EPRA: Dutch REIT regime rule changes boosts international competitiveness (NL)

Dutch REITs will compete better with their European peers from the start of this year following new legislation that allows certain ancillary services to qualify alongside these listed property companies’ core investment activities for treatment under their special tax regime, the European Public Real Estate Association (EPRA) said.

These additional business activities must be carried out by a regular taxable subsidiary of the REIT (or 'FBI' in Dutch) and may include services such as providing meeting space, in-house catering, supplying energy to tenants and using social media and marketing tools in, for instance, shopping centers. The possibilities for Dutch REITs to do property management in joint venture situations have also been expanded.

Ronald Wijs, a member of EPRA’s tax committee said: “This legislation is a major improvement. It should allow Dutch REITs to manage their property portfolios in a more dynamic way and to meet the changing demands from investors and tenants. As a result, it should enable the Dutch FBIs to compete on a more level playing field with REITs in other countries. The Dutch listed property industry, with the strong support of EPRA, has consulted closely with the Ministry of Finance to achieve this very positive change in the rules.”

The broadening of permitted activities within the FBI structure is subject to a number of requirements:

1. The permitted activities should take place in a taxable subsidiary earning an “at arm’s length” remuneration.

2. The ancillary activities should directly relate to the investment properties of the FBI or certain affiliated entities.

3. The (fiscal) value of the shares in the subsidiary that performs the activities may not exceed 15% of the (fiscal) equity of the FBI.

4. The turnover of the ancillary activities may not exceed 25% of the FBI’s turnover (on a property-by-property basis).

5. To avoid the taxable profit of the subsidiary from being eroded and the value of this company being kept artificially low, the subsidiary is required to be entirely financed with equity.

Dutch REITs form the second largest component of the FTSE EPRA/NAREIT Developed Europe REITs Index after the UK, with six companies with a combined market capitalization of around €24 billion representing about 30% of the index. The total market cap of the index, containing 43 constituent listed companies, was roughly €79 billion in mid-January.

Dutch Constituents of the EPRA Global REIT Index (by free float market cap ranking)



Eurocommercial Properties


Vastned Retail

Nieuwe Steen Investments

The high ranking of the FTSE EPRA/NAREIT Netherlands REIT sub-index is particularly influenced by the inclusion of Unibail-Rodamco, Europe’s largest listed commercial real estate company, which was created from the merger of Paris-based Unibail with the Dutch company Rodamco Europe in 2007. There are also strict rules for the inclusion of stocks in the FTSE EPRA/NAREIT REITs indices, for example on the proportion of a share’s free float–which can affect the ranking of markets such as France, with a large listed REIT sector.

Also in Germany listed residential property firms are a growing force but are not eligible for REIT status under local tax rules.

FTSE EPRA/NAREIT Developed Europe REITs Index top five by market cap

Country Market Cap (billions) Number of Index Constituents Average Dividend Yield 2013

UK €39.18 16 3.44%

Netherlands €24.15 6 5.28%

France €10.38 8 5.55%

Belgium €3.77 7 6.28%

Germany €1.10 3 4.85%

Philip Charls, EPRA CEO, said: “We see this clearly as a move in the right direction for the Dutch FBI regime, providing more scope and flexibility for Dutch REITs to deploy their expertise to the benefit of tenants and stakeholders alike. It is another good example of EPRA working closely with its local members.”

Source: Bellier Financial

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