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Legislative framework GVV

The regulated real estate company is regulated by the Law of May 12, 2014 and the Royal Decree of July 13, 2014.

The intention of the legislator is that a regulated real estate company guarantees optimal transparency of the real estate investment and ensures the distribution of maximum cash flow, while the investor enjoys a whole range of benefits.

The regulated real estate company is under the control of the Financial Services and Markets Authority and is subject to specific regulations, the most salient provisions of which are the following:

  • take the form of a public limited company with a minimum capital of €1,200,000
  • company with fixed capital and fixed number of shares
  • mandatory listing with a mandatory distribution of at least 30% of shares in the public
  • limited possibility to take out mortgages
  • debt ratio limited to 65% of total assets; if the consolidated debt ratio exceeds 50%, a financial plan must be drawn up
  • annual financial interest charges resulting from debt may under no circumstances exceed the threshold of 80% of the operating result before portfolio result increased by the financial income of the regulated real estate company
  • strict rules relating to conflicts of interest
  • an accounting of the portfolio at market value without the possibility of depreciation
  • a quarterly estimate of property assets by independent experts, subject to a three-yearly rotation system
  • a diversification of risk: a maximum of 20% of assets invested in fixed assets constituting a single real estate ensemble, subject to exceptions
  • a regulated real estate company may not engage in “development activities”; this means that a regulated real estate company cannot act as a construction promoter with the intention of constructing buildings in order to sell them afterwards and pocket a development profit
  • an exemption from corporation tax provided that at least 80% of the distributable operating result is distributed
  • a 30% withholding tax to be deducted when dividends are made payable (subject to certain exemptions)
  • the possibility of setting up subsidiaries taking the form of an “institutional regulated real estate company” on condition that more than 25% of its share capital is held directly or indirectly by the public regulated real estate company in question, and this in order to carry out specific projects with a third party (institutional or professional investor)
  • at least three independent directors within the meaning of Article 7:87 §1 of the Companies and Associations Code who sit on a board of directors
  • the fixed remuneration of the directors and effective leaders may not depend on the operations and transactions carried out by the public regulated real estate company or its subsidiaries: it is therefore excluded that they would be remunerated on the basis of the turnover. This rule also applies to variable remuneration. If the variable remuneration is determined as a function of the result, it may only be based on the consolidated EPRA result.

These rules aim to limit the risk for shareholders.

Companies that merge with a regulated real estate company are subject to a tax (exit tax) of 12.875% on the deferred capital gains and tax-free reserves. It should be noted that as of assessment 2021, the exit tax rate will increase back to 15%.