Changes to the taxation regime in Germany coupled with domestic tax changes has made the European country more attractive for local property investors, a major accounting firm has said.
“As the German tax rate is now close to the 15 per cent incurred on income by Australian super funds, it is probably more efficient to structure German property vehicles via entities that would be considered transparent for Australian purposes,” Deloitte UK practice partner David Brown said.
“German taxes paid would then flow straight through the Australian trust fund vehicle (listed property trust) and end up as a tax credit. Managed funds or individual investors could use this to offset against their Australian tax bill,” he explained.
The German corporate tax rate has fallen from 40 per cent to 30 per cent with the effective tax for passive real estate activities now standing at 15.8 per cent.
The local tax reforms allowed trusts to maintain transparency when investing in offshore structures with high levels of trading such as real estate investment trusts (REITs).
Investors could also take advantage of tax-deferred income and discounted tax rates to help offset any capital gains tax upon the sale of any underlying property, according to Brown.
The United Kingdom was another property market Brown named in which local investors should consider investing.
“Some UK REITs, in particular, are trading at significant discounts to the latest valuation of their underlying assets which may make them attractive targets for Australian buyers,” he said.
