Public property investment company (PPIC)
- is subject to the provisions of the Law of 12 May 2014 and the Royal Decree of 13 July 2014 regarding the regulated real estate companies;
- must be established as a company limited by shares (naamloze vennootschap/société anonyme), or a partnership limited by shares (commanditaire vennootschap op aandelen/société en commandite par actions);
- is listed on the stock market and have a free float of at least 30%;
- can perform all activities related to the construction, remodeling, renovation, development, acquisition, disposal, management and exploitation of real estate;
- is excluded from acting directly or indirectly as a property developer;
- can maintain subsidiaries controlled exclusively or jointly that may or may not assume the status of an institutional GVV/SIR.
- are under the supervision of the Financial Services and Markets Authority (the FSMA) and are required to comply with stringent rules regarding conflicts of interest. Next to Article 523 (conflicts of interest for directors) and Article 524 (conflicts of interest involving affiliates) of the Belgian Companies Code, which apply to all listed companies, specific rules regarding functional conflicts of interest apply to the GVV/SIR (pursuant to Article 37 of the Law of 12 May 2014 regarding regulated real estate companies).
Special regulations
1. Immovable property
To properly spread the investment risk no building/property complex may account for more than 20% of the consolidated assets. The FSMA may allow an exception in certain cases (provided the GVV/SIR demonstrates that such exception is in the interest of the shareholders or if it has established that such exception is justified taking into account the specific characteristics of the investment and particularly its nature and scale, and always subject to the condition that the consolidated debt of the GVV/SIR does not exceed 33% of the consolidated assets). This exception must be motivated in the prospectus and in the periodic reports prepared by the GVV/SIR.
2. Accounting rules
Under European Union law, like all other listed companies, GVV/SIR must prepare their consolidated financial statements in accordance with the international IAS/IFRS standards. Public GVV/SIR and, as the case may be, their institutional GVV/SIR (see below) are also required to prepare their statutory financial statements in accordance with IAS/IFRS pursuant to the Law of 12 May 2014 and the Royal Decree of 13 July 2014 regarding the regulated real estate companies. Since real estate property investments make up the largest part of the assets of a GVV/SIR, they must be valuated at fair value pursuant to IAS 40.
3. Valuation
The fair value of the real estate property is valuated at the end of each financial year by an independent real estate expert, who adjusts this fair value at the end of each quarter. The real estate property is then recognised in the balance sheet in accordance with this value of the expert. Buildings are not depreciated but recognised in the balance sheet with the fair value.
4. Result (available for distribution)
By way of equity consideration, the company must pay an amount that is equal to at least the positive balance between the following amounts:
- 80% of the amount that is equal to the sum of the adjusted result and of the net gains on the development of property that has not been exempted from mandatory payment;
- the net reduction in debt charge of the company in the course of the financial year.
This obligation applies only if the company has reported a net profit and if it has the available means in accordance with the Belgian Companies Code.
5. Debt and sureties
The consolidated level of indebtedness and the separate level of indebtedness of the GVV/SIR is limited to 65% of total assets. A GVV/SIR or its subsidiaries are only permitted to provide mortgages or other security interests or guarantees as part of their financing of real estate property-related activities. The total amount covered by such mortgages, security interests or guarantees must not exceed 50% of the total fair value of the real estate property owned by the GVV/SIR and its subsidiaries, and the mortgage, security interest or guarantee provided muts not relate to more than 75% of the value of the encumbered property.
6. Institutional GVV/SIR
Subsidiaries of a public GVV/SIR must always be controlled exclusively or jointly by the public GVV/SIR. These subsidiaries may have the regulatory status of institutional GVV/SIR (whose funds can only be raised from eligible investors (in aanmerking komende beleggers/investisseurs éligibles), as defined by the Royal Decree of 26 September 2006 regarding the register of eligible investors and the adjustment of the term eligible investor). This ensures, for example, that a public GVV/SIR can develop specific projects together with a third party. The regulatory framework for the institutional GVV/SIR is designed to avoid such a partnership in an institutional GVV/SIR being in conflict with the interests of the shareholders of the public GVV/SIR. Institutional GVV/SIR are supervised by the FSMA as well.
7. Tax system
Both public and institutional GVV/SIR are subject to corporate income tax at the standard rate, with a reduced tax base, consisting of the sum of
a. the non arm’s length benefits they have received and
b. expenses and costs that cannot be deducted as professional expenses and costs, not including impairments and losses on shares.
In addition, they may be subject to the special taxation on commissions of 309% on commissions paid and remuneration not accounted for in individual tax forms and the combined tax return. The withholding tax on dividends paid out by a GVV/SIR is in principle equal to 25%.
Companies that apply for accreditation as GVV/SIR or that merge with, or separate and transfer a portion of their immovable assets to a GVV/SIR are subject to an exit tax of 16.995% (16.5% plus the additional crisis contribution of 3%). This exit tax represents the tax price these types of companies are required to pay in order to exit the common tax regime. Under tax law, this transfer is treated as a (partial) distribution of the company’s assets by the company to the GVV/SIR. When distributing its assets, a company must treat the positive difference between the distributions in cash, in securities or any other form, and the adjusted value of the paid-up capital (i.e. the surplus value available in the company) as a dividend. The Income Tax Code provides that the amount distributed equals to the fair value of the assets on the date on which this transaction was completed (Section 210, §2 Income Tax Code, 1992). The balance between the fair value of the assets and the adjusted value of the paid-up capital qualifies as a dividend. The previously taxed reserves may be deducted from this balance. The remainder is generally the taxable base subject to the rate of 16.995%.
8. Société d’Investissement Immobilier Cotée (‘SIIC’)
Since 2006, Montea has been subject to the French SIIC (Societe d’Investissement Immobilier Cotée) regime through its permanent establishment in France. This means it has also been subject to the 0% corporate tax rate since that date. In order to be eligible for this regime, the company must satisfy the following conditions:
- the parent company must have the structure of an SA or any other form of company limited by shares that is eligible to be listed on the stock exchange. This parent company must be listed on a stock exchange under EU law.
- the SIIC’s main activity must be restricted to the leasing of property. Property developments must not exceed 20% of the gross book value of the portfolio.
- shares in the SIIC must not be held for more than 60% by a single investor or group of investors acting by mutual agreement.
- profit generated from the leasing of buildings, the gains realised from the sale of buildings, the gains realised from the sale of securities in the partnerships or subsidiaries that are subject to corporate income tax and that have opted for the SIIC status, proceeds paid out by subsidiaries that have opted for SIIC status, and the shares in the profit in partnerships are exempt from corporate income tax.
- the distribution obligation is 85% of the exempt profit from rental income, 50% of exempt profit from the sale of buildings and from securities of partnerships and subsidiaries subject to the SIIC status, and 100% of the dividends distributed to them by their subsidiaries that are subject to corporate income tax and that have opted for the SIIC status;
- the payment of a 19% exit tax on the unrealized gain on buildings owned by the SIIC or its subsidiaries that are subject to corporate income tax and that have opted for the SIIC status, and on the securities held by partnerships not subject to corporate income tax.