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  • Tag Archive: Real Estate

    1. New capital gains regime for real estate companies proposed in Italian Budget

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      Introduction

      Parliament is currently discussing the draft 2023 Budget Law. Although this is yet to be approved, the draft signals a potential change to the taxation of rela estate companies in Italy. Specifically, the tax treatment of shareholdings in such companies.

      What’s the proposal?

      Article 23 of Presidential Decree no. 917/1986 proposes new provisions regarding the ‘alienation’ of shareholdings in real estate companies by certain persons.

      Specifically, the proposals relate to disposals by:

      • non-resident shareholders;
      • in respect of non-resident “real estate entities and companies”

      In other words, companies and entities that derive their value mainly from real estate situated within the Italian territory.

      It is a provision aimed at taxing capital gains on foreign shareholdings that result, de facto, the transfer of real estate properties located in Italy.

      OECD ‘land rich clause’

      Undoubtedly, the proposal has got its inspiration fromArticle 13, paragraph 3, of the OECD Model Tax Treaty. This is often referred to as the “land rich clause”.

      The proposals could have an immediate impact on cases where the shareholder realising the capital gain:

      • is tax resident in a State not having an in-force tax treaty with Italy; or
      • does not meet the requirements to apply the tax treaty.

      The proposals do not apply to shares listed on a stock exchange.

      Conclusion

      Where there is a tax treaty in force, the change could apply where the tax treaty with the shareholder’s state of residence grants Italy rights of taxation in respect of capital gains on shareholdings in real estate companies.

      In this respect, Italy may tax such capital gains in accordance with provisions set forth by over twenty tax treaties including the land rich clause. It is likely that the number of tax treaties that reflect this position will increase over the coming years.

      If you have any queries about this article on Italy real estate companies, Italian tax matters or capital gains in general then please do not hesitate to contact us.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.

    2. Spanish Net Wealth Tax & Solidarity Wealth Tax for non-Spanish residents

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      Introduction

      Several weeks ago, we commented on the Spanish Government’s recently proposal to introduce a Solidarity Wealth Tax.

      However, this article considers new wealth tax proposals – in respect of the Net Wealth Tax and the Solidarity Wealth Tax – for non-Spanish-tax-resident individuals who hold Spanish real estate through one or multiple non-Spanish-resident entities.

      What is the proposal?

      It is envisaged that non-Spanish-tax-resident individuals would be subject to the Net Wealth Tax (“NWT”) when they hold shares in an unlisted entity. This would be where “at least 50% of its assets are directly or indirectly made up of real estate located in Spain”.

      These new proposals would replace the current domestic provisions which historically have required non-resident individuals to pay NWT in circumstances where they directly own real estate only.

      Additionally, the Spanish Government plans to bring in the Solidarity Tax (“ST”) to supplement the regional NWT. The ST will be calculated and assessed at the federal level.

      The ST will be levied on non-Spanish-tax-resident individuals with a net wealth in Spain of at least EUR 3 million. It should be noted that this will include any interests in non-resident entities that own Spanish real estate

      The NWT can be credited against any ST liability.

      Commencement of new Spanish Net Wealth Tax and Solidarity Wealth Tax

      It is expected that these measures will be passed before the end of 2022.

      If the new legislation is published prior to the end of 2022, then both would apply to indirect holdings of Spanish real estate held on 31 December 2022.

      It is currently expected that both would have to be paid in June or July of the following year.

      If you have any queries about the Spanish Net Wealth Tax or Solidarity Wealth Tax, or Spanish tax matters in general, then please do get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.

    3. Israel Real Estate Tax Appeals – Ruling on luxury apartments

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      Introduction

      A new ruling was issued by Judge Yardena Seroussi in respect of an appeal to the Real Estate Tax Appeals Committee. The ruling concerned how luxury apartments should be taxed.

      Israel Real Estate Tax Appeal – The facts of the case

      The Appeals Committee considered whether a land appreciation tax exemption should be granted to several sellers during the sale of a luxury apartment.

      It was claimed by the vendors that they were entitled to the full sum of the maximum exemption for a single apartment prescribed by law.

      However, the Israel Tax Authority held that the exemption applies only to sales of an entire apartment unit and not each share in a multiple ownership arrangement. Accordingly, it calculated its tax on the maximum exemption per seller—not according to their actual portion of ownership.

      The owner of a single apartment is entitled to an exemption from land appreciation tax, up to the amount permitted by law.

      At the moment, this amount stands at ILS 4.6 million.

      It is worth noting in the case that:

      • the apartment sold for in excess of ILS 10 million;
      • the vendors were separate family units (a family unit consists of parents and children under 18 years of age); and
      • each of the two rights-holders in the apartment applied for an exemption at the full maximum sum.

      The decision

      The Israel Tax Authority had decided that the exemption was available in respect of the entire apartment rather than to each individual seller.

      However, the Appeals Committee ruled that the exemption applied to the sale of a single apartment and therefore the exemption should be granted to each separate vendor.

      This was on the basis that the sellers were not part of the same family unit

      Is an appeal likely?

      It seems quite likely the Israel Tax Authority will appeal this ruling.

      If you have any queries about this Israel Real Estate Tax Appeal or Israel tax matters in general, then please do not hesitate to get in touch.

      The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article