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.