject to reverse charge, i.e. the buyer shall assess and pay the VAT to the tax authority, the general VAT rate being 27%.

New real property (i.e. which has not been occupied or less than 2 years have been passed since its occupancy or development) and building plot is excluded from this exemption and the reverse charge regime, therefore their sale is subject to VAT at the rate of 27% which shall be charged by the seller to the buyer.
A preferential 5% VAT rate shall be applied until 31 December 2019 for the sale of (i) residential units in a multi-unit residential building having a total net floor space not exceeding 150 square meters and (ii) single-unit residential units having a total net floor space not exceeding 300 square meters. The preferential VAT rate is prolonged until 31 December 2023 provided that building permit had been obtained until 1 November 2018.

Personal income tax
If a private individual sells real estate, his/her income (the revenue less deductible costs, e.g. acquisition costs) is taxable at 15% personal income tax rate. The taxable income is gradually decreasing by each year from the acquisition, becoming tax exempt by the fifth year. If the private individual sells the real estate in the scope of its business activities, the tax liability shall be assessed under different rules, depending on the form in which the private individual pursues its business activity.

Local real property taxes
Real property tax on buildings and building plots can be imposed by the local municipalities within the confines of the act on local taxes. The tax is payable on a semi-annual basis by the person registered as owner on the first day of the tax year.

The maximum rates local municipalities can impose in 2019 are (i) in case of buildings, HUF 1,898 (approx. EUR 6) per sqm or 3.6% of the adjusted market value of the building and (ii) in case of building plots, HUF 345 (approx. EUR 1) per sqm or 3% of the adjusted market value of the building plot.

India Small Flag India

Stamp duty must be paid upon a transfer of immovable property and the rate depends upon the nature, usage, location and valuation of the property. Registration fees must also be paid. The market value of land is determined by Government authorities and declared each year (ready reckoner rates).

Capital gains tax liability may arise for the transferor upon a transfer of real estate if the asset was a long-term capital asset of the transferor. Alternatively, the profit upon transfer of real estate may be taxed in the hands of the transferor as income if the asset was held as a trading asset or short-term asset of the transferor.

The recently introduced Goods and Services Tax (“GST”) may be payable upon a transfer of development and other rights in the real estate if the transaction is considered as supply of goods or services or both. Note that:

  • GST is not applicable on a sale of land and is also not applicable on the sale of units/apartments/flats in a building after issuance of a “completion certificate” by the government authorities.
  • “Supply” has been given a wide definition in relation to the construction or real estate sector, and a range of transactions may be treated as supply of goods or services.

Other taxes may be payable to municipal authorities and corporations depending upon where the property is located.

Ireland Small Flag Ireland

Capital Gains Tax
The sale of Irish real estate, or of unquoted shares in companies deriving the greater part of their value from Irish real estate, will be subject to Irish capital gains tax. The current rate is 33%. The gain is calculated on the proceeds of sale less acquisition and enhancement costs, and less the incidental costs of acquisition and the incidental costs of disposal.

Irish capital gains tax is subject to a withholding procedure. The buyer must generally withhold 15% of the consideration and pay this amount to Revenue unless the seller provides a tax clearance certificate from Revenue. A clearance certificate is automatically available on application to Revenue if the seller is resident in Ireland for tax purposes. A non-resident seller will need to agree and discharge its capital gains tax liability in order to obtain a clearance certificate. This withholding procedure only applies to a buyer where the consideration payable to the seller exceeds the relevant threshold current at the date of the transfer agreement (currently €500,000 or €1,000,000 if the asset disposed of is residential property).

A capital gains tax exemption applies to disposals of land acquired between 7 December 2011 and 31 December 2014 (inclusive), provided the land was held for four years. The relief applies to residential and non-residential real estate located within any EEA state acquired by an Irish resident during the period set out above.

Stamp Duty
Ireland also imposes stamp duty on transfers of Irish real estate and certain other property. The stamp duty is charged on the consideration payable for the property, or the market value in certain instances. Stamp duty is generally payable by the buyer, although in certain transactions, such as voluntary transfers, both parties to a contract can be technically liable. There are provisions which apply to contracts to acquire land, as opposed to actual transfer documents, in cases where there is a “resting on contract” position.

The rate of stamp duty on transfers of residential property is 1% on consideration up to €1,000,000 and 2% on consideration over this threshold.

The stamp duty rate on transfers of non-residential (commercial) property is 7.5%.

Where non-residential property is transferred and is subsequently utilised for construction of residential accommodation, a stamp duty refund is available which effectively reduces the rate from 7.5% to 2%. This scheme is subject to a number of conditions.

Generally, the buyer of the property is liable for stamp duty which can be directly assessed.

VAT
The sale of Irish real estate may be subject to Value Added Tax (“VAT”). As there are many variations and exemptions under the current Irish VAT regime, the VAT treatment should be addressed by the appropriate professional advisors pre-contract with the final agreed position reflected in the contract.
Broadly, the sale of land which has been developed in the previous 20 years, or buildings which have been developed or redeveloped in the previous five years (“new” property) will be subject to VAT. The sale of “old” property which falls outside these rules is exempt from VAT. In certain cases, where a sale would otherwise be exempt, the buyer and seller can agree that the sale will be subject to VAT in order to avoid a clawback of VAT previously recovered in respect of the relevant property by the seller. The first sale of residential property by the person who developed the property is always subject to VAT.
The rate of VAT on transfers of real estate is 13.5% (a VAT rate of 23% applies to VATable lettings).

Japan Small Flag Japan

  1. Fixed Asset Tax, City Planning Tax
    A fixed asset tax, and city planning tax are imposed each year on January 1st on a person who is registered in the tax registration as the owner of the land, building and depreciable assets. Upon a transfer of real estate, the seller and purchaser usually agree on an adjustment clause for the purchase price pursuant to which the seller bears these taxes for the period up until the day preceding the closing date, and the purchaser bears these taxes for the period from the closing date.
  2. Real Estate Acquisition Tax, Registration and License Tax
    When real estate is transferred, a transferee is charged a real estate acquisition tax. Also, a registration and license tax is also charged when registration for transfer of purchased real estate is made. The tax rate for these taxes is decided depending on the assessed value of the real estate transferred.
    In the case of a transfer of a beneficial interest in a trust, taxation for the real estate acquisition tax will not occur as a trust beneficiary interest is not real estate. In addition, the amount of registration and license tax in connection with the change of trust beneficiary upon the transfer of the trust beneficiary interest is JPY1,000, which is much lower than such tax imposed in the case of real estate.
  3. Consumption Tax
    The seller of the building is charged with consumption tax and local consumption tax when the building is transferred. These taxes do not apply to the transfer of land. Although the tax is imposed on the seller, the purchaser usually pays the amount of the tax on top of the purchase price.
  4. Income Tax
    Rent and sale proceeds from properties constitute taxable income. For foreign investors who are treated as non-residents for tax purposes, this income is subject to withholding tax if they directly invest in the properties without a local entity (a resident). Such withholding tax does not apply to a resident who receives rent and sale proceeds from properties.

Kenya Small Flag Kenya

The main taxes associated with commercial real estate ownership and transfer of commercial real estate are:

  • Land rates: Payable annually to the government of the county where the property is located.
  • Stamp duty: Payable when transferring a property, when obtaining a lease and when charging or discharging a property.
  • Capital gains tax: Payable upon the transfer of a property. It is calculated on the net gain on the transfer.
  • Value Added Tax: Chargeable on all rent paid in respect of the leasing or other letting of a commercial property. The sale of commercial property is also chargeable for VAT.
  • Ultimately corporate tax: on income derived from the property.

Mexico Small Flag Mexico

Taxes payable with respect to a commercial real estate transaction include the following:

  • Real Estate Acquisition Tax (impuesto sobre adquisición de inmuebles). Any irrevocable conveyance of title over real estate is subject to this tax and the rate varies depending on the State, usually between 2% to 3% of the highest between the appraised cadastral value and the purchase price.
  • Value Added Tax. This tax has a rate of 16% and applies to the acquisition of buildings, constructions and improvements over commercial real property.
  • Income Tax. Seller is responsible for the payment of the corresponding income tax derived from the real estate sale. Base and rates for the payment of income tax will depend whether the seller is an individual or entity, as well as on the seller’s place of residence.
  • Real Estate Tax (impuesto predial). This tax is payed each year (periodically) by owners of real estate, depending on the value of the property.
  • Recording Duties. Public Registry duties depend on the value of the transaction and the place where the real estate is located, although some states have caps to these duties.
  • Appraisal Fees. In commercial real estate transactions, an appraisal has to be made for tax purposes and generally a broker or certified appraiser charges between 1% and 2% of the transaction value as appraisal fee.
  • Notarial, Brokerage and Legal Fees. These additional fees vary widely depending on the characteristics of a particular transaction.

Monaco Small Flag Monaco

Commercial real estate ownership does not lead to any tax.

The sale and transfer of real estate is subject to a transfer tax of 7,5% paid by the buyer. Notary's fees also apply to all transfers.

However, property traders (marchands de biens) are exonerated from this tax as long as they re-sell the real estate within 4 years and are therefore only subject to a 1,5% tax on purchase.

Value added tax (VAT) at a rate of 20% applies on transfers of real estate completed for less than five years.
In addition, a transfer of shares of an entity owning real estate in the Principality would be subject to a tax of 4,5% calculated on the total value of the real estate (not only the value of the shares transferred) as it would be assimilated to a change of effective beneficial owner by virtue of law no. 1.381.

Romania Small Flag Romania

Property ownership is subject to local taxes that vary depending on surface and zoning.

Aside from income tax on gains from the sale of real estate, asset sales are subject to notary taxes and land book tariffs, which are usually calculated as a percentage of the actual sale value of the transferred properties. Such sale value may not be lower than the value indicated in the notary’s market surveys of property values for different real estate categories (approx. between 2.2% for smaller values and 0.44% for higher values).

As mentioned, land book registration of real estate transfers is subject to a fixed tariff of 0.5% of the asset’s value for companies and 0.15% for individuals.

Depending on the status of the seller and the history of prior transactions, VAT may be applicable to certain real estate transactions. In Romania, the current VAT quota applicable to real estate transactions is 19%. Also, if the seller is an individual and the property’s value is higher than EUR 100,000, the seller will need to pay a 3% tax applied on the difference between the property’s value and the amount of EUR 100,000.

Russia Small Flag Russia

Real estate owners are liable to pay property tax for buildings and structures, and land tax for land plots.
The tax rate varies depending on the specific region, but in any case cannot exceed 2.2% of the cadastral or the accounting value of the real estate.

Land tax rates depend on the municipality where the land is located. The rates cannot exceed:

  • 0.3% of the cadastral value for agricultural, residential and farming land.
  • 1.5% of the cadastral value for other land (primarily commercial land).

In many cases, a building is owned by a private entity, but the land is leased from a public authority. In this case only property tax is paid. Further, certain entities are exempted from property tax and land tax, such as residents of certain special economic zones.

As for the taxes associated with the sale of real estate, VAT 18% is generally payable on the sale of real estate by the seller. However, VAT does not apply to the sale of residential real estate, land, and purchase of real estate through share deals. Further, in certain cases the taxpayer can be exempted from VAT. For example, a party may qualify for a VAT exemption if its average profits in the last three months did not exceed about EUR 27,000.

Slovenia Small Flag Slovenia

Asset deals concerning real estate are usually taxed by the 2% Real Property Transaction Act, payable by the seller, however, the parties may agree that such tax be borne by the buyer. If certain specific conditions are met, such transactions may also be taxed in accordance with the Value Added Tax Act (22%, however tax neutral if both parties are subject to value added tax). Obligations concerning taxation must be fulfilled prior to registration in the Land Registry. In the case of share deals, the buyer enters into the position of the owner of real estate which is why such transaction is not viewed as a real estate transfer, however, share deals may be subject to the payment of Corporate Income Tax, currently amounting to 19%. The contracting parties are free to agree on who bears the liabilities for taxes and duties in relation to the real estate.

Spain Small Flag Spain

Real estate activities in Spain are subject to direct taxation on profits obtained, and to indirect taxation on the possession of real estate assets and transactions related thereto.

Direct Taxes
Corporate Income Tax ("CIT")

Spanish Corporate Income Tax ("CIT") is a tax on profits earned by:

  • companies resident in Spain on all income earned from their operations whether arising inside or outside Spain, at a rate of 25%; and
  • non-Spanish tax residents acting through a Spanish permanent establishment, at a rate of 25%.

Non-Spanish tax residents acting without a Spanish permanent establishment: Non-Residents Income Tax rate of 19% which can be reduced by virtue of Double Tax Treaties / EU Directives.

Existence of “participation exemption” provisions for Spanish tax-resident companies on dividends received and gains on sales of subsidiaries (Spanish or non-Spanish), but subject to certain conditions.

Existence of a Corporate Income Tax consolidation regime (a minimum participation of 75% is required).

Tax deductibility of financial expenses: As a general rule, net financial expenses incurred by Spanish entities would be deductible for tax purposes up to an amount of 30% of their operating profit (EBITDA) for the financial year. In any event, an expense amount of EUR 1 million would always be deductible (if incurred).

In the case of entities belonging to a tax consolidated group, the 30% limit and the EUR 1 million threshold would apply to such tax group.

Please note that additional limitations exist in the case of LBO transactions (i.e. acquisition of an entity and subsequent merger or subsequent application of the CIT consolidation regime).

Furthermore the difference between the 30% limit and the net financial expenses for the tax period could be accumulated (i.e. added to the 30% limit) in the tax periods ending in the following 5 years.

It should also be noted that any net financial expenses not deducted for tax purposes may be deducted in the following tax periods, provided that the 30% limit is complied with in these years.

In addition to the above, fair market conditions and strict documentation obligations should be observed as regards any indebtedness incurred with related parties. In particular, the taxpayer would be obliged to carry out a comparability analysis in order to determine a fair market value of the remuneration agreed under the relevant transaction.

Please also note that interest derived from Profit Participating Loans granted as from 20 June 2014 by companies which belong to the same corporate group (regardless of their tax residence) are not deductible for CIT purposes.

Individuals' Income Tax

Generally tax-resident individuals are taxed on worldwide income and gains.

Non-Spanish tax residents are taxed on activities of Spanish permanent establishments or Spanish-source income.

Spanish tax-resident individual investors: Dividends and capital gains tax rates range between 19% (up to EUR 6,000), 21% (EUR 6,000 to EUR 50,000) and 23% (above EUR 50,000) in year 2019.

Indirect Taxes

Value Added Tax ("VAT")

Transfer of Properties

Any transfer of real estate assets is always subject to either Value Added Tax ("VAT") or Real Estate Transfer Tax ("RETT"), the application of one excluding the other. The basic difference lies in the fact that, whereas the VAT borne by a company in a transaction may be deducted from the VAT incurred or to be incurred by such company in its other business activities, the RETT is not directly tax-deductible, although in accordance with the increase in price of the asset acquired, it may be considered an expense via the amortisation of the aforementioned asset.

The following real estate transactions are subject to VAT:

  • sale of new constructions;
  • sale of plots suitable for construction; and
  • sale of properties to be refurbished or demolished. In the former case, the purchaser must invest in the refurbishment an amount exceeding 25% of the purchase price of the building.

In the remaining cases, the purchase is always subject to RETT instead of VAT; in this way, the second and subsequent handovers of any property are in principle exempt from VAT and, therefore, subject to RETT. However, this exemption may be waived, the transaction thus being subject to VAT (hence excluding the RETT) when the purchaser is a taxpayer performing a business or professional activity and is entitled to the total deduction of the VAT borne in the transaction.

The general VAT rate is 21%.

It is worth pointing out that when a transaction is subject to VAT, it will also be subject to Stamp Duty ("SD"), provided the transaction is formalised through a public deed and may be registered at the Land Registry, as is usually the case. The general SD rate is between 0.5% and 2%, depending on the Autonomous Community where the asset is located. Finally, it should be mentioned that if the VAT exemption mentioned above is waived, a higher rate of SD is applicable which, depending on the corresponding Autonomous Community, may vary between 0.5% and 3%.

Lease of Properties

In general, the lease of properties is subject to Value Added Tax at the rate of 21%.

However, leases whose object consists of buildings or parts thereof exclusively used for housing, including accessory garages and annexes and furnishings leased jointly with such buildings, are exempt from Value Added Tax.

In both cases, such exemption is not applicable to leases with a purchase option, provided that the transfer of the asset would have been subject to VAT.

Real Estate Transfer Tax ("RETT")

General Rules

RETT is applied to real estate transactions other than those mentioned in the foregoing section, and in particular to (i) second and subsequent transfers of properties once their construction has concluded (unless there is a waiver of the VAT exemption, as mentioned above), (ii) the sale of land not classified as plots for construction pursuant to urban development regulations and (iii) the transfer of real estate assets within the framework of the transfer of a going concern ("unidad económica autónoma") for VAT purposes.

The RETT general rate is 7% but it may range between 6% and 11% depending on the Autonomous Community where the real estate asset is located.

Transfer of Shares

On a general basis, the sale of shares will be exempt from RETT / VAT if the asset is used for an economic activity.

Local Taxes

Property Tax ("PT")

PT ("Impuesto sobre Bienes Inmuebles") encumbers the ownership of properties of a rustic or urban nature, the ownership of an in rem usufruct or ground lease over such properties or the ownership of an administrative concession over such assets or over the public services to which they are subject. The taxpayer is the owner of the property or the holder of such rights or administrative concessions. The taxable basis of the PT, which is due on an annual basis, is determined by the cadastral value, which includes the land value plus that of the constructions thereon. Applied to such a basis are the taxation rates of 0.4% for urban land and 0.3% for rustic land, although these rates may be increased by each City Council depending on the population and other specific circumstances of the municipality.

Tax on the Increase in the Value of Land of an Urban Nature

This tax is collected as the result of the transfer of the ownership of urban land by any title and the granting or transfer of any in rem right of enjoyment, restricting ownership, over such land. The party obliged to pay such tax is the transferor of the land or the person granting and transferring the in rem right of enjoyment, when the transfer is for value.
In fact, this tax does not encumber the capital gains earned by the vendor, but rather is calculated on the increase of the cadastral value, adding thereto, at the time the tax falls due, a certain percentage established by the City Council depending on the number of years elapsed since the previous transfer (which cannot be more than 20 or less than 1).

This local tax is currently subject to significant dispute within the Spanish tax system, as the Spanish Constitutional Court (Tribunal Constitucional) has recently declared unconstitutional part of the regulation of this local tax referring to the determination of the tax base (based on the land's cadastral value during the year of sale and the holding period), irrespective of the fact that there is no real gain (or even a loss) on the assets. This decision may have an impact on future proceedings in which the non-application of the tax or a refund based on the lack of increase in value of the transferred land is requested.

Other local taxes

City Councils may also subject acts regarding the use and exploitation of the property to taxation, amongst which it is worth mentioning the Tax on Constructions, Installations and Works ("Impuesto sobre Construcciones, Instalaciones y Obras"), which encumbers the performance of any construction, installation or works for which urban development or works licences are required. Moreover, the granting of other licences might constitute a further taxable item, such as, for instance, the obtaining of the so-called opening licence.

Business Activity Tax ("Impuesto sobre Actividades Económicas") is another local tax on the mere performance of economic activities. As a general rule, the company may be obliged to register for the purposes of this Business Activity Tax and pay the relevant tax due, which would be determined according to the item corresponding to the relevant activity (i.e. item 833 if the company performs development works on the real estate assets and item 861 in the case of leasing activities). The local regulations of the City Council corresponding to the real estate assets' location will always have to be observed.

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  • Following recent legislative changes that entered into force on 1 January 2019, Swedish corporations will generally be charged corporate tax at a flat rate of 21.4 percent on their net profits (previously 22 percent). The corporate income tax will be further reduced to 20.6 percent in 2021.
  • As noted above, share transfers are generally tax exempt meaning no capital gains tax will apply when transferring an SPV holding real property. However, the tax residual value of the target property will be of importance to the buyer, as a transfer of the property from the SPV may trigger deferred taxes. Market standard practice indicates a price deduction of part of the deferred taxes, ranging between zero and 50 percent, but sometimes up to 100 percent.
  • A state property tax is levied on owners of commercial properties, ranging from about 0.2 up to about 3 percent of the tax value of the property depending on its fiscal classification.
  • Both real estate and share transfers are exempt from VAT. As a general rule, income (rent) from property leasing is also exempt from tax, meaning that no VAT deductions are allowed on expenses related to the property owner’s rental business. A landlord may however choose to become voluntarily registered for VAT liability for commercial leasing, which is market standard practice, allowing the landlord to charge and deduct VAT (25 percent) on income and expenses related to such leases.
  • Direct real estate transfers carry a stamp duty of (currently) 4.25 percent for legal entities, based on the higher of the purchase price and the tax value of the property the year before the transfer. No such tax is imposed on indirect transfers however, an additional factor behind the popular use of transaction structures involving indirect real estate transfers through share sales.
  • Registrations of new mortgages carry a stamp duty of 2 percent of the total mortgage amount, increasing costs of financing when purchasing a property with no or few existing mortgages.

Thailand Small Flag Thailand

  • Under the Building and Land Tax Act B.E. 2475, the owner of the real estate property is liable for building and land tax at a rate of 12.5% of the annual assessed rental value.

Transfer

  • The transfer of real estate property is subject to a transfer fee at the rate of 2% of the assessed land value. This amount can either be borne by one party to the transaction or shared between the transferor or transferee.
  • The transferor of real estate property is subject to specific-business tax at a rate of 3.3% of the transfer value or market value, whichever is higher.

The transferee of real estate property is subject to withholding tax at a rate of 1% of the transfer value or market value, whichever is higher.

Turkey Small Flag Turkey

Both the seller and buyer have to pay real estate transfer tax, which is normally set at %4 of the declared value of the real estate. In theory, this is shared equally between the buyer and seller, so each party shall pay %2, however in practice it is mostly borne by the buyer. There is a service fee of TRY 128,00- as a fixed fee.

However, the government has temporarily reduced real estate transfer tax to 3% until 31.12.2019 to support the real estate market due to decreasing sales numbers.

VAT is payable on the sale of real estate if the seller is a legal entity. The VAT regime may sound complicated because VAT rate is based on the type of the property, square meter of the property, price per square metre of the land as determined by the local municipalities, when the construction permit is obtained. Basically;

  • Commercial property sales are subject to 18% VAT
  • Residential property sales are subject to 1%, 8% or 18% depending on above criteria such as whether the property is smaller or larger than 150 m2

As the government lowered the real estate transfer tax temporarily to 3% to support he real estate market, the VAT of 18% above has also been temporarily decreased to 8% until 31.12.2019.

In order to support the real estate market, the government decreased the stamp duty rate to 0% from 0.948% for real estate related contracts such as preliminary sales contracts, land share agreements, real property sale contracts with advance payments from projects which the construction of which is ongoing, etc.

On the other hand, there are some taxes arisen from the ownership of the real estate. The real estate tax rate varies between 0.1% and 0.6% depending on the type of real estate (land, household or business premises).
Environmental Cleaning tax is collected by the relevant municipality. The rates of this tax vary depending on the type, size and location of the real estate.

Electricity and gas consumption tax. The rate for this tax varies between 1% to 5% of the price of electricity and gas consumed. Electricity and gas generation and distribution companies are exempt from this tax. Electricity and gas distribution companies collect the tax and transfer the money to the relevant tax office.

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Ownership: business rates, which are payable to the local authority. The rates are calculated by multiplying the property's 'rateable value' by a multiplier set by central government. The rateable value is the property's open market rental value on 1 April 2015, based on an estimate by the Valuation Office Agency. The standard multiplier for 2019/2020 is 50.4. Where a property is let, the tenant will be liable to pay the business rates. Business rates can be significant sums if a property is situated in an expensive area e.g. central London.

Direct taxes: corporation tax, or income tax, or capital gains tax may apply to income, profits and gains arising from the ownership of commercial real estate. Which tax treatment applies will vary depending on whether the real estate is owned by an individual, or by a non-natural person/entity, and the nature of that entity.
The current corporation tax rate is 19%, which rate applies to UK corporates and to non-resident corporates making direct disposals of UK real estate and certain indirect disposals of interests in entities that are UK-property rich. At the time of writing, the UK Government's position is that it intends to reduce this rate to 17% from April 2020, however this is subject to any future change in UK Government policy

Taxes on asset transactions are:
Stamp Duty Land Tax (SDLT): this is payable by purchasers of UK commercial real estate interests and is calculated on the basis of a slice rate system by reference to the amount of "chargeable consideration" (normally the stated purchase price plus any VAT, but also includes any other money or money's worth) given for the real estate, starting at 2% on £150,001 - £250,000 and 5% on £250,001 and above for commercial property.
On the grant of a lease, SDLT is also payable on the net present value of the rents (plus VAT if any) payable during the term of the lease on a slice system at the rates of 1% on £150,001 - £5,000,000 and 2% on £5,000,001 and above. This is in addition to SDLT on any lease premium paid.

Value Added Tax (VAT): at 20%; The seller normally must make an election to charge VAT (which typically it would do to enable it to recover VAT it incurs in relation to the real estate). However, sale of commercial real estate can be exempt from VAT or be treated as a VAT-free transfer of a going concern (i.e. a business that is operating and making a profit), depending on the facts.

As mentioned above at Q6, UK commercial real estate is often owned by offshore entities. We have not summarised any non-UK taxes which may be payable in offshore jurisdictions.

United States Small Flag United States

Taxes imposed on ownership of commercial real estate are:

Income taxes: U.S. federal income taxes, as well as state and local income taxes in certain states and localities, apply to income arising from the ownership of commercial real estate by both U.S. and non-U.S. tax residents. The rates will vary depending on a number of factors, including the structure through which the real estate is owned (e.g., whether the real estate is owned through a flow-through entity, a "C" corporation or a REIT), whether the direct and indirect owners of the commercial real estate are U.S. tax residents and, if not, the applicability of an income tax treaty with the U.S.

Property taxes (or real estate taxes): In the U.S., the real property tax scheme varies by state and sometimes by local jurisdiction, but generally, local governmental entities are required to comply with the state's tax laws to assess and collect an annual tax (with the rate varying by locality) on the value of land, structures, and improvements. Usually, the tax imposed is calculated by reference to a stated percentage of the fair market value of the real estate. Certain types of property are exempt from real property tax, including properties owned by a not-for-profit organization and properties in specified economic development zones. In addition to real property tax, most state tax schemes provide for the taxation of tangible personal property owned by business entities.

Other taxes: Certain jurisdictions impose a commercial rent tax on tenants of commercial real estate.

Taxes commonly imposed on the transfer of commercial real estate located in the U.S. are:

Income Tax: U.S. and non-U.S. tax residents are generally subject to U.S. federal income tax, as well as state and local income tax in certain states and localities, on capital gains recognized on the disposition of U.S. real estate. The rates vary depending on a number of factors, including the structure through which the real estate is owned. In addition, non-U.S. tax residents disposing of U.S. commercial real estate are generally subject to a withholding tax equal to 15% of the purchase price (including any debt assumed or treated as assumed in connection with the disposition).

Real Estate Transfer Tax: Many U.S. states (and a number of counties and cities) impose a transfer tax on the sale of a property (or the granting of a long term lease) based on the purchase price of the property. In addition to direct transfers of property, some states impose a tax on transfers of a controlling interest in an entity that owns property located within the state. Each state and local government sets its own rate of tax and the basis to which that rate is applied.

Mortgage Recording Tax: A number of states and municipalities impose a mortgage recording tax, calculated as a percentage of the face amount of the mortgage (and occasionally varying with the length of the term of the mortgage loan). The tax is typically due at the time the mortgage is recorded and paid by the borrower although the process for the payment of mortgage recording tax and the party responsible for the payment of the same can vary depending on the custom of the applicable state and/or municipality. Some states permit a borrower seeking to refinance a mortgage loan to have the mortgage encumbering its property assigned to its new lender and thus avoid paying mortgage recording tax on the principal then outstanding.

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Land and Building Tax

Land and building tax (Pajak Bumi Bangunan – “PBB”) is a tax on property chargeable on all land and/or buildings. An individual or an entity that owns a right to a piece of land, and/or takes benefits therefrom, and/or owns, controls and/or takes benefits from a building can be regarded as a PBB taxpayer for such land and/or building.

PBB must be paid on an annual basis at the maximum amount of 0.3% (depending on the regional regulation) of the NJOP (as defined under question 9) imposed by the local government.

Tax on Land Transfer

In general, in a sale and purchase of property, the buyer must pay the tax on the acquisition of land and buildings (Bea Perolehan Hak Atas Tanah dan Bangunan –“BPHTB”) and the seller must pay the transfer tax (Pajak Penghasilan Atas Penghasilan Dari Pengalihan Hak Atas Tanah – “PPh”) in accordance with the following formulae:

(a) for the seller (PPh) = 2.5% x the sale value or NJOP (if the sale value is lower than the NJOP); and

(b) for the buyer (BPHTB) = 5% x (the sale value or Tax Object Acquisition Value (Nilai Perolehan Objek Pajak or “NPOP”, if the sale value is lower than the NPOP) minus the Non-Taxable Sales Value (Nilai Jual Objek Pajak Tidak Kena Pajak or “NJOPTKP”).

NJOPTKP is effectively a non-taxable portion, which is a fixed value set for each region by the tax office. Note that the application of tax may differ in certain circumstances, including in relation to inheritance, and may vary by region.

BPHTP is due on the date of the execution of the deed of conveyance to the land title (i.e. the date of the AJB). In practice, a notary would not typically officiate the execution of an AJB until evidence of payment of the BPHTB has been presented.

Fees for land deed officials

Aside from taxes, there are typically also fees payable to Land Deed Officials in a real estate transfer. This fee is negotiable and is typically based on a percentage of the purchase price or transaction value.

Morocco Small Flag Morocco

For an asset deal, the following fees shall be paid:

  • Notary public fees: such fees vary depending on the value of the transaction and are generally borne by the buyer, unless agreed otherwise:
    • If the sale price is under or equal to MAD 300,000 the notary public fees are fixed at MAD 4,000;
    • If the sale price ranges from MAD 300,001 to MAD 1,000,000 the notary fees shall amount to 1.5% of the sale price;
    • If the sale price ranges from MAD 1,000,001 to MAD 5,000,000, the notary public fees shall amount to 1.25% of the sale price;
    • If the sale price ranges from MAD 5,000,001 to MAD 10,000,000, the notary public fees shall amount to 0.75% of the sale price; and
    • if the sale price is more than MAD 10,000,000 the notary public fees shall amount to 0.5% of the sale price.
  • Registration Duties with the Tax administration: a rate of 4%, calculated on the purchase price. These registration duties are borne by the buyer.
  • Registration Fees with the Land Registry: amounting to 1.5% of the purchase price (required to register the deed of sale and update the Land Registry).These registration fees are borne by the buyer.

For a share deal, the following fees shall be paid:

  • Registration Duties with the Tax administration: such tax vary depending on whether the purchasing entity is considered as real estate company (meaning, any company whose gross fixed assets are composed of real estate assets for at least for 75% of the company’s gross fixed assets):
    • if the purchasing entity does not qualify as a real estate company, a share purchase agreement has to be registered with the tax office, but is exempted from registration duties.
    • if the purchasing entity does qualify as a real estate company, the sale of shares triggers the payment of registration duties, at the rate of 6% of the purchase price. Such registration duties are payable by the buyer.
  • Registration Fees with the Land Registry: the purchase of shares does not trigger the payment of property registry fees nor public notary fees, as the sale and purchase agreement does not need to be notarised.

Two main municipal taxes are paid on the occupation of business premises:

  • Business tax: the taxable basis for business tax is based on the gross annual rental value of all the assets at the company's disposal (including assets purchased and on rent). The applicable rate depends on the nature of the activity and ranges from 10 to 30% applicable on the annual rental value of assets used for the activity.
  • Tax on Municipal Services: the basis of the municipal tax services is the same as for business tax and varies according to the geographical location of the activity as follows:
    • 10.5% for properties located within the perimeter of urban municipalities, delimited centres, and summer, winter and spa resorts ; and
    • 6.5% for properties located in peripheral areas of urban municipalities.

Foreign investors are subject to income tax withholding as follows (subject to amendments of the finance bill for 2020):

  • For natural persons: real estate income of natural persons is subject to the following rates,
    • less than MAD 30,000 : exemption
    • between MAD 30,001 and MAD120,000: 10%
    • more than MAD 120,000: 15%

Capital gains on real estate properties are subject to individual income tax at the rate of 20%, however, in the case of capital loss, the minimum tax payable amounts to 3% of the sale price.

  • For foreign companies: the following rates apply,
    • net tax income lower than MAD 300,000: 10%;
    • net tax income between MAD 300,000 and MAD1,000,000: 17.5%; and
    • net taxable income higher than MAD 1,000,000,000: 31%.

Rental of equipped premises:
Rental of equipped premises are generally subject to VAT at the rate of 20% (including rental in mall centres).
OPCI's Tax aspects:
Regarding the OPCI, the applicable tax regime for such real estate investment vehicle is quite specific and may be summarized as follow (subject to amendments of the finance bill for 2020):

  • Regarding the OPCIs upfront capital investment:
    • exemption from the tax on capital gains on the in-kind contributions (apport en nature) for all OPCI created before the end of 2020;
    • taxes on capital gains are paid on the sale of all or part of the shares with a 50% deduction, for all OPCI created before the end of 2020.
    • exemption from Registration Duties with the Tax Administration;
    • 1.5% for Registration Fees with the Land Registry.
  • Regarding the taxation of the OPCI:
    • Exemption from Corporate Income Tax;
    • Exemption from taxes on dividend and interests.
  • Regarding the taxation of shareholders:
    • Corporate Income Tax at a standard rate of 60%;
    • Taxes on dividends received by individuals at a 15% rate;
    • Taxes on dividends received by non-residents at a 15% rate;
    • Capital gain tax for individuals at a rate of 20%;
    • Capital gain tax for companies at a standard rate of 60%;
    • Exemption from Registration Duties with the Tax Administration.

In order to benefit from a total exemption from Corporate Income Tax (rental income, capital gain, dividend), the OPCI must meet the following conditions:

  • Assessment made by a shares auditor;
  • Holding the assets for a minimum period of ten years from the date of contribution; and
  • Distribution of:
    • minimum 85% of the result of the fiscal year relating to the leasing of buildings built for professional use;
    • 100% of the dividends and shares received;
    • 100% of the fixed investment revenues received;
    • Minimum 60% of the capital gain on the sale of securities.

Updated: December 17, 2019