European Association for Investors in Non-Listed Real Estate Vehicles

Gustav Mahlerplein 62, 1082 MA Amsterdam, The Netherlands +31 (0)20 235 86 00 | [email protected] | www.inrev.org Response to call for evidence on ATAD I 11 September 2024 DG TAXUD Submitted electronically SUBJECT: Call for evidence on Anti-tax Avoidance Directive (ATAD I) INREV* welcomes the opportunity to comment on this initiative to gather evidence and views on the implementation of the ATAD across EU Member States, the functioning of the ATAD and future- proofing the measures. Although the evaluation of the ATAD, as mandated by ATAD Article 10 focuses on ATAD measures in five key areas: (1) the interest limitation rule, (2) exit taxation, (3) the CFC rule, (4) the hybrid mismatches rule, and (5) the GAAR, we would like briefly to raise issues specifically with the interest limitation rule and the GAAR.

…and (5) the GAAR, we would like briefly to raise issues specifically with the interest limitation rule and the GAAR. Member State inconsistency associated with the interest limitation rule The challenge posed by the ATAD I provisions in relation to interest limitation arises from the relatively minor yet impactful variations in implementation across different Member States. These discrepancies introduce significant complexity and the potential for inconsistencies, especially for multi-jurisdictional investors. As the rules have evolved, certain deviations have emerged. For instance, recent amendments in the Netherlands have excluded real estate companies from de minimis thresholds, further complicating the regulatory landscape.

…have excluded real estate companies from de minimis thresholds, further complicating the regulatory landscape. We urge the Commission to work toward harmonisation of the interest limitation rules across the EU and to limit deviations by member states in the update of the directive in order to lower the cost and complexity of their implementation. Improvements to the GAAR We urge the Commission to use the review of ATAD I to strengthen the GAAR provisions to address, inter alia, concerns about the misuse of shell entities. The proposed Unshell directive is an example of adding on new regulations rather than investing the effort to fine tune, evolve or enhance existing regulations. Perceived shortcomings of the GAAR provisions in ATAD I which were reflected in the impact assessment prior to the proposal of the Unshell Directive and other places should be addressed in this review of ATAD I.

…prior to the proposal of the Unshell Directive and other places should be addressed in this review of ATAD I. GAAR should not be a “tool of last resort” and could be made clearer and more effective to combat tax avoidance. The costs and complexity caused by the Commission’s approach of creating the misuse of shell entities directive in response to less-than-perfect GAAR provisions in ATAD I are potentially enormous. They could be much lower if the GAAR provisions were revised to directly address the misuse of shell entities. Cost and complexity generally Although we believe that the concerns expressed above are worth pursuing in the review of ATAD I, they raise another more general concern that any changes to ATAD I should be adopted only if there Ref. Ares(2024)6425712 - 11/09/2024 2 European Association for Investors in Non-Listed Real Estate Vehicles is a real improvement to be made.

- 11/09/2024 2 European Association for Investors in Non-Listed Real Estate Vehicles is a real improvement to be made. The fund management business spends significant time and effort ensuring that the regulatory obligation to Treat Customers Fairly (“TCF”) has led to market standard inclusions in offering documents and subscription forms for funds that are partly driven by frameworks introduced in ATAD I and ATAD II. For example, these provisions are typically designed to achieve a TCF outcome where one ‘causing’ investor’s tax status or treatment of an investment structure has led to a negative tax outcome for the fund overall as a consequence of ATAD I or ATAD II (for example, the hybrid provisions).

…a negative tax outcome for the fund overall as a consequence of ATAD I or ATAD II (for example, the hybrid provisions). The costs in time, money and administration of implementing changes even in the apparently simplest and most straightforward areas, such as updating subscription forms, for example, are staggering and are typically borne by both investment managers and ultimately investors. Changes with significant consequent costs should therefore be made only if proportional to the benefits they create. This is particularly acute for long term ‘open end’ investment funds as opposed to closed end funds which typically exist for a defined period and therefore have relatively recently designed and approved the relevant documentation.

…exist for a defined period and therefore have relatively recently designed and approved the relevant documentation. Unique characteristics and specificities of EU real estate investment markets INREV further underscores the importance of considering the unique characteristics and specificities of the EU real estate investment markets in making changes to ATAD. Given the benefits created by the ability of real estate investment to create returns that fund the obligations of pension funds and insurance companies, tinkering with existing regulations should be approached cautiously and consciously. Conclusion We hope our comments make a constructive contribution to the reconsideration of ATAD I and are available for further clarification or explanation if desired.

…contribution to the reconsideration of ATAD I and are available for further clarification or explanation if desired. Kind regards, [signed] Jeff Rupp Director of Public Affairs [email protected] * INREV is the European Association for Investors in Non-Listed Real Estate Vehicles. We provide guidance, research and information related to the development and harmonisation of professional standards, reporting guidelines and corporate governance within the non-listed property funds industry across Europe. INREV currently has more than 500 members.

…governance within the non-listed property funds industry across Europe. INREV currently has more than 500 members. Our member base includes institutional investors from around the globe including pension funds, insurance companies and sovereign wealth funds, as well as investment banks, fund managers, fund of funds managers and advisors representing all facets of investing into non-listed real estate vehicles in Europe including funds, joint ventures, club deals and separate accounts for institutional investors.

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Gustav Mahlerplein 62, 1082 MA Amsterdam, The Netherlands +31 (0)20 235 86 00 | [email protected] | www.inrev.org INREV response to the European Commission Call for Evidence 9 February 2026 EU rules on administrative cooperation in the field of taxation (DAC) – recast The European Association for Investors in Non-Listed Real Estate Vehicles1 (INREV) appreciates the ongoing efforts of the European Commission to review and modernise the EU taxation framework and welcomes continued commitment to reducing administrative burdens and increasing legal certainty for taxpayers. In this context, INREV recognises the importance of administrative cooperation as a tool to combat tax fraud, evasion and avoidance, while ensuring the effective functioning of the internal market.

…as a tool to combat tax fraud, evasion and avoidance, while ensuring the effective functioning of the internal market. As part of this process, INREV wishes to highlight a number of practical challenges faced by the private real estate investment industry in complying with existing EU tax legislation, in particular under the Directive on Administrative Cooperation (DAC). INREV believes that the review and recast of existing directives represent a timely opportunity to advance meaningful simplification, ensuring that rules remain effective while becoming more coherent, predictable and easier to apply for investments and capital allocators operating across the EU. The objective of this submission is to provide an overview of the main obstacles encountered in practice, with a view to identifying possible areas for simplification, harmonisation and administrative improvement.

…with a view to identifying possible areas for simplification, harmonisation and administrative improvement. General comments on investment funds Legal and economic framework for cross-border investments INREV’s membership is composed primarily of institutional real estate investors and investment managers. For the purposes of this response, the focus is on cross-border investments, which 1 INREV is the European Association for Investors in Non-Listed Real Estate Vehicles. We provide guidance, research and information related to the development and harmonisation of professional standards, reporting guidelines and corporate governance within the non-listed property funds industry across Europe. INREV currently has around 500 members.

…governance within the non-listed property funds industry across Europe. INREV currently has around 500 members. Our member base includes institutional investors from around the globe including pension funds, insurance companies and sovereign wealth funds that provide critical income security for more than 172 million people, as well as investment banks, investment managers, fund-of-funds managers and advisors representing all facets of investing in non-listed real estate vehicles in Europe. Our investment manager members manage more than 500 non-listed real estate investment funds, as well as joint ventures, club deals and separate accounts for institutional investors. Ref.

…estate investment funds, as well as joint ventures, club deals and separate accounts for institutional investors. Ref. Ares(2026)1430430 - 09/02/2026 2 European Association for Investors in Non-Listed Real Estate Vehicles typically involve domestic institutional investors and pension funds, as well as international investors such as insurance companies and foreign pension funds. For many years, a standard market structure for real estate fund investments consisted of a regulated investment vehicle, most commonly an Alternative Investment Fund (AIF), domiciled in a jurisdiction offering a robust regulatory framework and a high degree of investor familiarity. These vehicles generally hold real estate assets through intermediary entities, often Special Purpose Vehicles established in the state where the property is located, primarily for operational and legal reasons.

Purpose Vehicles established in the state where the property is located, primarily for operational and legal reasons. The investor base is institutional, including pension funds and insurance companies. Financial flows within these structures comprise capital contributions and distributions of income or gains and, while often complex, are not designed for aggressive tax planning purposes. It is important to recall that anti-abuse provisions are fundamentally not intended to target the fund industry represented by INREV. The financial flows involved are significant and operate within highly regulated structures, without any objective of circumventing the tax rules of source states. In practice, transactions structured as share deals are generally subject to appropriate taxation in the source jurisdiction.

…structured as share deals are generally subject to appropriate taxation in the source jurisdiction. Nevertheless, certain aspects of these arrangements may be affected by compliance rules and anti- abuse measures. Areas of potential concern include the assessment of economic substance in intermediary entities, the availability of treaty benefits which may be perceived as treaty shopping, and the transparency of cross-border arrangements under frameworks such as ATAD and DAC 6. Where investments are made directly, exemptions frequently apply. Importantly, the portfolio diversification and risk management through the use of a capital pooling structure should not result in a less favourable tax treatment. Against this background, it is essential to avoid creating excessive complexity in reporting obligations that would be disproportionate to the objectives pursued.

…avoid creating excessive complexity in reporting obligations that would be disproportionate to the objectives pursued. Current compliance costs and administrative burdens are already significant. The imposition of additional layers of complexity would undermine the principles of proportionality and legal certainty. INREV therefore considers that there should be a clear legislative objective to simplify these frameworks while preserving transparency and regulatory integrity. In this respect, it should be emphasised that, in most cases, the vehicles used fall within the scope of the AIFMD or even more prescriptive regulatory regimes and are already subject to strict regulatory supervision. Characteristics and tax neutrality of the investment fund industry INREV would like to reiterate several essential characteristics of the private real estate investment and asset management industry.

…to reiterate several essential characteristics of the private real estate investment and asset management industry. The investment fund market is broad and diverse. It includes funds distributed to professional and institutional investors, which may pursue a wide range of strategies, including investments in listed transferable securities, real estate and private equity. It also includes vehicles specifically designed to serve pension funds and insurance companies by matching income streams to liabilities and thereby provide retirement and similar long-term benefits. The fund industry operates under stringent regulatory frameworks. At EU level, the UCITS Directive and the Alternative Investment Fund Managers Directive establish mandatory rules governing the cross-border activities of investment funds and their management companies.

…establish mandatory rules governing the cross-border activities of investment funds and their management companies. In parallel, MiFID II imposes strict investor protection obligations on firms distributing financial products, including UCITS and AIFs. In practice, these regulatory requirements are reflected in detailed contractual arrangements among the entities and intermediaries involved in cross-border fund distribution. 3 European Association for Investors in Non-Listed Real Estate Vehicles Investment funds are designed to ensure tax neutrality compared to direct investments, a principle recognised both by the OECD and by the European Commission. Tax neutrality is a fundamental feature of collective investment and underpins the ability of funds to pool capital efficiently without distorting investment decisions.

…investment and underpins the ability of funds to pool capital efficiently without distorting investment decisions. Most jurisdictions achieve tax neutrality by treating collective investment vehicles as fiscally transparent and taxing income at the investor level, or by treating them as opaque but exempting them from taxation or applying reduced or zero tax rates. Even where neutrality applies at fund level, taxation of financial flows occurs at several points in time. This includes withholding taxes at source on certain types of income, investor-level taxation of income or gains under domestic rules supported by exchange-of-information mechanisms such as the Common Reporting Standard, taxation of distributor profits arising from the marketing of fund units or shares, and taxation of management companies operating cross-border under national laws and applicable double tax treaties.

…and taxation of management companies operating cross-border under national laws and applicable double tax treaties. In this context, EU tax directives should not, in practice, call into question the principle of tax neutrality for investment funds. On the contrary, they should support the effective functioning of the internal market. Operations and investments should not be hindered by restrictions, disadvantages or distortions arising from tax provisions or divergent administrative interpretations by Member States. Such outcomes inevitably restrict freedom of establishment and the free movement of capital within the EU. Any practical application of EU tax directives that undermines tax neutrality and thereby restricts freedom of establishment or capital movement constitutes a barrier to investment and to the inflow of foreign capital into the EU.

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