The Belgian Federal government has recently announced new measures to make the Belgian real estate market more attractive to foreign investors. In particular, the creation of a new type of real estate investment fund, FIIS (“fonds d’investissement immobilier spécialisé”)/GVBF (“gespecialiseerd vastgoedbeleggingsfonds”) has been announced, as well as a number of liberalisation changes to the current SIR (“société immobilière réglementée”/GVV(“gereglementeerde vastgoedvennootschap”) regime.
At the moment, only the basic principles of the new measures are known as no draft legislation has been submitted yet to the Belgian parliament. Therefore, the information set out below remains subject to change.
The new FIIS/GVBF will be a closed, non-quoted real estate investment platform dedicated to institutional investors and large corporate real estate actors. Each fund of this type will have to be registered with the Belgian Ministry of Finance and could potentially be subject to AIF(M) regulations (depending upon whether the exceptions or the AIF(M)’s de minimis thresholds will apply).
In contrast to the existing SIR/GVV regime, for the new FIIS/GVBF: (1) one single shareholder will be sufficient; (2) there will be no obligation to diversify the new fund’s real estate; and (3) there will be no maximum debt percentage. However, as for SIR/GVV, the new FIIS/GVBF fund will have to include an obligation to annually distribute at least 80% of its net income. The new fund will also have to hold real estate with a minimum market value of 10M EUR and, in principle, be created for a limited 10 year period. However, this period can be extended to avoid having to wind-up the fund in difficult economic circumstances.
The new fund’s tax regime will be similar to the one of the existing SIR/GVV. Thus, in practice, the FIIS/GVBF will be virtually tax transparent. It will only be taxed on abnormal or gratuitous advantages received and certain unreported and disallowed expenses. This tax transparency means the taxation will be shifted from the fund level to the fund’s shareholders. Thus, in principle, there will be a dividend withholding tax (the standard rate is 27%). In addition, dividends distributed by the fund do not, in principle, qualify for the participation exemption in the hands of its Belgian corporate shareholders. Foreign shareholders may be subject to a more beneficial type of tax treatment. An exit tax of 16.995% will apply on latent capital gains on real estate transferred to such a FIIS/GVBA (when opting for this regime or when the fund will acquire real estate in a later stage by merger, demerger, or a similar transaction).
Simultaneously, the existing SIR/GVV regime will be liberalised. Without setting out the details here, please already note the following two changes: (1) the rules for participating in institutional Belgian REITs will become more flexible; and (2) it will become possible to invest in infrastructure projects for such an ‘institutional REIT’.
Obviously, we will continue to follow these major legislative changes and are available to advise upon whether this new regime is an opportunity for your real estate investments.
