Most of the value in a real asset investment is created during the hold and lost or protected at the exit. An asset that has been managed well and sold badly returns less than an asset managed adequately and sold well, and the difference is almost entirely preparation. Selling is a process that begins twelve months before the first buyer is approached, not on the day the agent is appointed.
Share deal or asset deal
The first structural question is whether the buyer acquires the property itself or the shares in the company that owns it. The answer moves real money, principally through transfer taxes, and the analysis differs by country. In the Netherlands the interaction between real estate transfer tax and share transactions is specific and has been tightened, as we set out in our note on Dutch real estate transfer tax and the share deal question. In Spain, anti-avoidance rules target share transfers whose substance is a transfer of real estate.
The point for a seller is that the structure has to be capable of a share sale before the sale starts. A company with a clean history, no legacy liabilities and a single asset is saleable by shares; a company that has traded for fifteen years is not, and turning it into one takes time.
Article 14 of the Wet op belastingen van rechtsverkeer sets Dutch transfer tax at 10.4 per cent generally, at 8 per cent for a dwelling or for shares relating to one, and at 2 per cent for an individual acquiring a home as a main residence and in a few narrower cases. The buyer pays it and prices it into the bid, so the seller bears it economically.
On the seller’s side, article 13 of the Wet op de vennootschapsbelasting 1969 keeps the benefits of a participation out of taxable profit, and a participation starts at 5 per cent of the paid-up nominal capital. Below that line the gain is ordinary profit, taxed under article 22 at 19 per cent up to 200,000 euro and 25.8 per cent above, as our note on the Dutch participation exemption explains.
Real estate is widely assumed to be portfolio investment and therefore outside the exemption. Paragraph 9 does exclude a participation held as an investment, but paragraph 12 takes investments consisting of immovable property out of the definition of free investments, unless the holder is a fiscal or an exempt investment institution. What removes the exemption is falling below 5 per cent.
When the treaty stops protecting a share sale
A share sale is assumed taxable only where the seller is resident. The immovable property company clause in article 13(4) of the OECD Model Tax Convention removes that assumption and lets the state where the property lies tax the gain on the shares. Article 9(4) of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS carries the test the treaty network now runs on: that state may tax where the shares derived more than 50 per cent of their value, directly or indirectly, from immovable property situated there at any time during the 365 days preceding the alienation. It reaches comparable interests in a partnership or a trust, so neither a pre-sale dilution nor a non-corporate wrapper escapes it.
Thresholds are not uniform, and reading the model instead of the treaty is how sellers are caught. Article 13(2) of the treaty between the Netherlands and Germany lets the property state tax gains on unlisted shares deriving more than 75 per cent of their value, directly or indirectly, from immovable property there at any time in the preceding 365 days, and it excludes property in which the company or the holders run their own business. The same paragraph then hands the right back, taxing the gain only in the seller’s state where the seller held under 50 per cent before the first disposal, or where it arises from a reorganisation, merger, division or similar transaction.
Collection is not left to good faith. Article 13.1.i).3 of the Spanish non-resident income tax law treats as Spanish source the gain on interests in an entity, resident or not, whose assets are mainly Spanish real estate. Article 25 taxes it at 19 per cent absent a permanent establishment, and on a direct sale makes the buyer withhold 3 per cent on account.
Preparing the file a buyer will actually diligence
Buyers diligence the same things every time: title and registry position, leases and their compliance, the technical condition of the building, licences and planning, litigation, tax history, and the corporate chain. A seller who assembles all of that before going to market controls the process. A seller who assembles it in response to buyer requests gives the buyer twelve opportunities to reprice.
Every unanswered question in a data room is an invitation to reduce the price. The cheapest work in a sale is the work done before anyone is looking.
Part of the file is not discretionary. Article 20 of the recast Energy Performance of Buildings Directive, Directive (EU) 2024/1275, requires an energy performance certificate when a building is sold, shown to the buyer and handed over. A weak rating carries a refurbishment cost the lender takes off its valuation.
Counsel tests the corporate chain as hard as the building, reconstructing the share history and the filings never made, as our note on legal due diligence before you buy describes. The lender reconciles the leases to the rent roll and the rent roll to the bank statements, because a tenant paying late reduces the income it underwrites.
Fixing what is fixable, first
Twelve months out, the value-protecting tasks are usually known: an unregistered extension, a lease with an unexercised break, a tenant in arrears, a licence never formalized, a charge repaid but never cancelled. Each of these will be found and each will cost more in a price chip than in a fee to resolve. This is where the pre-sale year is genuinely spent.
Sequence matters as much as effort. Registry and licensing corrections run on timetables that no fee accelerates, so they start first. Lease work follows, because a tenant asked to regularise a position will ask what it is worth, and the answer is cheaper before the market knows.
What is left unfixed is not forgiven. The buyer converts the defect into money and keeps it, as a retention, an escrow held for years, or a price reduction.
Choosing the buyer universe
Who buys this asset determines how it should be presented. An institutional core buyer wants durable income, long leases and strong covenants, and will pay for certainty. A value-add buyer wants the gap and will pay for the possibility. A local private buyer may pay more than either for reasons that are not purely financial. Running a process aimed at the wrong universe wastes the market’s attention, and a marketed asset that fails to sell is materially harder to sell six months later.
The universe also sets the documentation burden. An institutional buyer works to a committee date and cannot recommend an asset on partial information, so it asks for the technical and environmental file, the leases with every side letter, the tax history, and the ownership chain.
The corporate file therefore has to match the property file, the point behind our note on holding European real estate through a Dutch holding structure: what the buyer underwrites is the company, not the bricks.
Timing against the plan, not the mood
The business plan should have said when the asset would be sold and why. Selling materially earlier usually means abandoning value that was the reason for buying; selling materially later usually means the plan failed and the sale is now driven by a facility maturity rather than by the asset. Where financing is involved, the maturity has to allow for the real length of a sale process, which is the discipline set out in our note on exit and refinance.
The real calendar is longer than the marketing calendar. Preparation takes the better part of a year, marketing and bids months, confirmatory diligence more, and completion waits on whatever consent is slowest.
A forced timetable is readable from outside. Security is published, maturities are visible on the register, and a bidder who knows when the seller has to complete bids accordingly. Extending early is worth more than the margin it costs.
Moving the structure before a sale
A seller who moves the holding company before the exit triggers a taxable event by design. Article 5 of the Anti-Tax Avoidance Directive, Directive (EU) 2016/1164, makes a member state tax the market value of the transferred assets less their value for tax purposes where a taxpayer moves its residence and that state loses the right to tax them.
The Netherlands applies that in the corporate income tax act itself. Article 15c deems the assets whose income would leave the Dutch base to have been disposed of at their value in economic traffic immediately before residence ends, and article 15d sweeps into the final year whatever was not already taken.
The deferral is real but narrow. The directive allows payment in five annual instalments within the Union and the European Economic Area, and article 25b of the Invorderingswet 1990 makes them five equal instalments, the first due one month after the assessment. Article 5(4) ends the deferral once the assets are sold, so migrating shortly before a disposal buys nothing: the charge falls due at completion, on a valuation the authority compares with the price achieved.
What the seller keeps
Sales are agreed on price and completed on warranties. What the seller warrants, for how long, subject to what caps and what disclosure, is where the last of the value is decided. A seller who has prepared properly discloses fully and warrants narrowly, because everything material is already in the data room. A seller who has not, warrants broadly to compensate for what the buyer could not verify, and carries that exposure for years after the money has been distributed.
Caps, baskets, de minimis thresholds and survival periods decide what a warranty is worth: a broad warranty under a tight cap is a different instrument from a narrow one that is uncapped. Warranty and indemnity cover is underwritten on the diligence file.
In a share sale the tax covenant lasts longest, because the buyer takes the company with its history and asks the seller to stand behind pre-completion tax until the assessment periods close. Where a source state can still tax an earlier disposal under an immovable property company clause, that promise outlives the deal by years, and the retention is sized against it.
Montclare manages and structures European real assets for institutional and private investors, from acquisition through to exit. Our services are set out on our services page.
This article is informational and does not constitute investment, tax or legal advice. Asset management and investment advice are regulated activities and the treatment of any transaction depends on its facts. Each engagement is subject to scope and applicable regulation.