As from 05.11.2014, Cofinimmo obtained its approved REIT status. ‘REIT” or “Belgian REIT” refers to “Société Immobilière Réglementée” (SIR, in French) or “Gereglementeerde Vastgoedvennootschap” (GVV, in Dutch). Before that, the company was governed by the “Sicafi” (French) or “Vastgoedbevak” (Dutch). The REIT status is governed by the Law of 12.05.2014 and the Royal Decree of 13.07.2014.
Companies applying for the approved REIT status, or which merge with a REIT, are subject to an exit tax, treated in the same way as a liquidation tax, on net unrealised gains and on tax-exempt reserves, at a rate of 16.5%. This rate is increased by a supplementary crisis tax uplift of 3%, meaning the total tax levy is 16.995%.
An alternative to direct property investment
- ± 1% transaction costs versus 12.5% in direct property investment
- Low risk and high dividend yield
- Better liquidity, easier transactions and lower management costs than direct property investment
- Low correlation between real estate market and common shares
- Diversified and specialised property portfolio
Main characteristics of a REIT
- Closed-end company
- Stock Exchange listing
- Activity limited to real estate investment - if necessary, the REIT company can invest its assets in listed securities
- No more than 20% of total consolidated assets invested in a single property
- Possibility for the Belgian subsidiaries of the public REIT to obtain the regime of institutional REIT
- Consolidated debt ratio limited to 65% of the market value of the company's assets; the granting of sureties and mortgages is limited to 50% of the total assets and 75% of an individual mortgaged building
- Very strict rules governing conflicts of interest
- Regular valuation of the asset portfolio by independent real estate valuers
- Properties carried at their fair value
- No depreciation
- Results (rental income and capital gains on sales less operating expenses and financial charges) are tax exempt
- At least 80% of the sum of the corrected result and the net gains on realised disposals of real estate assets not exempted to the compulsory distribution are subject to compulsory distribution; the decrease in debt during the year can however be subtracted from the amount to be distributed
- Withholding tax of 30%, giving relief for physical persons residing in Belgium.
Cofinimmo SA/NV has the public RREC status.
The following companies have the institutionnal RREC status:
- FPR Leuze SA/NV
- Prime BEL Rue de la Loi - T SA/NV
- Pubstone SA/NV
- Pubstone Group SA/NV
- Rheastone SA/NV
Cofinimmo obtained its approved SIIC status on 04.08.2008. This tax regime allows companies to benefit from a full exemption from corporate income tax under certain circumstances. Profits generated by letting real estate assets, as well as those derived from gains on the sale of these assets are tax exempt - provided the companies enact the following distributions:
- 85% of profits from letting
- 50% of capital gains
- 100% of the distributions of profits received from SIIC subsidiaries
Main characteristics of a SIIC
Full exemption for profits generated by the SIIC's main business activity
The following are fully exempt from corporate income tax:
- Profits generated by letting buildings
- The capital gains realised on the sale of buildings
- The capital gains realised on the sale of interests in tax-transparent real estate subsidiaries with the same main corporate purpose as the SIIC
- Dividends received from eligible subsidiaries
These profits are known as SIIC profits.
This tax exemption applies to income from real estate assets ("immeubles"), to profits generated by sub-letting buildings held through financial leases and to capital gains from the disposal of real estate financial lease contracts.
Companies applying for SIIC status, or which merge with a SIIC, are subject to an exit tax. This is treated in the same way as a liquidation tax and levied at a rate of 19% on net unrealised gains and on tax-exempt reserves.
Taxation of ancillary business activities
Profits generated by ancillary business activities, or dividends received from a subsidiary that has not opted for the tax regime (that is, non-SIIC profits), are liable to pay French corporate income tax at the standard rate (33.33%).
SIIC mergers and reorganizations
SIICs benefit from a specific tax regime that allows reorganisations such as mergers and spin-offs involving SIICs to occur without causing detrimental tax consequences. This neutral tax regime requires the surviving company to undertake certain distribution commitments previously held by the absorbed entity. They will also be required to distribute at least 50 % of the merger premium (boni de fusion) and 85% of the capital gain resulting from the contribution of the real estate assets.
Tax situation of SIIC shareholders
General tax regime for individuals
French residents are liable to tax on dividends received from SIICs under general personal income tax rules. Therefore, French residents benefit from a 40% rebate on dividends received from SIICs.
They also benefit from a limited tax reduction (capped at 230 EUR for married couples and 115 EUR for single individuals) and a tax rebate of 50% (capped at 1,525 EUR for single individuals or 3,050 EUR for married couples).
French residents may however opt to be taxed at source at a rate of 18%. In this case they do not benefit from the 50% tax rebate. Whichever option they choose, they are liable to social contributions (11 %) on the dividends received.
In addition, the shares in a SIIC are eligible for share savings plans (plan épargne en actions). These allow full exemption from personal taxation if certain conditions are met. This summary of the tax situation of French resident individuals states the most common cases and each individual situation has to be checked.
Dividends that are paid out of exempted profits do not benefit from the parent/subsidiary tax regime.
The following companies have opted for the SIIC regime:
- Cofinimmo Succursale
- Cofinimmo Investissements et Services SA
- Cofinimur I SA
- Cofinea I SAS
- SARL Hypocrate de la Salette
- SCI Beaulieu
Cofinimmo obtained the status of Fiscale Beleggingsinstelling (FBI) on 01.07.2011. This tax regime allows companies to benefit from a full exemption from corporate income tax under certain circumstances.
Main characteristics of an FBI
- Only public limited liability companies (naamloze vennootschappen), private limited liability companies (besloten vennootschappen) and mutual funds (fondsen voor gemene rekening) can be designated as an FBI (fiscale beleggingsinstelling or fiscal investment institution).
- The corporate purpose and actual activities of an FBI may consist only of asset investment.
- Real estate investments may be financed with borrowed capital up to a maximum of 60% of the book value of the real estate.
- All other investments may be financed with borrowed capital up to a maximum of 20% of the book value of the investments.
- At least 75% of the shares or profit-sharing certificates of a non-listed FBI must be held by natural persons, bodies not subject to profit tax and/or listed investment institutions.
- The shares or profit-sharing certificates in a non-listed FBI must not be held directly or indirectly by natural persons to the extent of 5% or more.
- The shares or profit-sharing certificates in a non-listed FBI must not be held to the extent of 25% or more by entities established in the Netherlands through the medium of a company or fund established outside the Netherlands.
- The profits of an FBI are subject to a corporate tax rate of 0%.
- An FBI’s profits available for distribution must be distributed to shareholders and other persons entitled to distributable profits within eight months after the end of each financial year.
Superstone NV has opted for the FBI regime.
Cofinimmo has set up Specialised Real Estate Investment Funds (Fonds d’Investissement Immobiliers Spécialisés - FIIS) governed by the Royal Decree of 09.11.2016 on specialised real estate investment funds (Belgian Official Gazette of 18.11.2016). This tax regime allows real estate investment in a flexible and efficient fund vehicle.
Main characteristics of the FIIS
- Light regulatory regime without the need for approval or direct supervision by the FSMA (the Belgian regulator) if certain criteria are met. The only requirement is registration on a list held by the Belgian Ministry of Finance.
- The FIIS can be integrated by a single eligible investor and exempted from the AIFM Law (Law of 19.04.2014 on alternative investment funds and their managers) if certain criteria are met.
- The FIIS participation rights are only available to ‘qualified investors’ in accordance with the AIFM Law.
- The FIIS is subject to a minimum investment volume of at least 10,000,000 EUR at the end of the second financial year following its registration on the FIIS list.
- The FIIS is a closed fund with a fixed capital and may not be listed on the stock exchange.
- The FIIS invests in real estate, defined in the broad sense, but without mandatory diversification requirements or (the use of) leverage limits.
- FIIS accounts are mandatory under IFRS (excluding Belgian GAAPs).
- The FIIS is subject to an annual distribution obligation of 80% of its results.
- The duration of a FIIS is limited to 10 years with the possibility of extending this period by consecutive periods of a maximum of 5 years each.
The following companies are included in the list of Specialised Real Estate Investment Funds drawn up pursuant to Article 3, §2 of the Royal Decree of 09.11.2016 on specialised investment funds:
- STERN FIIS SA/NV
- STERN FIIS II SA/NV
- STERN FIIS III SA/NV
- STERN FIIS IV SA/NV
- GESTONE SA/NV
- GESTONE II SA/NV
- GESTONE III SA/NV
- TRIAS BEL SOUVERAIN T SA/NV