REITs In Europe: Fragmentation, EU Law And Pillar Two

REITs face persistent tax challenges when investing cross-border within the EU, as fragmented national regimes often undermine the intended single level of taxation. Drawing on recent ECJ case law and the EU Pillar Two Directive, this article, published in Finance and Capital Markets (IBFD), outlines key gaps in the current framework and their practical impact.

The article also proposes a coordinated EU approach built on four pillars: a guaranteed level of source-state taxation, a residence-state withholding tax exemption, consistent treatment of direct and indirect investments, and a Pillar Two framework better aligned with REIT structures.

The fragmentation problem

Member States retain full discretion in designing REIT regimes. Distribution obligations, the scope of exempt income, eligible asset definitions and investor-base rules differ considerably across the EU. As a result, the « single level of taxation » that REIT regimes are intended to achieve domestically often breaks