Property lobbyists are set to do battle with the European Union amid growing fears it may try to impose a tax which would undermine the benefits of Real Estate Investment Trusts (REITs).
The British Property Federation (BPF), EPRA, INREV and AREF have united in a bid to stop the proposed financial transactions tax (FTT) from being applied to REITs and real estate funds. Industry concern is centred on the wide-ranging definition of financial institutions to which the tax would apply. At present, this includes alternative investment funds and their fund managers.
However, the definition of AIFMs and AIFs as set out in the EU's Alternative Investment Fund Management Directive remains unclear and could extend to REITs as well as funds.
'The financial transactions tax has been presented by its European supporters as a tax on banks, but this hides a much broader impact,' commented John Christian, real estate tax partner at international law firm Pinsent Masons. 'For example, the real estate funds sector finds itself potentially caught under the enormously wide definition of a financial institution. Applying the tax to real estate funds and managers does not affect banks but instead impacts investment yields to pension funds and other investors.'
REITs expert Robert Moir, a partner at Pinsent Masons, added: 'The real estate investment industry is rightly concerned about any EU financial transactions tax, which will impact London disproportionately. If it were to go ahead, the definition of what is and isn't a financial transaction subject to tax should be clarified.'