In taxing times

The Eurobuild Awards is Christmas for all those involved in the real estate sector. A jury consisting of over two hundred people will decide who the best of the year has been in development, construction and investment, and will give their verdicts on the eve of St Nicholas’ Day. The winners of the Eurobuild Awards include not only those who have directly created new facilities. We also recognise those who support the investment processes. In this, the fourth time the Awards have been held, a jury consisting of twenty or so people will decide upon the best companies in the Tax & Financial Consultancy of the Year category once again.

This we can be sure of
According to the old saying, we can only ever be sure of two things in life: death and taxes. Because we would not wish the first of these on anyone, let’s focus instead on taxes, which play a huge role in the investment process. “The Tax & Financial Consulting category of the Eurobuild Awards competition utilises the immense knowledge and experience of the many experts on the jury when it comes to tax, economic and accounting solutions for the commercial real estate industry, particularly in the transaction field,” says TPA Horwath Polska managing partner Wojciech Sztuba. According to him: “Office buildings, shopping centres, hotels and logistics parks, which people are very familiar with, change hands more often than you might expect. The transactions concern either the properties directly or SPV companies or larger capital structures. The professional conduct of such a transaction necessarily involves the management of related risks and administrative responsibilities for both parties, as well as the possibilities of tax optimisation or some additional profits. Despite the fact that the provisions of the law change quite often, Poland still offers unique possibilities in this field.” The properties that have recently changed owners with the help of TPA Horwath Polska’s experts include: Manufaktura in Łódź, and in Warsaw the Intercontinental hotel, Senator, IBC I and II, Marynarska Business Park and the Twarda Tower office building. “Tax and financial consultancies play a significant role in planning effective tax structures, supporting the ongoing operations of real estate companies and in real estate deals as consultants and due diligence agents. Each case of tax and financial consultancies influencing companies’ revenues – as with any other service – should be calculated individually. However, logically these should be amounts that justify involving consultants in the first place. In my opinion, such consultancy is crucial for the proper structuring of real estate purchase and sale transactions,” says Agnieszka Popko, a board member of ECE Projektmanagement Polska. Such companies are typically and widely involved in any investment transaction. “In most investment deals they prepare the applications for binding VAT tax interpretations and fees on civil law transactions to reduce the buyer’s risks. Considerably more involvement from tax and financial consultants is required in share deals. Tax and financial analyses of entire companies are necessary for these, including income tax, VAT and any potential tax risks involved in carrying out business operations and income tax optimisation,” adds Monika Rajska-Wolińska, a partner of Colliers International and the managing director of the company in Poland.

This where the money is buried
More than EUR 2 bln of transactions were closed on the Polish market in the first three quarters of 2013. Properties that changed hands included Silesia City Center (over EUR 400 mln) and Galeria Dominikańska (app. EUR 152 mln), and the Mokotów Nova (EUR 121 mln) and Aquarius Business House (EUR 42 mln) office buildings. “Professional consultancy is necessary at all stages of property transactions. The tax aspects of these transactions have a particularly significant impact on the profitability and flow of the operation. The necessity for a professional tax analysis to calculate the scope and scale of VAT could serve as one example. Factoring in the correct percentage rate or working out an exemption often requires legal analyses, not only in terms of the tax law but also civil law and other related legal areas. Only specialised consultants have the relevant knowledge for the accurate tax classification of the transaction. The role of financial consultants also cannot be underestimated. The structure of transaction funding and the multitude of financial instruments and solutions which could be applied add force to the argument for using the services of a professional financial consultancy. Such services help to increase not only the income from a transaction but also the security and certainty of it being finalised in the first place. Errors made in the course of a transaction could have negative effects in terms of miscalculated taxation, which could lead to financial penalties, a reduced profit margin or even incur a loss on the transaction. Financial consultancy can make it easier to raise capital at lower costs, resulting in benefits in the form of higher profits,” says Jarosław Jankowski, the president of the board of Waryński.

Catchword: optimisation
Tax and financial consultancy is also of key significance and is necessary in share deals as well as for atypical investment structures. “The broadest scope of services is rendered by companies in share deals. On the one hand, they make it possible to identify and eliminate tax risks for the company that is the property owner; on the other, the parties can prepare appropriate structures that optimise the income tax paid, which could have very measurable financial results. Apart from such optimisation of the tax burden, this kind of consultancy increases the security of a transaction, particularly for the buyer. It is difficult to measure this precisely, but it increases the security of turnover, which is so important for the real estate market,” says Monika Rajska-Wolińska of Colliers International. “Taxes and financial issues play an extremely important role on the real estate market. This is precisely why we are paying tribute to the best company in this category once again. I think that the Eurobuild Awards prize contributes to making such services more popular on the real estate market, thanks to which it has become more efficient and professional,” says Katarzyna Matejuk, the director of the Eurobuild Awards. Last year the best company in the Tax & Financial Consultancy of the Year Poland category was KPMG, while in 2011 it was PwC. Who will win this year?