Letter from Brussels

Over most of the past two years, the Public Affairs and Tax Committees and the Brussels-based Public Affairs team have been kept busy with a stream, or sometimes more accurately a torrent, of regulatory and tax consultations. These consultations are a required step in the process of developing new regulations and tax measures and are designed to get public input into policy proposals before they’re adopted in final form. 

Often working together with other industry associations, although sometime independently, proposed new regulations or tax measures are analysed and feedback on them is provided within strict timelines. We focus particularly on the impact they may have on the non-listed real estate investment industry and frequently propose alternative solutions that can achieve some or all of the policy goals at lower cost or with less burden on the industry.

The high tide of regulatory and tax consultations is finally ebbing.

In the last 12 to 15 months, we responded to EU, UK and OECD consultations such as the AIFMD review, European Long-Term Investment Fund (ELTIF) review, Solvency II review, Merger Control Regulation review, Fighting the use of shell entities tax review, the UK Funds Review, Long-Term Asset Fund (LTAF) proposal, use of AHCs in alternative asset funds, Residential Property Developers Tax (RPDT) and BEPS Pillar Two Proposal. We have also filed several ESG and climate change related consultations. But the high tide of regulatory and tax consultations is finally ebbing. Policy makers have been sorting through the comments they received and are now starting to publish their own conclusions on the desired next steps, along with legislative proposals or recommendations for achieving them. 

The UK government has announced that, consistent with our recommendations, it will exempt purpose-built student housing and build-to-let schemes from the RPDT

One of the first legislative proposals to appear was on Solvency II in late September, although unfortunately it does not offer much hope that better data will be used to determine the volatility of real estate investment in Europe and therefore the standard model solvency capital reserve requirements for European insurers investing in property. More positively, the UK government has announced that, consistent with our recommendations, it will exempt purpose-built student housing and build-to-let schemes from the RPDT. 

We’re still awaiting legislative proposals from EU and UK policy makers on most of the other initiatives mentioned above as well as, at the time of writing, the final OECD Pillar Two recommendations, which are expected to become embodied in EU law together with the conclusions reached in the shell entities debate through the EU Anti-Tax Avoidance Directive 3. 

As these reports and legislative proposals are made public, our focus will shift. First, we analyse whether our previous concerns have been addressed or ignored and, then, we will develop targeted arguments to inform discussions or, as needed, to try to influence policy making outcomes during the course of the legislative process that involves the other decision makers, such as the European Parliament and Council.

We’re moving to this next stage, which will involve speaking with members of the European Parliament and informing them about the issues and concerns we see in various proposals. Most of the awaited legislative reports and proposals are expected late this year. Fortunately, policy makers are back in Brussels again and are willing to meet and discuss issues as the Covid crisis hopefully fades. We’re ready to begin.