EPI 4 Investor plc - European Property Investments

EPI 4 Fund Taxation Summary Section 10Important notice: This taxation summary should be considered as a brief summary only. Ernst & Younghas provided a more comprehensive taxation opinion to the promoters which should be consideredcarefully by investors before proceeding with the investment. This summary document does notsubstitute for a detailed tax opinion and should not be relied upon as such.The Fund will be set up as an Irish incorporated limited company ( Irish Holdco )which will be tax resident in Ireland and will not be a close company for Irish taxpurposes. The investment structure will be as follows:Investors will introduce approximately 0.1% of their investment as share capitalinto Irish Holdco and the balance of the investor funds will be introduced asshareholder loan.Irish Holdco will own four targeted properties, which are considered to be passivelong term holds through the use of German GmbH companies. The fund will own82 % of each GmbH. The passive projects are:• The Siemens Building in Erlangen• The Burger King Building in Kiel• The Biotech Building in Munich• The Capital Tower Building in BerlinThe Fund will also acquire the Expec Property Portfolio as an active business witha view to breaking up and selling the Portfolio over a period of time to maximiseits value. In this case, Irish Holdco will establish a GmbH & Co. KG ( Expec KG ) toacquire 100 % of the shares in an existing GmbH ( BRP1 GmbH ). Irish Holdco willown 82 % of the KG with EPI 4 Promoter Ltd. owing the remaining 18 %.Irish Holdco will also participate in a significant development project, the LogisticsCentre and Solar Park in Berlin. Irish Holdco will acquire 41 % of an Irish companythat has been established for the purpose of acquiring the site and carrying outthe development.Irish Holdco has also been invited by a German developer to participate in thedevelopment of a waterside property in Bamberg. Irish Holdco will not hold anyequity interest in this project but instead will participate in development by theprovision of development funds.It is the intention of the promoter tomanage all of these Investments andthe timing of the various disposalsto satisfy the conditions of Section626B Taxes Consolidation Act ( TCA )1997 so that capital gains arisingon disposal or liquidation of thesubsidiary companies can qualify forexemption from Irish capital gainstax. As Irish Holdco will hold a numberof subsidiaries, some of which areactive trading companies and othershold property as long term passiveinvestments, it is critically importantthat at any time that there is a disposalof a subsidiary that that subsidiary itselfis a trading entity or if the subsidiarybeing disposed of is not a tradingentity at the time of the disposal thegroup taken as a whole is, wholly ormainly, carrying on a trade or trades.There will therefore be a significantonus on the promoter to monitorthe companies, the valuations of thevarious properties and the amount ofincome being derived from tradingand non-trading categories to ensurethat the conditions for qualificationfor the capital gains tax exemptionunder Section 626B are satisfied.31