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Government Intends to Regulate REITs

20 October 2017

The Portuguese government intends to develop a regulatory regime for real estate investment companies, specifically for Real Estate Investment Trusts (REIT) – a type of structure that is starting to become more active in Portugal. The government must create legislation to regulate their activities in the country. The Executive will, therefore, present a proposal for a regime at the end of discussions on the 2018 State Budget (OE2018).

The Portuguese Association of Real Estate Developers and Investors (APPI) is in favour of regulation, the Jornal Econômico reported. The association’s general secretary, Hugo Santos Ferreira, agrees will the majority of his members, that Portugal should accommodate this type of investment vehicle. “Portugal will lose some of its competitiveness in attracting investment if it does not adopt such structures. Given the great competition that we face from REITs and SOCIMIs, it’s important that we should define legal and fiscal regimes as competitive and attractive as those,” the executive argued.

This type of investment vehicle has a number of advantages, such as permitting small Portuguese individual investors to invest in large real estate projects in their country, “but also that of fiscal neutrality (with a system of ‘exit taxation’, thus harmonizing the rules of taxation at European level), the obligation to distribute almost all of the results (promoting the rapid renewal of Portugal’s real estate assets), and even the fact that the structure requires professional management,” Hugo Santos Ferreira stated.

Another advantage of the vehicle, according to Mr Ferreira, is the inclusion of all types of leases, not limited to housing. It is, therefore, another measure that would bolster the local market’s dynamization, including in the office segment.

JLL’s Head of Capital Markets, Fernando Ferreira, believes that the government must regulate the structure, “like any other investment product.” “Simply, legislation should be created so that it can be taxed, like any other commercial activity, and to prevent financial crimes,” he stressed.

Original Story: Idealista

Translation: Richard Turner