Regulated Real Estate Company (RREC)
On 1 September 2014 the Financial Services and Markets Authority (FSMA) approved Home Invest Belgium as a public Regulated Real Estate Company (RREC) as well as approving all the documents drawn up by the company in this framework, subject to the approval of this change in status by the company’s extraordinary general meeting.
Home Invest Belgium convened an extraordinary general meeting of its shareholders on 25 September 2014, which unanimously approved the company’s change in status from sicafi into RREC (public Regulated Real Estate Company, in accordance with the Law of 12 May relating to Regulated Real Estate Companies).
Home Invest Belgium was the first Belgian sicafi to obtain RREC status.
The RREC is supervised by the Financial Services and Markets Authority (FSMA) and governed by the Law of 12 May 2014 and the Royal Decree of 13 July 2014 relating to Regulated Real Estate Companies.
The Regulated Real Estate Company is defined under law by its activity, which consists of the provision of buildings – directly or through a company in which it owns a stake – to users and possibly, within the limitations specified for this purpose, to hold other types of “real estate property” (shares in public sicafi, stakes in certain foreign undertakings for collective investment in real estate, shares issued by other REITs and real estate certificates). In this framework the RREC can perform all activities related to the building, conversion, renovation, development (for its own portfolio), acquisition, sale, management and operation of buildings.
The public Regulated Real Estate Company has the following main characteristics:
- a fixed capital company;
- a stock exchange listing;
- debt ratio limited to 65% of the market value of the company’s assets;
- property portfolio recorded at its fair value, without any deprecation;
- diversified portfolio: no more than 20% of total consolidated assets invested in a single property, unless the FSMA grants a derogation;
- very strict rules governing conflicts of interest;
- quarterly assessment of assets by an independent expert;
- if the financial year closes with a profit, the distributed dividend corresponds to at least the positive difference between 80% of the adjusted result and the net debt reduction of the Regulated Real Estate Company during the current year, notwithstanding Article 617 of the Companies Code (Code des Sociétés);
- profit is subject to corporate income tax (“ISOC”) – on reduced taxable basis of non-deductible expenses and exceptional or gratuitous advantages or unjustified remunerations and commissions;
- As from 1 January 2016, the withholding tax on dividends distributed by the company is levied at 27% save for exemptions provided by law (and the Royal Decree executing the Income Tax Code) or by double tax treaties.
Those companies that apply to the FSMA for a change of status as a RREC or which merge with a RREC are subject to a tax (exit-tax1), which is treated as a liquidation tax to be paid on the net unrealised gains and on tax-free reserves at the rate of 16.5%, plus the 3% supplementary crisis contribution, totalling 16.995%.
1 The method for calculating the exit tax is described in the administrative circular of 23 December 2004 (Reference: AFER No. 43/2004).