Public Regulated Real Estate Company (“public RREC”)
(Openbare gereglementeerde vastgoedvennootschap of Openbare GVV)
Public RREC under Belgian law
A “public RREC” is subject to regulations applicable to regulated real estate companies at any time (Law of 12 May 2014 concerning regulated real estate companies) and the Royal Decree with respect to RRECs (Royal Decree of 13 July 2014 with respect to regulated real estate companies)
These are the main characteristics of a public RREC:
- A public RREC is an operating company whose purpose is to make real estate available to users directly or indirectly, and that is managed in the interest of the company, i.e. in the interest of all the stakeholders involved in that company.
- It is listed, under control of the Financial Services and Markets Authorities and must adhere to very strict rules regarding conflicts of interest.
- In addition to some restrictions and obligations imposed by the Belgian Company Code, the “RREC legislation” and the Royal Decree on regulated real estate companies, the RREC also complies with the guidelines of the Belgian Corporate Governance code.
- The Royal Decree on regulated real estate companies stipulates that the financial statements must be prepared according to the international reference IAS/IFRS.
- A RREC may lease out as its principal activity one or more properties with purchase option when those properties are intended for purposes of general interest, including social housing.
- The investment properties that are accounted for as assets in accordance with IAS 40, must be valued by an independent expert in accordance with the “RREC legislation”.
- The RREC diversifies its investment properties so that the investment risks are spread properly. In principle, each building/real estate complex may not represent more than 20% of total assets.
- The RREC does not perform any depreciations on its real estate portfolio.
- It is prohibited for the RREC to act as a property developer (except in case of occasional transactions).
- The RECC’s debt ratio may at no time exceed 65% of its assets. If the RECC exceeds a debt ratio of 50%, it is required to prepare a financial plan.
- As a return on capital, the RREC must pay a minimum amount, calculated in accordance with the RREC Decree.
- The RREC is subject to corporate tax, against normal rate, though the basis for this is very limited. It consists of the sum of the received abnormal or benevolent benefits, the non-deductible expenses and costs. It can be subject to the special assessment on secret commissions. In accordance with the Inheritance Tax Code, the RREC, as being a collective investment undertaking, is subject to the annual subscription fee based on the total net amounts outstanding in Belgium as at 31 December of the preceding year. The dividends distributed by a RREC are subject to 27% withholding tax as from 1 January 2016.