In recent years, investors and fund managers have increasingly focused on how tax structuring of investment vehicles fits within their social and corporate responsibilities. Many have adopted internal codes of tax conduct to guide how they make choices in this area.
International bodies such as the UN and OECD have also concentrated on this important issue, especially after multinational groups’ use of tax structures that arbitraged tax rules in different jurisdictions made the headlines in recent years. In Europe, the Anti-Tax Avoidance Directives were adopted to regulate tax practices facilitating base erosion and profit shifting, including through the use of hybrid mismatches.
But structuring international real estate investment vehicles to achieve tax neutrality, a widely accepted objective in the investment fund sphere, is notoriously complex and the choices are often not clear. Earlier this year, the INREV Tax Committee set out to provide support to INREV members by developing a framework of recommendations and workable standards, in line with industry best practices for non-listed real estate vehicles.
Structuring international real estate investment vehicles to achieve tax neutrality, a widely accepted objective in the investment fund sphere, is notoriously complex and the choices are often not clear
On 9 September, INREV published a draft Code of Tax Conduct based on five overarching guiding principles. Building on a wide range of tax guidance developed by industry experts and adopted by stakeholders, the draft code attempts to strike an appropriate balance between sometimes competing tax and business considerations. ‘Views on tax conduct have been evolving rapidly in recent years,’ explains Tax Committee Chairman Keith O’Donnell, Managing Partner at Atoz in Luxembourg. ‘We wanted to give INREV members clear guidance on current best practices of good tax governance and implementation.’
On 9 September, INREV published a draft Code of Tax Conduct based on five overarching guiding principles
As guidance for members related to governance and social responsibility, the draft code is a logical addition to the INREV Guidelines. To include the code as a new module, INREV members must first be given the opportunity to review and comment on it and the publication in September therefore kicked off an eight-week consultation period. Francisco da Cunha, Partner, Cross-Border Tax at Deloitte in Luxembourg, who led the INREV drafting group, together with Keith O’Donnell, explained the structure and substance of the proposed code during the 24 September Tax & Regulations monthly briefing. They discussed some of the more detailed aspects of the draft code and the important contribution that these recommendations and best practices regarding tax matters can make to the non-listed real estate investment industry.
We wanted to give INREV members clear guidance on current best practices of good tax governance and implementation.
Comments on the draft code can be submitted directly to INREV any time until 4 November 2020 at firstname.lastname@example.org. In addition, just before the close of the comment period, it will be a topic of discussion during the Advanced Tax Round Table on 3 November 2020. Comments received will be reviewed and a final draft will be sent to the INREV Management Board for their consideration in the final meeting of the year in late November. If approved, the code will be added to the INREV Guidelines in January 2021.