The Finnish Property Market 2009 - KTI

More documents

Recommendations

Info

20 The Finnish Property Market 2009 applies to the depreciation of buildings and other structures. Depreciation for each building is calculated separately, with a maximum rate varying from 4% up to 25% depending on the type of building or structure. Taxation of partnership structures Taxation issues are of great importance in structuring real estate fund structures. In real estate funds targeted for domestic investors, partnership structures are most commonly applied. In principle, partnership is a pass-through structure from a taxation point of view, and income and capital gains are taxed according to the investor’s own tax status. The interpretation of a partnership’s tax status might depend on the organisation and the type of activities of the fund. Taxation of a partnership’s income generated by property business can either be taxed according to income taxation rules or as business income. Therefore, the tax authorities should be consulted when the fund structure is set up. However, Finnish partnership structures cannot be beneficially applied for funds targeted at foreign investors. Value added tax Value added tax (VAT) is another tax that is relevant for property investment. The standard VAT rate is 22%, which is calculated on the total charge for goods and services. There are some lower VAT rates for specific groups of goods and services. In Finland, it is optional for the property owner to apply for VAT liability for collecting rents. The liability is granted given that certain requirements are met concerning the premises and tenants. The tenant must also be VAT liable. In these cases, the VAT included in the rent is deductible from the tenant’s final VAT. The property owner can deduct the VAT included in the cost of services of the property. Under Finnish VAT legislation, a taxable entity is also entitled to deduct VAT included in the costs for the construction of a new building as well as the restoration of an existing building, provided that the relevant property is intended for the use of a VAT taxable business activity. This deduction will then be revised if the use of the property entitling to a deduction decreases or if the ownership of the property is transferred within a set revision period. In some circumstances also an increase of taxable use could lead to a revision. From the beginning of 2008, this revision is proportionate to the lapse of time. This means that the full amount of deducted VAT will not be subject to revision – as was the case under the previous rules – but only a decreased amount in accordance with and proportionate to the time lapsed under the revision period. The revision period has also been extended from a five year period to a ten year period. Corporate tax rate Capital gains tax rate Tax rate 26% Note 28% Levied on profits from selling real property, buildings, securities such as housing company shares, shares in listed companies, etc. VAT 22% Special rates for food (17%); medicine, books, transportation, cultural events, etc. (8%); and newspapers and periodicals (0%). Tax on real property Transfer tax, real property Transfer tax, securities 0.5–1.0% Depends on municipality and type of property. Taxable value defined separately for the building and the land. 4% The majority of transactions are carried out by selling the shares of a (mutual) limited realestate company, when the transfer tax is 1.6%. 1.6% Transfer of securities is tax-exempt if the transfer takes place through the stock exchange or if both the seller and the purchaser are nonresidents. Shares in a housing company are always subject to transfer tax. Source: Finnish Tax Administration, www.vero.fi
4. Structure and players in the Finnish property market 4.1 Ownership structure has changed markedly According to KTI estimates, the size of the Finnish professional property investment market is ca. €36 billion. The ownership structure of the market has changed markedly during the past few years. Only a decade ago, the market was dominated by domestic institutions such as pension funds, in particular. They still remain major players in the market with a share of some 38%, but their dominance has decreased together with the emergence of foreign investors, domestic funds and other players. The structure of the Finnish property investment market (36,5 mrd €) Non-listed property companies 12 % Listed property companies 12 % Charities and trusts 2 % Others 1 % Real estate funds 8 % International investors 27 % Institutional investors 38 % Source: KTI (Annual reports, query for investors, KTI estimates) Institutional investors Institutional investors have traditionally played a dominant role in the Finnish property investment market. Pension insurance companies and pension funds are the biggest players in this group. At the end of 2008, the total property investments of Finnish pension institutions amounted to €13.1 billion (€11.2 bn in 2007). This figure includes both direct and indirect investments in Finland and internationally. “Finnish pension funds increase their property portfolios” The biggest property investors in Finland (fair values of direct holdings at the end of 2008, EUR billions) ■ Institutional investors ■ Non-listed property companies/funds ■ Listed property companies ■ International investors Varma Mutual Pension Insurance Company Sponda Ilmarinen Mutual Pension Insurance Company VVO Tapiola Group and Tapiola Funds’ Local Government Pension Institution Citycon Aberdeen’s funds' investments in Finland Sato CapMan Real Estate RBS Nordisk Renting Etera Mutual Pension Insurance Company NIAM Pension Fennia Avara Suomi Ltd Technopolis Wereldhave Finland OP Bank Group´s pension and life funds Nordea Life Assurance Finland Ltd Protego Real Estate Investors Suomi Mutual Genesta Property Nordic Bronda Properties Norgani Hotels Veritas Pension Insurance 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 Source: Annual Reports, Query for Investors, Press Releases 21 The Finnish Property Market 2009
Page 1: The Finnish Property Market 2009 1
Page 5: Contents Preface 7 1. Basic facts a
Page 8 and 9: 1. Basic facts about Finland 2. The
Page 10 and 11: subordinated loans or state guarant
Page 12 and 13: Key Figures - Finnish Economy 2001
Page 14 and 15: 14 The Finnish Property Market 2009
Page 16 and 17: The indefinite leases often last lo
Page 22 and 23: Real estate investments’ proporti
Page 26 and 27: The Finnish fund managers concentra
Page 32 and 33: 5. Property sectors - market struct
Page 34 and 35: The office market in 2009 The deman
Page 36 and 37: Prime office yields in Finnish citi
Page 38 and 39: Rental practices Rental practices i
Page 42 and 43: 5.4 Logistics market - a developing
Page 44 and 45: The Helsinki Central Business Distr
Page 46 and 47: Preferred office locations in Helsi
Page 48 and 49: 6.2 Other growth centres: Tampere,
Page 50 and 51: Throughout the recent years, the va
Page 54 and 55: Key terminology Property Kiinteist
Page 56: 56 The Finnish Property Market 2009

The Finnish Property Market 2009 - KTI

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?