Guidelines

INREV Members should comply with all tax laws, regulations and any other obligations which directly apply to INREV Members’ activities.

Compliance with tax laws and regulations involves compliance with the letter of the laws as well as the spirit of the laws and guidance as provided by public authorities. INREV Members are encouraged to seek to address any uncertainty in tax laws on a principled basis. Uncertainties might be addressed by applying for a ruling or opinion, for example.

INREV Members should comply in undertaking their activities with, inter alia:

• Making timely and correct tax payments;
• Applying all relevant tax reporting obligations (filing of tax returns, settlement of tax payments and all legal tax related reporting requirements);
• Providing information on tax obligations when tax reporting obligations fall elsewhere; and
• Applying other reporting requirements (e.g., automatic exchange of information).

Where possible INREV Members are likewise encouraged to actively weigh the effects of an indirect application of any other tax law or regulation which may apply to INREV Members’ activities. Members are also encouraged to align with the EU and other relevant legal and policy frameworks as well as the EU and other relevant processes on tax and anti-money laundering and countering the financing of terrorism (“AML-CFT”) developments. Specific attention is encouraged for:

• General or Specific domestic or European Anti-Abuse laws;
• The application of the arm’s length principle for transactions with related parties (detailed and updated as per the Organization for Economic Cooperation and Development “OECD” Transfer Pricing Guidelines);
• Anti-money laundering and countering the financing of terrorism (“AML-CFT”);
• Tax transparency regulations, including the EU Mandatory Disclosure Regime (“DAC6”) and FATCA/CRS regulations.

INREV Members are encouraged to apply relevant laws and regulations to their investment activities. Inappropriate use and/or interpretation of international public law (be it of a bilateral or multilateral character), EU Directives and Regulations, as well as domestic legislation applying to each of the concerned jurisdictions in a cross border investment is, hence, discouraged.
 

INREV Members are encouraged to co-operate with public authorities. Co-operation includes:

• a timely, constructive and transparent relay of information or documentation when officially requested by public authorities acting within their legal capacity;
• a timely, constructive and transparent response to appropriate queries officially raised by public authorities acting within their legal capacity;
• firming up compliance agreements;
• seeking active real-time audit;
• seeking clearance for significant transactions when engaging on what is perceived as being a tax risk area; and
• seeking advance tax and/or pricing agreements.

Co-operation is encouraged in any of the jurisdictions where investments are performed (and not only in INREV Members’ own country of residence).
 

INREV Members are encouraged to lawfully co-operate with public authorities on any reasonable tax related requests; any cooperation request which is unclear or unreasonable should be diligently addressed as means to clarify the extent and scope of any such request.
Requests properly introduced by the competent administration should be complied with in a timely manner
 

INREV Members are encouraged to seek co-operation from public authorities when appropriate as means to clarify or address any question regarding the application of the law (insofar as reasonable and in a fully transparent manner).
In doing so, INREV Members should principally seek to ensure an interpretative clarification from the public authorities under the terms and procedures of tax law.
 

INREV Members are encouraged to formalise an internal tax governance and tax risk management framework.

As such, INREV Members are expected to indicate that tax and tax policy are well embedded within their organisations and that these reflect the INREV Members’ stances or endorsements of tax conduct in general.

Tax governance and risk management responsibilities, which are recommended to operate with an appropriate level of human resources as per each Member Organization – could have the following objectives:

• Assurance of an independent assessment of tax matters within the organisation’s main decision making functions;
• Assessment and compliance with tax obligations arising from investments;
• Prevention and mitigation/elimination of tax related risks arising from the investments (either financial, reputational or other risks);
• Assurance that the tax risk profile of the organisation is consistent across investments and in line with Investor expectations;
• Definition of processes to monitor the enforcement of same principles internally and externally (towards third party service providers);
• Management and orientation of INREV Members interaction with public authorities as regards specific tax related matters;
• Management of hiring policies for third party service providers to assist the undertaking of said responsibilities; and
• Handling conflicts of interest within the vehicle.

Further guidance on this matter can be found in OECD Guidelines.
 

INREV Members are encouraged to regularly monitor and test the operational capacity of the tax governance and risk management responsibilities to assess the extent to which it is representative of their endorsed tax conduct and the assumed positions on tax risk.

Individuals in charge of the tax governance and risk management responsibilities should possess a senior level of experience when dealing with pan European investment tax related items (notably European, international and other relevant tax law).

INREV Members are recommended to ensure that individuals allocated to such responsibilities regularly receive on the job training as means to appropriately manage and update tax positions, as well as to meet regulatory requirements, where needed. Third party service providers could assist in the undertaking of such framework. A written protocol on how to handle conflicts of interest within the investment vehicle may be implemented.
 

The supervision of these responsibilities should be allocated to senior leadership and/or the Board of Managers / Directors who should prompt regular briefings on material tax issues, legislative changes and significant disputes.

Significant tax risks should also be subject to validation by the person in charge of tax governance and risk management.

The tax governance and risk management responsibility is also recommended to support and contribute to the implementation of international and EU standards on AML-CFT.
 

INREV Members are recommended to determine their approach towards tax and pre-define an internal tax and transfer pricing policy in light of responsible business investment strategy.

Within this approach to tax and transfer pricing, INREV Members are encouraged to:

• monitor the tax impact on any investment envisaged in a jurisdiction;
• take into account capital efficiency and regulation while structuring an investment;
• make a holistic assessment taking into account the range of possible tax outcomes; and
• follow OECD recommendations.

For the content of the tax policy, guidance can be taken from the UN investors' recommendations on corporate income tax disclosure and the GRI 207: Tax 2019 reporting standard.
 

INREV Members should define tax criteria to ensure that their investment strategies are neither solely tax driven nor that they have, as one of their principal purposes, the avoidance of tax. As such, any investment strategy must consider a balancing of interests and be justified by strong business rationale, as well as being non-artificial and coherent. Furthermore, INREV Members should be able to define what type of tax approach may be considered as being solely tax driven or aggressive tax planning investment (e.g., exploitation of technicalities in a tax regime or exploitation of inconsistencies between tax regimes in order to reduce tax liability).

As part of their approach to tax, INREV Members are recommended to formulate their view on tax with respect to real estate investment strategies. The view on the tax approach in real estate investment strategies can be further detailed in concrete tax criteria that need to be tested during the entire lifecycle of a real estate investment. Tax management that is supported by overall business rationale that may prevent economic and juridical double taxation may be considered.
 

INREV Members are encouraged to consider risks associated with the use of Non-Cooperative Jurisdictions (hereafter “NCJs”) or any other countries that one could reasonably believe do not align with international tax cooperation standards before investing.

When operating in or through an NCJ, INREV Members are recommended to be in a position to demonstrate the business rationale or acumen and sound economic reasons thereof and provide an appropriate description of the tax regime/attributes which apply.
 

In addition, INREV Members should be in a position to demonstrate that they are not obtaining or bringing into the overall structure any specific tax benefit from investing through a NCJ;

When operating in or through a NCJ or low tax country, INREV Members are encouraged to:

• Evaluate the tax related risks associated thereof (financial, reputational risk);
• Formulate their views and assess the use of NCJ and/or low tax jurisdictions taking into consideration all relevant facts and circumstances.

Finally, INREV Members should:

• Closely monitor developments surrounding jurisdictions that are deemed to be NCJs in the sense outlined in TAX-12, during the course of the investments’ lifespan; and
• To enhance due diligence and monitoring on the level of transparency and integrity of such jurisdictions.

While operating in jurisdictions, INREV Members and their investment managers are encouraged to conform to relevant national, EU and/or international rules and standards regarding transparency and disclosure of tax information (including voluntary disclosure), formulate their views and remain transparent on their chosen tax policy.
 

Where applicable and as part of full transparency, INREV Members are encouraged to report relevant information pertaining to tax in general, tax risk or tax policy to investors as appropriate, although it does not necessarily imply a full disclosure to the public.
INREV Members are recommended to document the tax policy applied during a fiscal year including investment jurisdictions where they operate.
 

INREV Members are also encouraged to demonstrate transparency to stakeholders by publishing their tax policy.
For the content of the tax policy report guidance could be taken from the GRI 207: Tax 2019 reporting standard.