CMS guide to hotel industry issues: stamp duty saving for real estate transfers

United Kingdom

The rates of duty on transfers of hotels within Europe vary considerably. The attitude of the authorities and taxpayers in the various jurisdictions within Europe to the payment, or rather avoidance of stamp duty, also varies considerably. In the UK the quadrupling of the rate of duty during the ‘90s led to a wholesale avoidance industry and eventually to the demise of stamp duty and its replacement with stamp duty land tax – a tax on transactions rather than documents.

The purpose of this guide is to outline various possible methods for avoiding or mitigating stamp duty or real estate transfer tax across Europe looking in particular at the possibility of selling shares in hotel owning companies whether those companies are local or foreign companies. The high level of real estate duties across Europe should certainly be sufficient to lead multinational hotel groups to consider structuring their companies and real estate assets so as to minimise the impact of real estate duties on an eventual sale of whole or part of the group. Even though such minimisation may not be of direct benefit to the vendor it is quite likely that it will lead to the achievement of a higher sale price.