Global Real Estate Investment. What to Expect in 2021?

Psoted on: March 9, 2021 at 10:25 am, in

Overview:

  • Experts predict that despite the Covid-19 pandemic, the global real estate investment market will remain at a decent level in 2021.
  • Industrial and residential real estate types have shown enviable resilience to the global pandemic crisis. They experienced a subdued drop in transaction volume.
  • According to reputable experts, the main countries for investment in real estate in 2021 will be Germany, the USA, Canada, Australia, and Great Britain.

In 2020, the world has experienced unbelievable events and major changes. The pandemic and subsequent lockdowns around the globe have caused uncertainty not only for the average person but also business people who are involved in real estate investments have felt strong fluctuations in this area.

As for 2021, the use of the Covid-19 vaccine and the anticipated overcoming of the global pandemic gives good reason to think that the world economy will enter a phase of a strong recovery during this period. This fact in turn directly affects the real estate investment market and should boost property investor confidence in “tomorrow”.

A large number of developed countries are trying their best to keep their economies at an as acceptable level as possible. To do this, they are taking drastic measures to support economic development through ultra-low interest rates and quantitative easing programs. These low-interest rates will be able to support real estate investment in 2021.

Lockdown restrictions and widespread economic uncertainty have caused deal volumes to decrease in 2020. Experts estimate that global investment volumes have fallen by about 28% in 2020. However, it should be noted that the 2020 crisis did not affect all types of real estate in the same way. The industrial and residential divisions experienced more reserved drops in transaction volumes, increasing the market share, which accounted for 21% and 28% of total investment, respectively. The resilience of these sectors to changes in the past year of pressure gives strong hope that this inclination is likely to persist in 2021.

2020 was a challenging year in every way, and it didn’t spare the real estate investment sector. This is a truth that is hard to argue with, but despite the short-term uncertainty associated with the pandemic, real estate has been and remains an attractive capital-raising tool for investors in the long term.

What Real Estate Sectors Should Investors Pay Attention to in 2021?

  • Experts predict that office real estate will remain one of the largest property sectors for investment. The focus is expected to be on lower-risk assets with stable yield characteristics in the world’s best locations.
  • The residential sector will be able to attract an ever-increasing share of global investment, subject to the support of strong fundamentals and the growth and consolidation of portfolios of cross-border investors.
  • Elderly housing and healthcare are operating asset classes with long-term income potential. The accent on health and wellness in 2021 is expected to drive the investment share.

Where to Invest?

For those who are planning to make real estate investments in 2021, we have prepared a shortlist of countries that would be comprehensive for this purpose. You’ll be happy to know that there are many potential countries where you can invest your capital in residential property.

Germany

Growth in real estate prices in Germany will continue despite the pandemic and temporary economic difficulties, experts predict. The housing market in Germany is surprisingly resistant to the negative effects of the Covid pandemic. Only a slight slowdown in price growth is expected: apartments and houses will rise in price by about 4% in 2021 instead of the 5-6% forecasted earlier.

Reputable real estate investment specialists claim that the factors that influenced price increases earlier will persist in 2021: demographics that support the high demand for housing, a shortage of land for construction, as well as low-interest rates and a lack of alternative investment opportunities amid the instability of other markets.

The United States of America

The economy is showing good signs of recovery from the 2020 crisis: an overall unemployment rate is low and businesses are generally booming. These factors can’t but encourage new investment in real estate. Attention should be paid to cities such as San Diego, Los Angeles, and San Francisco, which are additional major destinations for real estate investment.

Australia

The Australian residential real estate market has seen extraordinary changes in property value over the past few decades. It has skyrocketed in significant and expensive cities like Sydney, Melbourne, Adelaide, Perth, Brisbane, and Hobart. Despite the recent tightening of credit policies, the country is recording a surge in investor interest.

Canada

Canada’s real estate market has shown great momentum and can even be said to have prospered recently. Home values rose about 10% last year in major cities, twice the long-term average. Metropolitan areas such as Toronto and Vancouver have consistently high real estate prices. Low-interest rates, moderate currency value, and tax abatements are factors that urged foreign venturers to increase their investments in real estate in 2020.

The United Kingdom

Great Britain’s real estate market has always been stable and has attracted the attention of global investors. At the moment, it is still a great place to invest in a stable asset for long-term benefits. The interest rate on the prime rate of the Bank of England has dropped to 0.1%. This in turn has increased investment opportunities. To give a necessary boost to the real estate market, the UK government has modulated the size of the temporary Stamp Duty Land Tax (SDLT) on real estate sales in order to attract new buyers.

Bottom Line

Investing in residential real estate is one of the most reliable ways to increase capital with a low risk of losing the assets invested.

Clevver always works with its clients in mind. We have released a comprehensive whitepaper on residential real estate investing and the taxation associated with it. Don’t hesitate to check it out absolutely for free!

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against Clevver or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. Clevver does not provide any legal advice itself. Clevver works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.


Double Irish with a Dutch Sandwich — Legal Cuisine

Psoted on: December 17, 2020 at 11:36 am, in

It’s about time that we educate you about the most appetizing tax scheme known by the name Double Irish with a Dutch Sandwich. What does it do? It is associated with minimizing the tax burden when using intellectual property. This system is widely used by American corporations and is slightly less common among European companies, but it is still present there.

Why Do Companies Use “Double Irish with a Dutch Sandwich” Scheme?

So, to begin with, we should turn attention to the prerequisites for using this method of minimizing taxes. If we consider the United States, then income received from intellectual property (royalties) is subject to a very significant tax – 35%. At high turnovers, this interest rate is incredibly burdensome for companies. As a consequence, many firms use tax optimization. This should not be confused with tax evasion. Optimization is the reduction of the tax burden by applying legally acceptable mechanisms.

Famous companies such as Apple, Google, Facebook, Coca-Cola, and others appear among the notorious cases of the “double Irish with a Dutch sandwich” scheme. For example, Google allegedly underpaid about 1 billion Euros in taxes to the French budget for 2016, due to tax optimization.

“Double Irish with a Dutch Sandwich” Peculiarities

Now, let’s move on to the “tastiest” part, and consider the structure of such tax planning and how the above media giants managed to significantly save on tax payments.

This scheme is a kind of chain, through which intellectual property rights are transferred from one company to another. This chain uses two Irish companies and one company registered in the Kingdom of the Netherlands (hence the name “double Irish with a Dutch sandwich”).

Under Irish law, a company is considered a resident of the country from which it is directly managed. Thus, a company incorporated under Irish law with an office and a current director in another country will be considered a resident of the latter. The first Irish company (hereinafter we will call it I1) is geographically located in an offshore zone – in Bermuda or the Cayman Islands, in which dividends and royalties are not subject to income tax. The second Irish company (hereinafter I2) is already registered and located in Ireland, but at the same time, it is a 100% subsidiary of I1. The third company is registered in the Kingdom of the Netherlands (hereinafter – N).

The very scheme of interaction between companies is as follows: A company that owns the intellectual property (located in a high tax area, for example, the United States) transfers intellectual property rights to I1 through a licensing agreement, then I1 sublicense these rights to the company N. The Dutch company, in turn, also transfers sublicense agreement with the same rights to I2. It directly collects profits from the use of intellectual property rights and conducts real business (excluding US consumers). This is because Ireland does not tax funds that are transferred by its residents to some countries of the European Union, incl. Kingdom of the Netherlands. In this case, I2 must pay tax only on the part of the income received from royalties, which it retains with itself (at a rate of 12.5%). From the Netherlands, funds are transferred to I1 (also bypassing taxation), which is a tax resident of the offshore zone, in which it is exempted from paying taxes for royalties. As a result, money is concentrated in the offshore jurisdiction. The popularity of the described scheme is confirmed by media reports, according to which foreign companies carried about 13 trillion euros through the Kingdom of the Netherlands in 2012.

Final Thoughts

It is worth remembering the worldwide trend towards de-offshorization and the introduction of BEPS rules, which are aimed at eradicating such phenomena. This means that in the near future such ways of tax optimization will be closed and global corporations, together with their lawyers, will have to look for new options for tax planning or pay taxes in the form in which they are provided by law. Already in 2017, US authorities directed corporations to end the system. Ireland is pressured to close this loophole.

Our Offer to you

Clevver can assist with the establishment of a Dutch Sandwich for you on demand. Also, Clevver can support the company formation in other alternative European jurisdictions like Switzerland or Malta.

Get in touch with us at [email protected] for more information.

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against Clevver or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. Clevver does not provide any legal advice itself. Clevver works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.