ELTIF 2.0 – Tax-free investment in real estate?

Legal Eubdate
9 January 2024

Belgium already has a number of vehicles specifically aimed at real estate investments that can benefit from a special tax regime: regulated real estate companies (BE-REITs), real estate investment funds (“bevaks”/“sicafis” – the zombie status which is not discussed further in this contribution) and specialised real estate investment funds (BE-REIFs – “GVBF’s”/“FIIS”). With the recent relaxing of the ELTIF Regulation (Regulation (EU) 2023/606), the European legislator is trying to revive the regime of European Long Term Investment Funds (ELTIFs). Combined with the tax framework adopted by the Belgian legislator early 2022, this may offer new opportunities for investors to invest in a “tax-transparent” manner in Belgium. The relaxed rules will take effect on 10 January 2024.


The ELTIF regime grants a special authorisation to fixed-term funds that focus on long-term investments. An ELTIF is an alternative investment fund (AIF) managed by an EU manager. This is an important difference from a REIT, which is a commercially operational real estate company. To be authorised as an ELTIF, the fund must appoint an authorised alternative investment fund manager (AIFM) or obtain an AIFM authorisation itself (the AIFM being subject to the relatively strict fund regulation (AIFMD)) in addition to its own ELTIF authorisation. Once the ELTIF authorisation is obtained, specific rules apply to the fund regarding eligible investments, diversification and portfolio composition, debt ratio restrictions and marketing to retail investors and professional investors.

Main features

Tax transparency

ELTIFs are subject to the same derogating tax regime as BE-REITs and BE-REIFs, which pay corporate income tax only on a very limited taxable amount (article 185bis ITC92). Rental income and capital gains on immovable property are not taxable.

Distinction between retail investors and professional investors

The new ELTIF regulations make a clear distinction between ELTIFs that are marketed exclusively to professional investors and ELTIFs that are also marketed to retail investors. With regard to professional investors, more lenient rules apply.

The fact that natural persons may also invest in an ELTIF is an important difference from the BE-REIF. In a BE-REIT this was already possible.

Eligible investments

The assets in which ELTIFs may invest are divided into two categories: “eligible investments” on the one hand (henceforth at least 55% of the total portfolio) and certain liquid assets on the other hand (maximum 45% of the total portfolio). The expansion of eligible investments and the relaxing of investment thresholds offer a greater degree of flexibility in the composition of an ELTIF’s portfolio: ELTIFs can create a much broader portfolio than, for example, BE-REITs and BE-REIFs (not restricted to real estate).

New diversification and concentration thresholds

For ELTIFs marketed to retail investors, diversification and concentration thresholds continue to apply (these are removed for ELTIFs exclusively marketed to professional investors), but are relaxed considerably: in general, an investment in a single asset may not represent more than 20% of an ELTIF’s committed capital (diversification), and an ELTIF may not hold more than 30% of the shares in a particular fund or more than 10% in the same liquid assets (concentration). Alternative thresholds apply to certain specific assets. The BE-REIT status also entails diversification obligations, while BE‑REIFs are not subject to any diversification obligation.

Debt ratio limitation

The thresholds for borrowing cash are also raised. ELTIFs that are marketed to retail investors can now borrow up to 50% of the net asset value of the ELTIF, and ELTIFs marketed solely to professional investors can go as high as 100%. BE-REITs are subject to a statutory 65% debt ratio limitation and rules on the granting of collateral, while BE-REIFs are not subject to any debt ratio limitation.

No 80% pay-out obligation

A key difference from other tax-transparent property regimes is that the ELTIF does not have to comply with an 80% pay-out obligation.

ELTIFs and real estate

Real estate is also included in the eligible investments of an ELTIF. Whereas the strict diversification requirements and the minimum value of EUR 10,000,000 per asset under the initial ELTIF Regulation made the regime unsuitable for (smaller) real estate investors, the relaxing of the rules ensures that real estate vehicles will also be able to use the ELTIF regime in the future.

All forms of real estate appear to be eligible as an ELTIF investment as they can contribute to the objective of smart, sustainable and inclusive growth. Although the “hard” requirement of smart, sustainable and inclusive growth has been removed from the definition of real assets (which includes real estate), this remains the overall objective of the ELTIF status as expressed in (the unchanged) Article 1 of the ELTIF Regulation. Moreover, an ELTIF should consider its investments as long-term investments, so buy-and-sell strategies, for example, will not be self-evident. However, this does not alter the fact that, in our view, an ELTIF should be able to respond to market opportunities, as long as it does generally intend to hold the investments for the long term.

An opportunity for retail investors?

Previously, natural persons could only invest in tax-transparent real estate structures through a BE‑REIT. The ELTIF regime now offers the possibility to do so in a non-listed context as well. For natural persons, the tax burden is then limited to 30% withholding tax on dividend payments by the ELTIF.

In certain circumstances, the ELTIF even offers opportunities to invest in real estate completely tax-free. If the ELTIF were to be liquidated (per hypothesis, an ELTIF of the capitalisation type) after a sufficiently long investment period, not only are the capital gains on the real estate tax-free, but the profits (liquidation bonus) can also be distributed to the natural persons without withholding tax.

Entry into force and transitional regime

The new ELTIF rules will apply as from 10 January 2024 for ELTIFs established on or after that date. ELTIFs already established prior to 10 January 2024 will have until 11 January 2029 to conform to the new rules.