Branded Residences: A revolution in Real Estate investment and taxation

19th May 2024

Unveiling 'Branded Residences': Luxury living, exclusivity, and tax insights

Branded Residences: A revolution in Real Estate investment and taxation


Branded residences represent an innovative trend in real estate, where properties associated with renowned brands in sectors such as hospitality, fashion or gastronomy offer exclusive living experiences with high added value. 


These brands bring their reputation, design and exclusive services to create unique spaces that attract investors in search of uniqueness and profitability. Owners enjoy a wide range of services and amenities, from concierge services to access to sports facilities and fine dining restaurants.


The Rise of Branded Residences: Attractive Luxury Offerings Attracting Global Investors


The branded residences market has experienced remarkable growth in recent years, with flagship projects such as the Four Seasons Hotel in Seasons Canalejas, Madrid, or the properties managed by Abama in Tenerife, attracting investors from around the world with their luxurious offerings.


 Renowned brands such as Fendi or Karl Lagerfield have also ventured into this market, offering exclusive properties that combine luxury and lifestyle.


Tax Implications of Prestige Properties: Keys to an Informed Investment


However, beyond the aesthetic appeal and exclusivity of these properties, it is important to consider the tax implications. In this regard, the tax structure may vary depending on whether the real estate units are sold to individuals or managed under lease agreements with the associated brand.


For example, in the case of first transfers for VAT purposes, investors can assert input and output VAT deducted from the construction process. Subsequently, owners can enter into leasing contracts with the associated brand, which allows them to enjoy VAT neutrality in leasing transactions.


Tax Differences in Independent Residential Projects and Rental Strategies


On the other hand, 'stand alone residence' projects, associated with fashion brands such as Karl Lagerfield or Fendi, may have different tax implications. In these cases, investors who rent out their properties for unused periods of time may carry out operations subject to and exempt from VAT, which affects the tax management of these properties.


In addition, for developers considering 'build to rent' projects associated with brands, it is crucial to understand the tax and management implications of this decision. The management of input VAT during the construction process and the tax structure of the lease agreements are key issues to consider.


Tax Considerations for Non-Resident Investors and Conclusions on 'Branded Residences'.


Finally, in the context of non-resident investors, it is important to consider the tax implications of purchasing real estate units through non-resident companies. The recent tax consultation (V2537) provides clarity on these issues, but expert advice is essential to avoid unpleasant surprises.


In summary, branded residences represent an exciting real estate investment opportunity, but it is crucial to understand the tax and legal implications involved. With careful analysis and the right advice, investors can make the most of these innovative opportunities in the real estate market.


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