Investment funds with direct real estate holdings -
civil law complicates tax compliance

Under civil law, an investment fund with direct real estate ownership cannot be entered in the land register as the owner of a property. The fund management company is entered in the land register as the owner under civil law. The economic affiliation to an investment fund with direct real estate ownership is merely noted in the land register. For the determination of the tax liability, this repeatedly leads to confusion for the tax offices.

Recently, the Federal Supreme Court and the literature have increasingly dealt with the issue of civil law vs. economic approach for the tax liability of investment funds with direct real estate ownership.

Unfortunately, the impact of the civil law approach on coordination from a tax compliance perspective cannot be ignored.

For many tax offices, the tax liability is linked to the land register entry. For example, fund management companies receive a joint real estate tax invoice for several different funds they manage. These must then in turn be allocated to the various funds or their properties. From an economic point of view, it is not the fund management that bears the tax burden, but the fund itself.

Also the contact person can only be deposited with many tax offices per fund management and not per fund. Outsourcing tax compliance activities to third parties thus requires enormous coordination, especially in the case of refunds by the tax offices.

In addition, the different handling of investment funds with direct real estate holdings per canton and then also per municipality is striking. Consequently, from the point of view of investment funds with direct real estate ownership, an improvement or standardization of the process within the cantons would clearly be desirable. Simply providing the correct contact person for each property would simplify matters. After consultation with various tax offices, the administration would also like to have this information recorded, but it is currently not possible from a systems point of view.

In view of the increasing number of owners through investment funds with direct real estate ownership, a change in the civil law conditions for a real estate investment fund could also be considered