THE IMPACT OF TAX AND LEGAL FACTORS ON THE FUNCTIONING OF REITS IN EUROPE

Abstract

Real Estate Investment Trusts (REITs) are investment funds that allow the transfer of capital between financial markets and real estate markets. Their main feature is the use of tax benefits that rely on the absence, or a significant reduction of corporate tax. This paper aims to analyse the impact of tax and legal factors on the functioning of REITs in European countries. In the first part of the paper, the origins of REITs and the principles of operation of such funds in European countries are presented. There are two schemes according to which REITs function, which are defined as an American and a European model. The main difference between these models is related to the level of restrictions contained in the national regulations. The European legislative provisions are intended to protect the interests of investors and their funds. Consequently, REITs in Europe are not free to develop their investment strategies and fully exploit the potential of local and regional real estate markets.