Chapter 4
Scaling Social Value

What are the benefits of non-financial investments for various stakeholders? Why is social value such an integral part of Environmental, Social, and Corporate Governance (ESG)? What are the best models to build social value for our new era? What do we gain (and lose) when we rethink traditional investment practices? This chapter revolves around investment –– with a particular focus on how capital can be leveraged to drive profit, while catering to both young people and the planet at large.

Towards ‘Triple A’ Rating for The Rental Housing Market

Djordy Seelmann

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How Sustainable Processes Can Help European Universities Prepare for an Influx of International Students

Sean Lowry

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Upgrade your ESG levels with technology

Kristin Pater

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Scaling Social Value

Lisette van Doorn

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Legalities Reports

1. What is the general status of student housing in your country?

Is there a shortage for student housing residentials? Are developers encouraged to develop student housing constructions? What is the position of the public authorities / municipalities towards student housing? Do many students live in PBSA’s (Purpose Built Student Accommodation)or mostly in private buildings/apartments (e.g. of their parents).

In  Austria,  we have experienced quite  a  boom in student  housing,  especially in Vienna.  The number of student housing projects is  still and constantly growing. The projects are mostly executed by developers who deal solely with student housing, however, there are also developers who execute various real estate projects, including student housing.

Most existing providers of student homes and accommodations are either non-profit associations or Church-owned. Some private student accommodation providers include The Student Hotel and Milestone.

There are currently many projects being developed. In Vienna there are about 200,000 students and thus, the demand in student  accommodation is trackable.  As far as we know, there is currently no formal or official program which would encourage developers to  commence PBSA projects. However,  some  universities  or  local authorities support PBSA initiatives, on a case by case basis and subject to the respective program and project

2. What is the legal framework for student lease contracts in your country? 

Is there special lease law for student tenants? Are there rent control regulations applicable to student housing? Are the student leases contracts flexible? Are the student lease contracts rather landlord or tenant friendly?

Depending on whether and, if so, to what extent the Austrian Tenancy Act (Mietrechtsgesetz) applies to a specific building, landlord and tenants have different rights and obligations with a rather strong emphasis on tenant-protection, such as rules on rent control and/or protection against termination/eviction.

The legal framework will depend on whether a lease is fully, partially or not at all subject to the Austrian Tenancy Act as different legal consequences are attached to such categorization in each case. Whether and to what extent the Austrian Tenancy Act applies is determined by various factors, such as: age and configuration of the building, date of the lease, agreed purpose of the lease etc. In general, the Austrian Tenancy Act regulates the lease of apartments, parts of apartments, business premises of all types, of land leased together with apartments or business premises, and for business parks. The mandatory provisions of the Austrian Tenancy Act reduce the freedom to contract significantly in favor of the tenant. They protect tenants e.g. with far-reaching limitations of the landlord`s right to terminate the contract and by stipulating maximum rent, with mandatory provisions concerning utility and service charges as well as maintenance. If the Austrian Tenancy Act is fully applicable to the lease, the tenant, for example, is protected by strict limits of the amount of rent. Where it is partially applicable, essentially "only" the termination restrictions apply. In case of lease agreements to which the Austrian Tenancy Act is not applicable at all, no such restrictions apply.

Furthermore, the Austrian Tenancy Act also contains special provisions with regard to the term of a lease. Residential leases with fixed term falling under the (partial or full) scope of the Austrian Tenancy Act have to be for at least a three years period and can be terminated by the tenant after one year, provided that three months' notice was given not later than at the last day of the calendar month at the latest.  These limitations (i.e., both the mandatory minimum lease term and the tenants right to terminate a fixed-term lease after one year), however, do not apply to commercial leases.

Having said that, the Austrian Tenancy Act provides for a significant exception with respect to the letting of serviced apartments operated similarly to a hotel (Beherbergungsunternehmen) or a residential unit designed for a specific sort of tenants (Wohnheim – e.g., for the elderly, for apprentices, young workers, pupils and students). These serviced or designated apartment buildings are thus excluded from the scope of the Austrian Tenancy Act.

In Austria, leases in buildings designated to provide accommodation to students studying in higher education institutions – "students" in a broader sense – generally falls under the (mandatory) Austrian Student Residence Act (Studentenheimgesetz). According to the wording of the Austrian Student Residence Act it applies to student homes provided for students by student home operators. Any entity providing student homes for students qualifies as "student home operator".

The Austrian Student Residence Act provides, inter alia, for the following restrictions:

  • Contractual Period: Austrian Student Residence Act provides for a contractual ("usage") period of one academic year. First semester students are entitled to a contractual period of up to two academic years upon their express demand. Each contract is to be extended for one year at a time for the average duration of studies, if students prove their social neediness and successful continuation of their studies.
  • Hotel guests: Short-term guest contracts (Gastvertrag) can be concluded with anybody (not limited to students) in case of free capacity. However, such contracts must be terminated upon expiry of the academic year.
  • Deposit: The deposit is capped at two room rates.
  • Some provisions of the Austrian Civil Code cannot be contractually excluded nor amended to the disadvantage of the student (e.g., the provision that the landlord has to keep the leased object in useable condition and that in case of an unusable object the tenant is no longer obliged to pay rent).

3. In which manner is student housing regulated from a zoning and planning perspective in your country?

Are there certain restrictions from a zoning and planning perspective for student housing in your country? Is it possible to develop student housing or use residences as a student house if the area is marked as a residential area under the zoning plan? Does zoning plans include regulations on rent levels which may have an effect on student housing? Is it possible to deviate from a zoning plan so that student housing can be developed.

In Austria, zoning and planning falls within the competence of the provinces. Since there are nine separate acts (Raumordnungsgesetz; Bauordnung) regulating the applicable provisions for the respective provinces, zoning and planning restrictions may differ depending on the location of a building project. Moreover, municipalities set out more detailed zoning and planning provisions (Flächenwidmungsplan; Bebauungsplan) within their competencies and may go both ways, either determining plots for student housing exclusively or as an alternative use, or zone plots for any other purpose that would exclude building a student home. Furthermore, municipalities can restrict any construction for year long periods, which they would do if they intend a more general amendment to city planning. Thus, we cannot provide a general statement on zoning and each project will need to verify that proper zoning is in place (or apply for an amendment). 

A deviation from a current zoning is only possible, if there is a legal exemption enabling the respective authority to deviate therefrom. Unless zoning clearly allows a student home, developers will depend on intensive consultation with the competent legislators/authorities and their support for certain projects.

4. Are there specific tax considerations to take into account for student housing in your country?

Which tax rules are relevant when engaging in student housing? For instance, what tax bases and rates apply for RETT and CIT? When financing investments, could one encounter (partial) non-deductibility of interest expenses? Are there any (specific) levies or benefits for developers and landlords engaged in student housing? What VAT consequences do student leases trigger? Are the prices of student housing or rents regulated? Are new tax rules expected that may affect student housing?

Acquisition

Asset deal

Upon direct acquisition of Austrian real estate, real estate transfer tax at a rate of 3.5% is triggered. The tax basis is the smaller of (i) the consideration paid and (ii) the property value. The property value shall reflect the fair market value of the real estate and may be calculated either by adding the value of the building(s) to the value of the land (according to a decree of the Austrian Minister of Finance) or by using the values stated in the most recent property price index published by Statistik Austria. If the fair market value is lower than the property value, the taxpayer may demonstrate this by submitting an opinion of a court-certified expert, which will lead to a lower tax burden.

In addition, upon registration of a change in ownership regarding Austrian real estate in the Austrian land register, a 1.1% court registration fee based on the fair market value of the property transferred is triggered.

The acquisition of real estate is exempt from VAT. However, the seller may opt for taxability, in which case VAT of 20% is triggered. This option is often exercised by sellers to secure input tax deductibility in connection with their own investments made.

Share deal

Real estate transfer tax is triggered if (i) at least 95% of the shares in a corporation holding Austrian real estate are transferred or unified in the hands of one shareholder or of shareholding companies belonging to a group of companies pursuant to the Austrian Corporate Income Tax Act or (ii) at least 95% of the interest in a partnership holding Austrian real estate is transferred or unified in the hands of one partner or (ii) at least 95% percent of the interest in a partnership holding Austrian real estate is transferred to new partners within a time period of five years. Shares in a corporation and interests in a partnership that are held by a nominee are attributed to the principal. In this case, real estate transfer tax amounts to 0.5% of the property value of the property value. 

The transfer of shares is exempt from VAT.

Operating phase

VAT

The letting of real estate to students is generally subject to 10% VAT. 

Corporate income tax

Assuming that the entity engaged in student housing is a corporation, it is generally subject to corporate income tax at a rate of 25%.

A corporation's tax base is the profit as shown in its financial statements. In addition, where mandatory tax provisions deviate from financial accounting rules, adjustments have to be made. As a general rule, expenses incurred in acquiring, securing and maintaining taxable income are tax-deductible. 

Buildings are generally depreciated at a rate of 2.5% p.a. If the property is used for residential property letting, the depreciation rate amounts to 1.5% p.a. However, it is argued that in case of short term letting such as in connection with hotels and student housing, the rate of 2.5% p.a. applies. As part of a COVID-19 pandemic relief package, for buildings acquired after 30 June 2020, an accelerated form of straight-line depreciation can be used. In the first year in which an asset is subject to depreciation, the deductible depreciation amount can be increased to thrice, and in the following year to twice the respective statutory depreciation rate (mentioned above). Land is not subject to ordinary depreciation. 

While interest payments are generally deductible, there are a few important exceptions:

  • No deduction is possible for interest in connection with debt which served the acquisition of shares that were, directly or indirectly, purchased from a group company or from a controlling shareholder. 
  • No deduction is possible for interest paid to a corporation if the payor and recipient are part of the same group or have the same controlling shareholder and if the interest or royalties paid are subject to no/low taxation at the level of the recipient (or the beneficial owner, if different).
  • In line with the EU Anti-Tax Avoidance Directive (ATAD), the Austrian legislator implemented an interest limitation rule. Pursuant thereto, an interest surplus in a fiscal year is only deductible to the extent of 30% of the taxable EBITDA for that fiscal year. An interest surplus shall be deemed to exist to the extent that deductible interest expenses exceed taxable interest income in the fiscal year. Several exceptions apply. In particular, an interest surplus shall be deductible up to an amount of EUR 3 million per assessment period, i.e., excess interest up to this amount – irrespective of the amount of the EBITDA – shall be immediately deductible as an expense. 
  • While there are no statutory thin-capitalization rules in Austria, the Austrian Supreme Administrative Court has established certain broad and rather liberal guidelines that are used to determine whether the equity funding in a specific case is adequate for the purposes of taxation. If the equity is inadequate, a portion of the indebtedness to shareholders may be regarded as the equivalent of shareholders' equity. Interest paid on such debt may not be deducted from the taxable income and may be subject to withholding tax. In practice, debt/equity ratios of 4:1 are not uncommon.

Payments between related parties are only recognized for tax purposes if they are based on written agreements that are worded clearly and unambiguously and comply with arm's length terms. The Austrian tax authorities generally follow the OECD's transfer pricing guidelines.

Tax losses can be carried forward indefinitely. However, in any given year, the utilization of such losses carried forward is normally limited to 75% of the income of the current year. A corporation's tax loss carry-forwards are forfeited upon an ownership change if there is a material change in its organizational (e.g., replacement of all directors of the corporation), economic (e.g., a new area of business is pursued by the corporation), and shareholder structure (e.g., the majority of shareholders of the corporation are replaced). Whether a substantial change in a corporation's shareholder structure has taken place has to be assessed from a formal perspective (rather than from an economic one). 

Withholding tax

Austria does not levy withholding tax on interest payments, unless the payor is a bank or the interest is paid under a bond.

Dividend payments effected by an Austrian corporation are generally subject to Austrian withholding tax at a flat rate of 27.5% (or 25% if the recipient is a corporation). Relief is possible under the Austrian provisions implementing the EU Parent Subsidiary Directive (meaning if the recipient is a qualifying EU company which has held a stake of at least 10% in the Austrian corporation for a minimum holding period of one year) or under applicable double taxation treaties. Relief at source is only possible if the recipient provides a certificate of residency to the payor. In case the recipient is a corporation, it additionally has to provide to the payor a declaration of substance, pursuant to which it is engaged in an active trade or business rather than in mere asset management, employs staff and has business premises.

Other taxes

Municipalities levy a recurrent real estate tax, which resembles a specific wealth tax on real estate. The tax basis is the tax value of the real estate. The tax rate depends on the type of real estate and is 1% at most. 

In connection with rental agreements, stamp duty is triggered at a rate of 1% (with the tax basis depending on the payments to be effected by the lessee and the terms of the agreement). However, a tax exemption applies to rental contracts concluded for living purposes.

Some municipalities levy "tourist tax". For example, Vienna imposes a city tax on persons taking non-residential overnight stays in an accommodation in the municipal district of Vienna. The tax amounts to 3.2% on the (adjusted) accommodation fee. However, persons staying in the accommodation for an uninterrupted period of more than three months as well as students studying in higher education institutions in Austria are exempted from the Viennese city tax.

Exit

Asset deal

The direct sale of Austrian real estate generally triggers corporate income tax at a rate of 25% on the difference between the sales price and the tax book value. 

Regarding VAT and real estate transfer tax, please see above. 

Share deal

Capital gains from the sale of shares in an Austrian company are generally subject to corporate income tax at a rate of 25% on the difference between the sales price and the tax book value. Relief may apply under applicable double taxation treaties.

Regarding VAT and real estate transfer tax, please see above.

5. Are there any other specific aspects in your country with respect to student housing? 

Are there any recent or expected future changes with respect to student housing law? Have there been rent reductions granted during the Covid-19 crisis to students?

Since the new Austrian Student Residence Act has only recently been amended and no further plans were announced by the government, we do not expect any further amendments in the near future. 

In Austria the commercial accommodation of (hotel) guests is a so-called regulated trade (reglementiertes Gastgewerbe) and, generally, for the operation of a hotel, a restaurant or other business in a student home, the owner will have to apply for a trade license for the regulated trade "accommodation of guests" or also "hospitality" according to the provisions of the Austrian Trade Code (Gewerbeordnung).

1. What is the general status of student housing in your country?

Is there a shortage for student housing residentials? Are developers encouraged to develop student housing constructions? What is the position of the public authorities / municipalities towards student housing? Do many students live in PBSA’s (Purpose Built Student Accommodation) or mostly in private buildings/apartments (e.g. of their parents).

Depending on the student city in Belgium, there is either a shortage or a (small) surplus of student rooms. The student cities of Ghent and Brussels are rather characterised by a shortage of student rooms, whereas Antwerp, Leuven, Namur and Liège are characterised by a stable supply, which tends to result in a surplus of student rooms rather than a shortage. A study by Stadim and Diggit in 2020 shows that in some cities, the structural quantitative and qualitative shortage is being eliminated by, among other things, the institutionalisation of the market through large real estate players setting up new construction projects which do meet the basic requirements with regard to comfort and fire safety. It is furthermore expected that the student population in Belgium will grow even further by approximately 30% by 2030. 

Today, the Belgian student real estate market is still mostly in the hands of private investors. In recent years, however, this market has also attracted the interest of national and international professional investors, which has resulted in a significant proportion of transactions in the student property market being attributable to developers, who often focus on the development of larger student complexes.

On the one hand, the government ensures that certain standards apply to student accommodation as to guarantee a basic quality, and on the other hand, it ensures that the traditional residential market is protected where necessary. Because of the saturation of the market for student rooms in, for example, Ghent and Brussels, we see students switching to the traditional residential market and wanting to rent a family home with several students.  This causes the rents for such family homes to be disproportionately inflated, as the financial burden of renting such a house can be better borne by several students (who come from different families) than by one family.

For what concerns the "Purpose Built Student Accomodations" (PBSA), the student accommodation is provided (i) by public actors such as the university itself or (ii) by institutional and private investors. It is important to emphasise that the student rooms cannot, in principle, be rented to non-students. However, in Ghent and Brussels we do see a tendency for students to start looking for accommodation on the traditional residential market and not on the PSBA market. This is in all likelihood caused by the prevailing shortage of student rooms there. As more investments are made by institutional investors in the Belgian student real estate market, supply on the PBSA side may increase, which in turn may release pressure on the traditional residential market.

2. What is the legal framework for student lease contracts in your country?

Is there special lease law for student tenants? Are there rent control regulations applicable to student housing? Are the student leases contracts flexible? Are the student lease contracts rather landlord or tenant friendly?

Since the entry into force of the Brussels Housing Rental Ordinance (“Brusselse Woninghuurordonnantie”), the Walloon Housing Rental Decree (“Waals Woninghuurdecreet”) and the Flemish Housing Rental Decree (“Vlaams Woninghuurdecreet”) we now have (some) specific provisions for student leases in Belgium. In Flanders and Wallonia, the rules are of mandatory law. This means that as soon as a lease falls within the scope of a student lease, the rules apply automatically and cannot, in principle, be deviated from. In Brussels however, the rules only apply if the owner and the student opt for the rules on student leases

Below is a brief overview of some of the most specific provisions for student leases per region:

Flanders

  • The student lease agreement must be in writing; 
  • The landlord has to agree to the transfer of the lease agreement or the subletting to a student of the premises if the original tenant is taking part in an exchange programme or an internship. The landlord can only oppose if he has good reasons for doing so; 
  • The lease agreement cannot be tacitly renewed; 
  • The lease agreement can be terminated without notice compensation if the student ends his studies, provided proof of the educational institution has been given. A notice period of two months must however be respected in any case; 
  • The annual property tax  cannot be charged to the lessee;
  • If the rental agreement lasts longer than one year, the rent shall be adjusted to the cost of living once a year on the anniversary of the entry into force of the rental agreement, unless such adjustment is expressly excluded; and
  • If the premises are leased to the same tenant, the basic rent shall not exceed the rent set in the initial lease. That rent may be adjusted proportionally following indexation, unless the normal rental value of the premises has meanwhile increased by at least 20% as a result of new circumstances or by 10% as a result of works on the premises. 

Brussels

  • The student lease agreement must be in writing; 
  • The maximum initial duration of a lease is 12 months; 
  • The lease agreement can be tacitly renewed for a new period of maximum 12 months or up to a period of 12 months if the initial duration of the lease was shorter; 
  • A specific label can be awarded to PBSA with a focus on the criteria proximity, facilities, connection possibilities, energy performance and acoustics of the student accommodation; and 
  • The annual property tax cannot be charged to the lessee; and 
  • There are no specific provisions on the rental price for student rooms

Wallonia

  • The student lease agreement must be in writing; 
  • The maximum initial duration of a lease is 12 months; 
  • The lease agreement can be tacitly renewed for a new period of maximum 12 months or up to a period of 12 months if the initial duration of the lease was shorter;
  • The lease agreement can be terminated without notice compensation if the student ends his studies, provided proof of the educational institution has been given. A notice period of two months must however be respected in any case (but not after 15 March).
  • There is a legal possibility to award quality labels to PBSA, but the Walloon decree/government has not yet made use of this possibility; 
  • The annual property tax cannot be charged to the lessee; and 
  • There are no specific provisions on the rental price for student rooms.

Based on the above, we can conclude that the student lease agreements are indeed rather flexible and tenant friendly. 

3. In which manner is student housing regulated from a zoning and planning perspective in your country?

Are there certain restrictions from a zoning and planning perspective for student housing in your country? Is it possible to develop student housing or use residences as a student house if the area is marked as a residential area under the zoning plan? Does zoning plans include regulations on rent levels which may have an effect on student housing? Is it possible to deviate from a zoning plan so that student housing can be developed.

When building or renovating student accommodations, the general rules with regard to zoning and planning must be met. In Belgium, this is regulated per Region and per municipality or city. For each region, you have an applicable city planning ordinance and housing code. The aforementioned regulations often focus more on, for example, fire safety for student rooms. The municipal or city regulations, such as in Ghent, focus extra on the protection of the traditional residential housing market in order to counteract exorbitant rent increases of normal family houses. 

As explained earlier, students in cities facing a shortage of PBSA accommodation also look for student houses on the traditional residential market. To ensure that students do not move even more to the traditional residential market, bans are also imposed on dividing family homes located in residential areas into different student rooms. In addition, some cities impose that student complexes must have a minimum size (e.g. 30 or 50 student rooms).

4. Are there specific tax considerations to take into account for student housing in your country?

Which tax rules are relevant when engaging in student housing? For instance, what tax bases and rates apply for RETT and CIT? When financing investments, could one encounter (partial) non-deductibility of interest expenses? Are there any (specific) levies or benefits for developers and landlords engaged in student housing? What VAT consequences do student leases trigger? Are the prices of student housing or rents regulated? Are new tax rules expected that may affect student housing?

Note that no specific tax regime applies to student housing. 

The purchase of residential property is subject to transfer tax of 10% in Flanders or 12.50% in Brussels and the Walloon Region, depending on the place where the property is located. In case the property qualifies as a new building for VAT purposes the purchase will or might be subject to 21% VAT instead. A building is considered to be new for VAT purposes (i) until 31 December of the second year following the year the building was first put to use or (ii) in case an old building has been thoroughly renovated. 

In this respect, it also needs to be mentioned that student accommodation leases are generally exempt from VAT. This means that VAT due on development costs will lead to an 21% additional burden. 

From an investor’s perspective, the tax treatment shall depend on whether the investment is owned via a fund structure (a REIT (retail fund) or a SREIF (institutional fund) or via an ordinary corporation. In a fund structure, investment income (incl. capital gain) are excluded from the taxable base and, in terms of interest deductibility, only the general “at arm”s length” principle applies. The fund shall however bear the annual property tax. The taxation is however switched to the investors via the compulsory yearly dividend distribution a fund has to make, such dividend distribution being subject to withholding tax. In case of an ordinary corporation, net income (incl. capital gain) is subject to 25% corporate income tax. Note that the annual property tax is a deductible expense for corporate income tax. From a financing perspective, and in addition to the “at arm”s length” principle, note that the company also need to consider (partial) non-deductibility of interest expenses when financing their investment; subject to de minimis and group provision, the deductible interest expenses are limited to 30% of the company’s EBITDA.

5. Are there any other specific aspects in your country with respect to student housing?

Are there any recent or expected future changes with respect to student housing law? Have there been rent reductions granted during the Covid-19 crisis to students?

During the Covid-19 crisis, landlords granted some incentives to the tenants of student leases. The Catholic University of Leuven allowed a 50% rent reduction for the periods in lockdown in 2020 (April – May) for all students renting a room in the student residences owned by the university. 

In Brussels, the organization for students in Brussels waived the cost of utilities for the months in lockdown in 2020 for lease contracts concluded with them, regardless of whether you use your student residence or not. The Brussels Ordinance also foresaw an exceptional notice period for the tenant of one month instead of two months for the period between 18 March 2020 and 30 September 2020. 

In 2020, the Regions advised the private actors to discuss the modalities of the lease with flexibility because of the unforeseen circumstances. In September 2020 (i.e. the start of the new student academic year), one could consider that the Covid-19 crisis was no longer unforeseeable and student tenants would have less arguments to claim incentives from their landlords.

1. What is the general status of student housing in your country?

Is there a shortage for student housing residentials? Are developers encouraged to develop student housing constructions? What is the position of the public authorities / municipalities towards student housing? Do many students live in PBSA’s (Purpose Built Student Accommodation)or mostly in private buildings/apartments (e.g. of their parents).

A shortage of student housing is a long-term issue in almost all Czech cities for which this issue is relevant. According to the Czech Ministry of Education, there are 112,000 students in Prague alone, whereas university dormitories offer just 26,000 accommodation places. Although PBSA facilities remain uncommon in the Czech Republic, they are nevertheless increasing in number. In Prague, there are currently 9 PBSA facilities each with a capacity of around 500 people. According to a survey by The Student Times, 20% of students live in dormitories, 70% rent ordinary apartments and 7% of respondents live with their parents. These figures are pushing developers to invest in the CEE region.

2. What is the legal framework for student lease contracts in your country? 

Is there special lease law for student tenants? Are there rent control regulations applicable to student housing? Are the student leases contracts flexible? Are the student lease contracts rather landlord or tenant friendly?

Lease contracts for student facilities such as dormitories do not differ from other short-term housing (temporary) leases, which are closely regulated in sections 2326-2331 (with the heading "Accommodation") of the Czech Civil Code. These provisions do not solely apply to student housing, but also to hotels, camps, etc. These contracts on accommodation regulate a use of space and acceptance of related services and are concluded for a defined period of time. A person accommodated in such space is entitled to terminate such contract even before expiry of the agreed period; in case a provider of the accommodation suffers any damage related to an earlier termination, it is entitled to request compensation.

However, most of students lease apartments (under standard market conditions), in which case the general provisions on leases set out in section 2246 and following of the Czech Civil Code apply. Of course, market conditions differ depending on the relevant location.

3. In which manner is student housing regulated from a zoning and planning perspective in your country?

Are there certain restrictions from a zoning and planning perspective for student housing in your country? Is it possible to develop student housing or use residences as a student house if the area is marked as a residential area under the zoning plan? Does zoning plans include regulations on rent levels which may have an effect on student housing? Is it possible to deviate from a zoning plan so that student housing can be developed. 

Since the Civil Code regards student housing (in special facilities) as regular accommodation, it is categorised as an area of civic amenities. Student dormitories can also be built in mixed residential areas or housing areas (only if they do not reduce the quality of the environment and the comfort of living in the defined area, are compatible with housing and serve mainly the residents in the defined area). If a developer wants to build a student housing facility in other areas than those listed above, it would need to approach the relevant authority and request a change in the zoning plan or ask for an exception from general rules for construction.

4. Are there specific tax considerations to take into account for student housing in your country?

Which tax rules are relevant when engaging in student housing? For instance, what tax bases and rates apply for RETT and CIT? When financing investments, could one encounter (partial) non-deductibility of interest expenses? Are there any (specific) levies or benefits for developers and landlords engaged in student housing? What VAT consequences do student leases trigger? Are the prices of student housing or rents regulated? Are new tax rules expected that may affect student housing?

General

In general, there are no specific tax rules, levies or tax benefits applicable to student housing. The general rules relating to real estate investments and leases/accommodation services apply. Currently, no new tax rules affecting student housing are expected to be introduced.

Acquisition

Asset deal

The acquisition or sale of real estate does not trigger any RETT, as RETT was abolished in 2020.

Transfers of real estate are generally exempt from VAT. However, transfers of building land and transfers of buildings within five years of their first approval for use are subject to VAT. A substantial change of the real estate restarts the five-year period. If the plot of land constitutes a functional unit with a building, the VAT treatment of the plot of land follows the VAT treatment of the building. In addition, the sellers may under certain conditions opt for VAT in order to maintain their entitlement to a VAT deduction on purchased supplies. Specific transitory rules apply to transfers of real estate acquired before 2014. 

If the transfer is subject to VAT, the entitlement for an input VAT deduction needs to be reviewed depending on the VAT treatment of the provided supplies (see below).

Share deal

If the acquisition is structured as a share deal and the acquisition is debt-financed, special attention should be paid to the tax deductibility of the interest on the acquisition financing. In general, the interest on debt taken on for the purposes of the acquisition of shares is non-deductible. Usually a post-acquisition restructuring (debt-push-down) is required to achieve the tax deductibility of the interest. 

Operating phase

VAT

For the application of VAT it is decisive whether the provision of student housing will be classified as a “lease” or as “accommodation services” (as defined in the classification code CZ-CPA 55). Although the classification of student housing as “accommodation services” is common in practice, all conditions and circumstances of the concrete case need to be considered. 

Accommodation services are subject to a reduced VAT rate of 10%.

The leasing of real estate is generally VAT exempt without the entitlement to deduct input VAT paid on the related purchased supplies. The VAT Act generally provides for the possibility to opt for VAT on leases of real estate to another VAT payer for the purposes of the other VAT payer’s economic activity (which is usually used to secure the input tax entitlement on the purchased supplies). As of 2021, no option for VAT is possible in the case of leases of residential property.

Tax on income

Assuming that the operating entity is a corporation, the income (meaning earnings less tax-deductible expenses such as tax depreciation and interest expenses), is subject to Czech corporate tax at the rate of 19%. 

Land cannot be depreciated. Buildings are depreciated for tax purposes either using the “straight-line” or “accelerated” method. Buildings are generally depreciated over 30 or 50 years, depending on their type. Buildings used for housing purposes are depreciated over 30 years. 

Tax losses can be carried forward for five years. There are certain restrictions for the deduction of tax loss carry-forwards where there is a change of shareholders of the relevant company (anti-avoidance provisions).

In general, expenses incurred to "generate, maintain and secure taxable income" are fully tax-deductible, unless they are specifically listed as non‑deductibles in the Income Taxes Act or unless they are items which are deductible only up to the limit set by the law (such as provisions for bad debts or reserves for property repairs ). Asset/real estate management and similar fees are fully deductible. If they are paid to a related party, standard transfer pricing rules will apply.

Real estate tax is deductible when actually paid.

The tax deductibility of finance costs is subject to the general condition that the costs must have been incurred "to generate, maintain and secure taxable income". The rules resulting from the implementation of the ATAD (EU Anti-Tax Avoidance Directive) into the Income Taxes Act need to be observed. If the annual interest expense (in excess of interest income) exceeds CZK 80 million (approximately EUR 3 million), then the interest expense (from related and unrelated parties) in excess of interest income would be deductible only up to 30% of taxable EBITDA. Any costs which cannot be deducted in one tax year can be carried forward to subsequent years. 

Thin capitalisation rules restrict tax deductibility on loans from related parties based on the debt-to-equity ratio. In general, the maximum debt-to-equity ratio for related-party debt is 4:1. The interest charged by related lenders is fully deductible only if the debt from related parties does not exceed four times the borrower’s equity. Finance costs on any debt in excess of this ratio are non-deductible and are considered to be a dividend, which may attract withholding tax at a rate of 15%. Finance costs on profit-participating loans are non-deductible and are considered to be a dividend, which may attract withholding tax at a rate of 15%. A loan is considered to be profit-participating when the amount and/or maturity of the related finance costs depends on the borrower’s profit. 

If a loan is provided in a foreign currency (e.g. EUR), foreign exchange differences (positive or negative) may arise due to the revaluation of the debt as at the balance sheet date. Both realised (i.e. upon payment) and unrealised (i.e. based on year-end revaluations) foreign exchange differences are generally included in the tax base of the Czech entity (i.e. foreign exchange profits are taxable and foreign exchange losses are tax deductible). 

Payments between related parties should be at arm’s length. The burden of proof is with the taxpayer. The Czech Republic generally follows the OECD transfer pricing guidelines and the methods defined therein. When determining an arm’s length rate, the financing conditions such as the debt amount, currency, risk level, term and type and amount of security should be taken into an account.

Withholding tax

Interest paid to non-residents is subject to withholding tax at a rate of 15% (a 35% rate applies vis-à-vis tax haven recipients). The withholding tax may be reduced or eliminated by applicable double tax treaties and the EU Interest and Royalties Directive. Taxpayers from EU/EEA states may file a tax return to deduct costs related to interest payments received.

Dividends are subject to withholding tax at a rate of generally 15% (a 35% rate applies vis-à-vis tax haven recipients). Dividends and capital gains can be tax exempt if the conditions of the participation exemption (derived from the EU Parent-Subsidiary Directive) are fulfilled. The main conditions are the specific legal form, tax residency of the parent company and of the subsidiary, a “subject-to-tax” rule and a minimum participation of 10 % over a minimum holding period of 12 months. The withholding tax may be reduced or eliminated by applicable double taxation treaties.

Real estate tax

Ownership of Czech real estate is subject to real estate tax. Real estate tax is imposed on buildings and land plots registered in the Real Estate Cadastre (Land Registry), depending on their size, purpose of use and location. The tax is generally payable by the owner. The tax period is the calendar year, and tax assessments are based on the situation as of 1 January of the given year. The due date for paying this tax depends on the amount of the tax and on the type of real estate.

Exit

Asset deal

The direct sale of real estate generally triggers corporate income tax. Gains from the sale (calculated as the difference between the agreed price and the net tax book value) are added to the regular taxable profits, which are subject to a 19% tax rate.  

Under the currently applicable rules, no RETT is levied.

Special attention should be paid to a potential VAT exemption, which may trigger the obligation to adjust the previously deducted input VAT. This adjustment is carried out for a period of ten years beginning as of the year in which the property had been acquired (at a rate of one tenth of the deducted input VAT).

Share deal

The sale of shares does generally not trigger VAT or RETT. 

Under Czech law, gains from the sale of shares in a Czech company are generally taxable in the Czech Republic (even if realised by a non-resident). The gains can be tax exempt under a similar condition as dividends (participation exemption). In the case of non-residents, Czech taxation may also be eliminated under applicable double taxation treaties.

5. Are there any other specific aspects in your country with respect to student housing? 

Are there any recent or expected future changes with respect to student housing law? Have there been rent reductions granted during the Covid-19 crisis to students?

Given the large shortage in student housing, there is potential for developers to invest in building new student facilities. As most students' dormitories are owned by the universities themselves, there is a lack of interest of universities to discuss with the relevant municipal offices' possible changes to the zoning plan which could offer up space to build new facilities in various cities. 

During the Covid-19 pandemic, the Ministry of Health came up with an emergency measure which forbade students from staying in dorms, except where they had no other place of residence and therefore, most of the student dormitories were closed.

1. What is the general status of student housing in your country?

Is there a shortage for student housing residentials? Are developers encouraged to develop student housing constructions? What is the position of the public authorities / municipalities towards student housing? Do many students live in PBSA’s (Purpose Built Student Accommodation) or mostly in private buildings/apartments (e.g. of their parents).

Pursuant to the available information and research findings, about 25% of higher education students live in dormitories in Hungary, but there is significant oversubscription to these places. Furthermore, 40% of students live with their parents during their studies.

Although we have no information on the number of students living in private apartments, the statistics show that demand for private apartments has remained constantly high.  In recent years, short-term apartment rental services (e.g. Airbnb) led to a shortage of such apartments, particularly in Budapest, though as a result of COVID-19 pandemic, tourism has substantially decreased in Hungary, which negatively impacted the short-term apartment rental market.  Consequently, private apartments have become more affordable for students.  The average rent for an average downtown apartment is EUR 430 in Budapest and EUR 300 in the other university towns. 

Currently, we are not aware of any special government-funded programs which encourage private developers to develop student housing construction, but the government has published a long-term dormitory development strategy in 2016, according to which more than 8,000 new dormitory bed places shall be created.  In the framework of the development strategy, a new neighborhood, called "Student City", will be built in South Budapest.

Some companies have already provided private dormitory services in Hungary, but the number of beds is still limited if compared to the other options available to students. 

2. What is the legal framework for student lease contracts in your country? 

Is there special lease law for student tenants? Are there rent control regulations applicable to student housing? Are the student leases contracts flexible? Are the student lease contracts rather landlord or tenant friendly?

In Hungary, there is no special legislation regarding student lease contracts, hence the general rules on lease agreements have to be taken into consideration. Furthermore, there are no rent control regulations in force, which are applicable to student housing.

Apart from some mandatory provisions, the parties are free to determine the terms of the student lease contracts, whereby the flexibility thereof is dependent upon the agreement by the parties.  Nevertheless, it is rare that they substantially differ from the general rules set out in the Hungarian Civil Code.

According to prevailing market practice, student lease contracts are typically concluded for a definite period, and unless otherwise agreed upon cannot be terminated by ordinary termination.  The amount of the security deposit is subject to the agreement between the landlord and the tenant, but the court may decrease it, if the rental fee is exceeded by three times the security deposit.  The landlord is obliged to maintain the apartment and ensure that the apartment is suitable for living.  The landlord has statutory liens over the assets of the tenant, securing the rent and other costs. 

3. In which manner is student housing regulated from a zoning and planning perspective in your country?

Are there certain restrictions from a zoning and planning perspective for student housing in your country? Is it possible to develop student housing or use residences as a student house if the area is marked as a residential area under the zoning plan? Does zoning plans include regulations on rent levels which may have an effect on student housing? Is it possible to deviate from a zoning plan so that student housing can be developed.  

In Hungary, the zoning and planning is regulated on national and municipal levels.  The relevant national legislation (i.e. the National Town Planning and Building Requirements) sets the general rules on the classification of zones and the main characteristics thereof, while the municipalities are responsible for designating the zones, and subject to the national legislation, laying down their detailed rules.  No particular restriction or regulation is applicable to student housing from a zoning and planning perspective on national law level, therefore, the municipalities may freely permit or restrict the development of student housing projects by labelling the relevant development area as a zone allowing or forbidding the construction of such buildings as long as these actions are compliant with the National Town Planning and Building Requirements. 

In the light of the above and given that it is also possible that the municipality's zoning plan does not contain any reference to student housing, the assessment of the zoning and planning regulations with respect to student housing requires an individual assessment in case of each project.

Classic dormitories for students can only be operated on a non-profit basis, while profit oriented dormitories are not regulated under Hungarian law.

4. Are there specific tax considerations to take into account for student housing in your country?

Which tax rules are relevant when engaging in student housing? For instance, what tax bases and rates apply for RETT and CIT? When financing investments, could one encounter (partial) non-deductibility of interest expenses? Are there any (specific) levies or benefits for developers and landlords engaged in student housing? What VAT consequences do student leases trigger? Are the prices of student housing or rents regulated? Are new tax rules expected that may affect student housing?

Acquisition

Acquiring ownership of a Hungarian real property triggers RETT payable by the acquirer at a rate of 4% of the market value of the Hungarian real estate. If the market value of the real estate property exceeds HUF 1 billion (approximately EUR 2.79 million), the rate of the transfer tax on the exceeding part is 2%, but the RETT liability is capped at HUF 200 million (approximately EUR 560,000) per real estate property. RETT may also be triggered by acquiring certain rights connected to Hungarian real property (e.g., use right) or by directly or indirectly acquiring at least 75% of the shares in an entity qualifying as a real estate holding company.

The sale and purchase of newly built real property or building plots is subject to VAT at a rate of 27%. The sale and purchase of other real property is, by default, VAT exempt, unless the seller opted for taxation, in which case the sale and purchase of real property could be subject to reverse charge. 

Operating phase

VAT

Insofar as student leases qualify as accommodation services, such services would trigger VAT at a rate of 5%. Otherwise, student leases would, by default, be VAT exempt, unless the entity engaged in student housing opted for taxation, in which case VAT would be triggered at 27%. 

Corporate income tax

CIT at the level of the corporation engaged in student housing should be established on the basis of the total revenues less costs and expenses (‘pre-tax profit’) as determined in the financial statements prepared in accordance with the Hungarian accounting standards, or in certain cases in line with international financial reporting standards. For the purpose of determining the CIT base, the pre-tax profit has to be modified by certain tax base increasing items and also certain tax base decreasing items may be applied. The most common pre-tax profit modifying items are losses carried forwards, provisions, depreciation, reported shares and interest limitation rules. The CIT is calculated at a flat rate of 9%. 

Withholding tax

From a double taxation perspective, it is noteworthy that Hungary does not levy withholding tax on payments made to entities. 

Other taxes

In addition to the CIT and the VAT administered by the state tax authority, local municipalities can levy building tax, land tax and local business tax and they are also entitled to determine the rates within their territories. The local business tax base is, in essence, calculated as the net sales revenue less the cost of goods sold, value of intermediated services, value of subcontractors' performance, R&D expenses and material cost. The highest permissible rate of the local business tax is 2%.  

The building tax is primarily levied on beneficiaries of certain rights over buildings, provided that such rights are registered in the Land Registry, or, in the absence of such beneficiaries, on the owners of the buildings. The building tax is either charged annually based on the net floor space of the building concerned, at a maximum rate of either HUF 1,100 per square meter (adjusted by accumulated inflation) or 3.6% of the adjusted fair market value of the building. The annual building tax is due in two instalments by 15th March and 15th September respectively.

The land tax is primarily levied on beneficiaries of certain rights over land, provided that such rights are registered in the Land Registry, or, in the absence of such beneficiaries, on the owners of the land. The land tax is either charged annually based on the area of land concerned, at a maximum rate of HUF 200 per square meter (adjusted by accumulated inflation) or based on the adjusted fair market value of the land, at a maximum rate of 3%.

Exit

In case of a share deal exit, the seller may incur CIT at 9% to be calculated on the basis of the capital gain resulting from selling the shares if 

  • the entity engaged in student housing qualifies as a real estate holding company for CIT purposes and 
  • the double taxation treaty concluded by Hungary and the jurisdiction of which the seller is a resident for tax purposes allows for Hungary to tax the capital gain arising on the alienation of shares in a real estate holding company, or there is no such convention in place at all. 

Furthermore, the VAT and RETT aspects set out for the construction phase should be given due consideration.

5. Are there any other specific aspects in your country with respect to student housing? 

Are there any recent or expected future changes with respect to student housing law? Have there been rent reductions granted during the Covid-19 crisis to students?

We do not expect any significant changes in the legislation with respect to student housing in Hungary. 

Hungary has become a quite popular destination for foreign students, especially in the fields of medical, dental and veterinary medical studies as well as economic studies.  Most foreign students require high quality accommodation, therefore, it seems that private developers may expect good returns on student accommodation in Hungary.

1. What is the general status of student housing in your country?

Over recent years, the development of the student housing business has gone hand in hand with the student migration trend (both domestic and international), which represents a significant portion of the basic demand for student housing, including Purpose Built Student Accommodation (PBSA).

With regard to Italy, the university student population (including students enrolled in higher education courses) is around 2.3 million annually, with a potential total demand for student accommodation which stood at around 500,000 beds. Despite this, the offer of beds in student accommodation is around 65,000 beds only (74% of which is provided by universities or regional bodies). This results in a chronic shortage of PBSA, meaning that most students need to be served by the private rental market. 

Considering, particularly, the major Italian university cities, represented by Milan, Rome, Bologna, Florence, Pisa and Turin, the offer of student accommodation covers just 6.2% of the relevant demand. 

The aforesaid gap between supply and demand is reflected in the increase in possibility for institutional investors and international capital to enter the market, with a potential investment equal to Euro 3.5 billion.

None the less as of today the Italian student housing market is still largely characterized by a particularly fragmented offer of traditional dormitory-style accommodation, far from a more efficient concept of development and management related to the PBSA, which is based on the creation of functional spaces for the needs of students' social life.

Against a backdrop of a still under-developed market in targeted solutions for student housing, and growing demand, it exists a significant potential for margin growth in the sector, and understandably investors and operators are encouraged to create PBSAs for Italian and foreign students, with new buildings or by upgrading existing real estate assets.

2. What is the legal framework for student lease contracts in your country?

In general, with respect to student housing, there is a lack of unified and specific legislation.

The types of contracts usually used in order to govern the relationship relating to student housing are the following: (i) short-term rental contracts or rental contracts for students, governed by article 5 of Law 431/1998, together with article 3 of the Ministerial Decree dated January 16th, 2017, in case of rent of accommodation without any additional services are provided; (ii) hospitality/hotel agreement, which are non-typical agreements (i.e. agreements which does not fall within the contractual types provided for by law) used in case further services (such as wi-fi, reception, laundry facility, bike sharing, etc.), in addition to the rent of the accommodation, are provided in an organized and professional manner. The contractual type mentioned under point (ii) above is also used for private university residential facilities, as provided for by the article 13 of the Legislative Decree no. 68/2012. 

With regard to the rental contract for students governed by the Law no. 431/1998 (type under (i) above), such type of contract is governed by residential lease law and can be used by students who have their domicile in a municipality other than that in which the university is located. This contract must contain an explicit reference to the student's enrollment at a specific university. The total duration of the contract is necessarily provided between a minimum of six months and a maximum of thirty-six months. The tenant may withdraw from the contract only for “serious reasons” with a notice of at least three months. The rental fee of rental contracts for students needs to be set within the limits of a range provided for by local agreements executed by and between landlords’ and tenants’ trade unions.

On the other hand, the aforementioned non-typical agreement between the manager and the student (type under (ii) type) has a variable length which is usually between six and twelve months. In order to apply this agreement, it is necessary, in any case, that the guest/student is enrolled in a university providing the manager with evidence of such enrollment.

Such non-typical agreements are often quite flexible and, in some way, student friendly, providing, by way of example, a short security deposit for the entire duration of the contract, as well as the possibility for the student  to terminate the agreement at any time, just paying a lump sum by way of penalty regardless of the number of remaining months until the contractual end of the agreement; on the other hand, the manager has the right to terminate the agreement in case of breach of the same by the other party or of the PBSA internal rules.

3. In which manner is student housing regulated from a zoning and planning perspective in your country?

At the national level, Law no. 338/2000 provided to allocate financial resources to development projects for college student accommodation, specifying that after 2003 annual budget laws should have provided further financial resources for the same projects. Ministerial Decree 7 February 2011, no. 27, implemented the said Law providing specific requirements (also in terms of size and services to be provided to the student) for the said projects to benefit of the said financial resources. According to the Law no. 338/2000, the development of the project can be carried out by private bodies selected through public tenders with the scheme of building and management concession (“concessione di costruzione e gestione”).

With reference to private projects local building regulations could provide specific requirements for the buildings to be used as student housing; developers should consult each municipality to understand their specific requirements.

If no specific local rules exist, the project should be evaluated on a case by case basis to understand what administrative procedure has to be followed according to the specific operational category provided by the SUAP of the municipality (the entity for productive commercial activities), e.g. hotel, hostels, b&b activity, etc.

4. Are there specific tax considerations to take into account for student housing in your country?

Buying a real estate property in Italy may be subject to different tax treatments according to the cadastral qualification of immovable property, the VAT status of the alienator and construction/refurbishment works performed on the building. According to the Italian tax authorities, to distinguish between residential and commercial immovable property, reference should be made to the cadastral classification, rather than the actual use of the property, at the time of the transaction. In general terms, residential property is subject to 9% registration tax and is VAT exempt if the alienator is not the constructor. On the other hands, properties which are classified as “instrumental properties” are subject to VAT thought the reverse charge mechanism (as optional regime) if construction/refurbishment works have not been performed within the last 5 years. Please note that, in other cases, the ordinary Italian VAT is generally applicable on the transfer of instrumental buildings, as hotels, at 22% rate. If a propriety is owned by a company (e.g. an Italian Srl) and the investor decided to acquire the company (share deal) rather then proceed with the asset deal, no material transfer tax are levied since the transaction is VAT exempt and Euro 200 lump sum registration tax applies. Investors and developers also need to consider that VAT may be (partially) no recoverable on the refurbishment works on residential properties and the possibility to claim the refund of the VAT credit is subordinated to specific requirements. The provision of accommodation services to students with further services (such as wi-fi, reception, laundry facility, bike sharing, etc.) is subject to the reduced VAT rate equal to 10%.

For corporate investors, income (including capital gains) from real estate is subject to 24% corporate income tax and 3,9% regional income tax. CIT deduction of interest expenses is limited up to the amount of interest income and to the 30% of the EBITDA.  Nevertheless, interest expenses are fully deductible on loans which are taken for the purpose to finance the acquisition or the construction of a property that are secured by a mortgage over the same properties and the properties are leased to third parties.

5. Are there any other specific aspects in your country with respect to student housing? 

The Covid-19 pandemic has had a strong impact on the student housing market whose consequences are expected to extend over the next academic year. Indeed, over the last year, 70% of the users of student facilities went back to their places of origin, this resulting in a reduction in occupancy of student accommodation in the short-medium period.

Distance learning and the economic effects of Covid could determine a temporary decrease in the student migration to which the student housing market is strictly connected.

Furthermore, the pandemic situation is causing a setback in the planning and construction of new accommodations in Italy. Despite the impact of the pandemic, student housing continues to represent an emerging market for Italy in the  medium to  long-term period.

Regarding the measures adopted in order to support students, some BPSAs have granted deferred payments, partial refunds and the possibility of using at least in part the fee already paid during the lock-down period for the next academic year while also satisfying students’ preference for single rooms instead of shared rooms during the health emergency phase.  Some BPSAs have also provided some additional services, such as health-care services, sustainable mobility (for instance, supply of bikes) and the delivery service of mail and packages.

In this perspective, Article 29 of Legislative Decree no. 34/2020 ("Decreto Rilancio") has recently provided a fund of Euro 20,000,000 to finance the reimbursement of the rents paid by less wealthy “nonresident” students during the lockdown months (during which students were unable to attend university lessons).

In conclusion, given the lack of any specific and innovative legislation relating to the student housing sector, it seems appropriate that the legislature delineates the regulatory framework applicable to student housing, both in terms of “ordinary” legislation and emergency measures to deal with covid-19, with the aim of identifying the most streamlined and flexible legal solutions for promoting investments in this market or at least making them easier.

1. What is the general status of student housing in your country?

Is there a shortage for student housing residentials? Are developers encouraged to develop student housing constructions? What is the position of the public authorities / municipalities towards student housing? Do many students live in PBSA’s (Purpose Built Student Accommodation) or mostly in private buildings/apartments (e.g. of their parents).

There are (roughly) 700.000 students every year in the Netherlands – with (approximately) 52% of them living out-of-home. As of last year, 85% of students have stated that their search for accommodation has taken over half a year before finding a residency. 

A recent report (2020) has indicated that there is a shortage of about 22.000 student housing residencies. The pressure is highest in cities like Amsterdam, Leiden, and Utrecht, with a relatively very tight housing market for students. Recently the minister of the interior has sent a letter to the parliament stating that she expects an increase of 21.500 student housing residencies in the coming 4 years. However, these extra residencies will likely not solve the problem seeing that the total amount of students is predicted to grow by over 125.000 until the year 2030.

Generally, universities in the Netherlands do not offer any kind of ‘on-campus-housing’. However, there are many student housing corporations that cater to the housing needs of students for which they pay a fee (in order to find a home). Examples of large housing corporation are SSH Student Housing and DUWO, however most student housing residencies are privately owned.

2. What is the legal framework for student lease contracts in your country? 

Is there special lease law for student tenants? Are there rent control regulations applicable to student housing? Are the student leases contracts flexible? Are the student lease contracts rather landlord or tenant friendly?

The Netherlands do not have specific/special lease laws that would apply to students, with the exception of Campus Contracts. Campus Contracts are temporary lease contracts for students in student rooms and houses. The accommodation must be explicitly intended for students and should be made available to a new student after the end of the lease contract. The tenant is obliged to leave the accommodation within six months after completing or cancelling their studies. Most student housing corporations use campus contracts for a large part of their housing supply. Also, if a tenant has not submitted a proof of registration at an educational institution within three months, the landlord may terminate the lease agreement. 

In addition, temporary lease contracts can be agreed upon without the tenant being protected against termination of the lease. For non-independent accommodations (meaning: a room/studio apartment with shared facilities) a temporary contract of up to 5 years, and for self-contained accommodations a temporary contract of up to 2 years can be agreed upon. It is important that the landlord inform his tenants in time that the contract is about to expire, otherwise it will automatically turn into a lease contract for an indefinite period of time with protection for the tenant against termination.

3. In which manner is student housing regulated from a zoning and planning perspective in your country?

Are there certain restrictions from a zoning and planning perspective for student housing in your country? Is it possible to develop student housing or use residences as a student house if the area is marked as a residential area under the zoning plan? Does zoning plans include regulations on rent levels which may have an effect on student housing? Is it possible to deviate from a zoning plan so that student housing can be developed.  

It is highly dependent on local regulations whether a residence may be used for student housing. In cities that are popular amongst students (e.g. Amsterdam, Den Haag, Rotterdam, Delft), the competent authorities are (generally) more likely to include stipulations in zoning plans or local policies to regulate (and often limit) whether residences may be used for student housing (i.e. non-self-contained residential use). 

A zoning plan for example often includes specific definitions that aim to restrict the possibilities to use a residence for student housing. In a zoning plan ‘residing’ is regularly defined as ‘the use of a residence by a maximum of one household’. As multiple students using a residence is generally not considered to qualify as the use by ‘one household’ (unless stipulated otherwise), such definition excludes the possibility to use a residence for student housing. If a zoning plan does not include any restrictions with respect to the use of a residence, the use for student housing would – from a zoning perspective – generally be allowed within an area that has been designated for residential purposes in a zoning plan.

In addition, local regulations often include stipulations pursuant to which a housing permit or an operation permit must be obtained by the owner of the residence for the use of a residence for room rental purposes. Such permits may include provisions regarding inter alia the minimum number of square meters per room or the maximum number of residents. Even if the applicable zoning plan does not prohibit the use of residences for student housing, it might be possible that the required permit will not be granted. 

A zoning plan does in principle not include regulations regarding rent levels as this subject is addressed in tenancy law. A zoning plan might however prescribe on a more general level certain ratios / guidelines for amounts of social and mid-rent housing for (specific parts of) a zoning plan area.

Lastly, there are several possibilities to file applications for (integrated) environmental permits for the development and use of residences intended for students. It depends on inter alia local regulations and the business case whether it is likely that such permits will be granted, and which procedure applies. 

4. Are there specific tax considerations to take into account for student housing in your country?

Which tax rules are relevant when engaging in student housing? For instance, what tax bases and rates apply for RETT and CIT? When financing investments, could one encounter (partial) non-deductibility of interest expenses? Are there any (specific) levies or benefits for developers and landlords engaged in student housing? What VAT consequences do student leases trigger? Are the prices of student housing or rents regulated? Are new tax rules expected that may affect student housing?

No specific tax regime applies to student housing. The same tax provisions apply as for ‘normal’ real estate investments. When buying residential real estate through an asset deal, in principle, no VAT is due unless: (i) the transaction concerns a transfer of new real estate (i.e. less than 2 years after first moment of use) or building land; or (ii) both parties opt for a VAT taxed transfer (only possible if certain conditions are met, depending on the purpose of the real estate). Acquisition of an asset (e.g. full ownership, economic ownership and/or usufruct) is subject to 8% RETT. Expenses incurred of a capital nature, including substantial development, renovation, remodelling, etc. are not treated as deductible expenses but should be capitalized and depreciated over its lifetime.

Investments in Dutch student housing are often structured via companies owning the real estate (PropCo). No VAT is due on the acquisition of the shares of the PropCo. In principle, the acquisition of the shares in Dutch PropCo is subject to 8% RETT, calculated on the fair market value of the real estate (in)directly held by the PropCo. Compared to the sale of the real estate asset itself, Dutch corporate income tax on capital gains (on the real estate assets) will be deferred in such share deal, as the unrealised gain on the real estate assets remains in PropCo. In practice a discount for the deferred tax liability is calculated. The Dutch PropCo is liable to corporate income tax at the standard rate of max. 25% on real estate income, including capital gains. There are several limitations on depreciation and interest deduction, which could increase the effective tax rate. Profit distributions of PropCo may be subject to dividend withholding tax and under circumstances also interest withholding tax can be applicable on intra-group loans.

Also when the Dutch real estate is acquired directly by a foreign company max. 25%  Dutch CIT is due on income and gains. In such case, however, no Dutch withholding tax applies on profit distributions (the interest withholding tax may still apply).


5. Are there any other specific aspects in your country with respect to student housing? 

Are there any recent or expected future changes with respect to student housing law? Have there been rent reductions granted during the Covid-19 crisis to students?

 A recent survey (2020) amongst students has indicated that the pandemic has not (much) influenced the desire of students to move out-of-home. This has been confirmed by the number of students that have moved out has kept growing (even in 2021). It is (regardless of the covid pandemic) expected that the trend will keep growing, mostly because the total number of students is expected to keep growing also because the number of international students is growing again. 

Almost all major cities take the peak demand months (mostly September) into account and are taking measures to deal with this. Groningen, for example, develops temporary accommodation for 150 students. Maastricht has approached hotels and hostels for extra places and Tilburg will be building 150 temporary housing units in the coming period. A number of universities are also offering support to international students to find housing.

Generally speaking, there have been no rent reductions granted during the Covid-19 Crisis to students. As a compensation to students, the tuition fee for the academic year 2021/2022 has been reduced by 50%.

Lastly, there are no expected changes with respect to student housing laws. However, the shortage of houses is a hot topic in the Netherlands. It is anticipated that the government will implement several measures and laws to address the housing shortage as much as possible.

1. What is the general status of student housing in your country?

Is there a shortage for student housing residentials? Are developers encouraged to develop student housing constructions? What is the position of the public authorities / municipalities towards student housing? Do many students live in PBSA’s (Purpose Built Student Accommodation) or mostly in private buildings/apartments (e.g. of their parents).

 

The number of student housing projects in Poland is constantly growing. Projects are executed by developers who deal solely with student housing (e.g., BaseCamp) as well as commercial developers who execute various types of real estate projects including student housing (e.g., Student Depot by Kajima). 

Poland has a good environment for future growth and, according to the experts, the perspectives are positive. The current average rents in Poland vary from EUR 250 to EUR 550 and it is expected that the amount of rents will grow further.  Also, further yield compression is expected. 

In general, the positive situation results, in particular, from the following factors: (i) macroeconomic perspectives (e.g., size and relatively high population, growing number of Polish students who can afford PBSA as well as growing number of foreign students) and (ii) local factors (e.g., there are numerous cases where universities support PBSA initiatives e.g., through contribution of property). 

Finally, the PBSA market is not yet saturated, so there is still a wide range of opportunities to invest. This corresponds to the shortage of student housing projects in Poland. According to research, only 1% of students chose PBSA as their accommodation.  The remaining groups chose parents' accommodation, university student halls or the residential market.

There is no formal or official program which would encourage developers to commence PBSA projects. Whilst this is on a case by case basis, in practice, often universities (e.g., through contribution of land) and local authorities (through appointment of officials responsible for coordination of a given project) support PBSA initiatives.

2. What is the legal framework for student lease contracts in your country?

Is there special lease law for student tenants? Are there rent control regulations applicable to student housing? Are the student leases contracts flexible? Are the student lease contracts rather landlord or tenant friendly?


There are no laws in Poland which would refer specifically to leases with student tenants. Consequently, merely some general provisions related to leases of premises for residential purpose would apply. In particular, there are no statutory rent control regulations and, as a rule, there is a certain level of flexibility with regard to lease contracts. However, the market practice has already set certain standards regarding lease contracts e.g., with regard to lease periods, indexation (always positive) or security to be provided by the tenants. Consequently, very often student housing developers use their market standard templates. Finally, there may be certain requirements of senior lenders. 

In addition to the lease contracts it is worth noting that PBSA projects in Poland are executed, in practice, according to the following formulas: (i) acquisition of already operating project, (ii) development of PBSA project by a developer on its own, (iii) forward funding acquisition or (iv) forward purchase acquisition.

3. In which manner is student housing regulated from a zoning and planning perspective in your country?

Are there certain restrictions from a zoning and planning perspective for student housing in your country? Is it possible to develop student housing or use residences as a student house if the area is marked as a residential area under the zoning plan? Does zoning plans include regulations on rent levels which may have an effect on student housing? Is it possible to deviate from a zoning plan so that student housing can be developed.  


As a rule, the zoning rules in Poland are set by a local zoning plan or an individual planning decision (often called a WZ decision). In general, the individual zoning decision may be issued if there is no local zoning plan. Both a local zoning plan and an individual zoning decision should allow for development of a student housing project. Yet, such a consent does not have to be expressed explicitly i.e., very often a local zoning plan or an individual zoning decision refers generally that a living project is allowed (without any specific reference to student housing). Therefore, whilst a decision whether or not a PBSA project is possible is always a matter of case-by-case analysis, as a rule, development of a student housing project may be possible even if there is no clear and specific reference to student housing (e.g., there may be simply a general notion that a living project may be executed). However, a specific answer should be always subject to a legal and zoning analysis of a given case.

4. Are there specific tax considerations to take into account for student housing in your country?

Which tax rules are relevant when engaging in student housing? For instance, what tax bases and rates apply for RETT and CIT? When financing investments, could one encounter (partial) non-deductibility of interest expenses? Are there any (specific) levies or benefits for developers and landlords engaged in student housing? What VAT consequences do student leases trigger? Are the prices of student housing or rents regulated? Are new tax rules expected that may affect student housing?

General

In principle, companies that are operating in the student housing sector are regular taxpayers in Poland. However, there are some specific tax rules or tax considerations that should be taken into account. 

Acquisition

Asset deal

Transfers of real estate are either subject to VAT or exempt from VAT, in which case the Civil Law Activities Tax ("CLAT") is applicable.

Transfers of building land and transfers of buildings within two years from their first approval for use are subject to VAT. Transfers of buildings older than two years are in principle exempt from VAT; instead, CLAT is payable by the purchaser. A substantial change of the real estate restarts the two-year period. 

The VAT treatment of the land follows the VAT treatment of the building constructed on this land.

In cases where the building will be used for conducting VATable activities, input VAT relating to the acquisition is tax deductible. 

Share deal

If the acquisition is structured as a share deal, the purchase of shares is subject to 1% CLAT, payable by the purchaser. In case the acquisition of shares is debt-financed, no debt-push down effected via a merger of companies is allowed after the acquisition. Also, special attention should be paid to the tax deductibility of the interest on the acquisition financing.

Operating phase

VAT

As mentioned above, in case the building will be used for the purpose of generating a VATable sale, input VAT relating to the acquisition will be tax deductible. The VATability of the services offered by student houses is, however, a very specific and unclear case in Poland.

In principle, long term residential leases are exempt from VAT. Short term residential leases could qualify for a reduced VAT rate of 8%. Polish tax law does, however, not provide for a clear definition of what should be treated as a short-term lease and what constitutes a long-term lease. Further, accommodation services classified under no. 55 of the Polish Classification of Goods and Services qualify for an 8% VAT rate, while student housing arranged for upon agreements with universities could qualify for a tax exemption.

As can be seen from the above, the appropriate classification of student housing is of crucial importance. As it may differ from case to case, the best way to confirm the VAT treatment is by obtaining a so-called individual binding tax interpretation from the Director of Fiscal Information Office.

Tax on income

Assuming that the operating entity is a corporation, the income (meaning earnings less tax-deductible expenses such as depreciation and interest expenses), is subject to regular corporate tax at the rate of 19%. From 1 January 2021, the revenue limit for the current tax year entitling a company to benefit from the reduced 9% CIT rate has been increased from EUR 1.2 million to EUR 2 million. However, the preferential CIT rate can only be used by taxpayers having the status of a small taxpayer or having started a business (with certain exceptions), and these conditions have not changed.

Land cannot be depreciated. Buildings are depreciated for tax purposes at a 1.5% rate for residential buildings and units and a 2.5% rate for non-residential buildings and units.

Tax losses can be carried forward for five years. There are certain restrictions for the deduction of tax loss carry-forwards where a change of shareholders of the relevant company is conducted for tax optimization reasons (anti-avoidance provisions).

The investor's financial model should also include the tax burden resulting from the so-called minimal tax on rented buildings.

In general, expenses incurred to generate or maintain and secure taxable income are fully tax-deductible, unless they are specifically listed as non‑deductible in the Income Taxes Act or unless they are items which are deductible only up to the limit set by the law. Asset/real estate management and similar fees are fully deductible. If they are paid to a related party, standard transfer pricing rules will apply. Real estate tax is deductible when actually paid.

The tax deductibility of finance costs is subject to the general condition that the costs must have been incurred "to generate, maintain and secure taxable income". Annual interest expenses will be limited by thin capitalisation rules that relate to financing coming from both related and unrelated entities.

Payments between related parties should be at arm’s length. The burden of proof is with the taxpayer. Poland generally follows the OECD transfer pricing guidelines and the methods defined therein. When determining an arm’s length rate, the financing conditions such as the debt amount, currency, risk level, term and type and amount of security should be taken into account.

Withholding tax

Interest paid to non-residents is subject to withholding tax at the domestic rate of 20 %. The withholding tax may be reduced or eliminated by applicable double tax treaties and the EU Interest and Royalties Directive. The recipient of the interest must, however, qualify to be their beneficial owner and be able to present a certificate of tax residency.

Dividends are subject to withholding tax which is generally levied at a rate of 19%. Dividends and capital gains can be tax exempt if the conditions of the participation exemption (derived from the EU Parent-Subsidiary Directive) are fulfilled. The withholding tax may be reduced or eliminated by applicable double tax treaties.

Real estate tax

Ownership of real estate is subject to real estate tax. Real estate tax is imposed on buildings, structures and land plots. In case of land, the tax calculation is based on the area of the land. In case of buildings, the tax calculation is based on the usable area of the building. In case of structures, tax of 2% is levied on the initial value of the structure.

The real estate tax is generally payable by the owner. 

The tax period is the calendar year and tax assessments are based on the situation as of 1 January of the given year. 

Exit

Asset deal

The direct sale of real estate generally triggers corporate income tax. The gain from the sale (calculated as the difference between the agreed price and the net tax book value) is added to the regular taxable profits, which are subject to a 19% tax rate.

Special attention should be paid to potential VAT exemptions, which may trigger the obligation to adjust the previously deducted input VAT. This adjustment is carried out for a period of ten years beginning as of the year in which the property had been acquired.

Share deal

Gains from the sale of shares in a Polish company are generally taxable in Poland (even if realised by a non-resident). The gains can, however, be tax exempt under an applicable double taxation treaty. 

The sale of shares does not trigger VAT, but CLAT is payable by the purchaser at a rate of 1%.

5. Are there any other specific aspects in your country with respect to student housing?

Are there any recent or expected future changes with respect to student housing law? Have there been rent reductions granted during the Covid-19 crisis to students?


There are no legal amendments planned in the near future referring specifically to student housing. 

We expect further growth in the student housing market in Poland. Despite online classes during the pandemic we still see that in many projects the level of vacancy areas still remains low (around 10% only).

1. What is the general status of student housing in your country?

The student accommodation market in Portugal was, until recently, characterized by its unstructured nature and by a significant shortage of supply. That resulted, on the one hand, from a low public offer which was almost entirely destined to students with reduced income and, on the other, by the fact that the private offer was mostly in the hands of unprofessional owners that rented single rooms to students in most of the cases on an informal basis without written contracts. 

Although part of these characteristics is still present today, the supply of student accommodation in Portugal has seen a very positive evolution in recent years due to a considerable investment in new student accommodation facilities made by international investors and operators of PBSA’s. Albeit these facilities are primarily directed to international students that chose Portugal to pursue their studies, there are also Portuguese students seeking this type of good quality accommodation that allows them to enhance their student experience. 

According to recent market studies, the PSBA’s occupancy rates in Portugal achieve almost 100% during the academic year. The same studies state that there is still a shortage of student accommodations in Portugal of approximately 14,000 to 20,000 beds. Therefore, unless if Covid-19 has a significant long-term impact in terms of student mobility, it is expectable that the development of new student accommodations will continue to be a trend in Portugal.

In this context, it is important to highlight that, due to its historic characteristics, the supply of student accommodation is not subject to a specific legal framework in Portugal. In fact, apart from some legal provisions that apply to the provision of such services by public entities, both the licensing and operation of student accommodation facilities by private owners does not follow a tailor-made legal regime instead relying on the general legal framework. This lack of regulation has, generally, proven to be useful by granting to developers and operators of PBSA’s a high degree of flexibility in the structuring of their projects.

2. What is the legal framework for student lease contracts in your country? 

Regarding student lease contracts in Portugal, it is worth noting that there is no special lease law for student tenants. Nevertheless, Portuguese lease law includes a specific regime designed for temporary accommodation, such as the accommodation of tourists, expat employees or students during the academic year.

Although this regime grants a certain degree of flexibility to the owners, notably by not subjecting the contract to a minimum mandatory term, due to tax reasons, operators of PBSA’s tend to opt to enter into services agreements with students, particularly in those cases where such operators provide more than just a simple accommodation to students by offering ancillary services such as cleaning, laundry services, F&B, among others.

These services agreements are not subject to any specific limitations. Therefore, within the limits of the law, parties are free to agree inter alia on the term of the agreement, rent and common expenses, security and on the parties’ termination rights. This allows owners to draft templates that protect their interests.

In terms of rent control regulations, contrarily to other European countries the Portuguese law does not contain such type of limitations for private owners. As such, the rents to be charged by private owners under the student leases or services agreements are not subject to any cap. This contractual flexibility is an aspect that is obviously valued by investors when assessing opportunities in the Portuguese student accommodation market.

3. In which manner is student housing regulated from a zoning and planning perspective in your country?

As mentioned, there is no specific regime regulating the licensing of student accommodation facilities in Portugal. As a result of that, the Municipalities have adopted different positions regarding the “traditional” uses that are compatible with the student accommodation activity. Whilst for some Municipalities student accommodation facilities can be developed in areas marked as residential areas under the respective zoning plans (as is the case of Lisbon), others have considered that such type of facilities should be developed in areas destined for services use (as is the case of Oporto).

In addition to these more common uses, we have also seen student accommodation facilities licensed in areas marked for equipment use which was traditionally associated with public or cultural facilities. Moreover, certain Municipalities have already licensed hotels whose business model consists in offering stays to students during the academic year in zones marked for touristic use.

Although the lack of a general regulation in this respect contributes for this diversity of solutions adopted by each Municipality, this has not refrained investors from developing student accommodation facilities in Portugal. Nonetheless, this diversity necessarily requires that investors consider the use class criteria followed by each Municipality, as well as any other licensing requirements, when structuring their investment. Notwithstanding, regulations clarifying the technical requirements applicable to the construction of PBSA’s would be welcomed.

Finally, it is worth bearing in mind that the general legal framework foresees certain restrictions for the operation of short-term rental accommodations which can create some challenges for operators that intend to rent rooms to tourists during the summer season. In particular, the operation of short-term rental accommodations is subject to a specific license and there are limitations in terms of the maximum number of rooms that can be destined to short-term rental by an operator. Moreover, some Municipalities issued regulations that restrict or prevent the approval of new short-term rental licenses in certain zones that are already heavily crowded with touristic offer.

4. Are there specific tax considerations to take into account for student housing in your country?

Companies engaged in the provision of housing to students are generally subject to the same taxation that would otherwise be applicable to other taxpayers engaged in similar activities within the real estate sector.

When acquiring the real estate assets, acquirers will bear Stamp Tax at a 0.8% rate and RETT at a maximum 7.5% rate, both on the higher between acquisition price and property tax value. 

Furthermore, one should also note that the ownership of real estate assets located in Portugal triggers Municipal Property Tax (MPT) on an annual basis at variable standard rates between 0.3% and 0.45% on the property tax value.

Since 2021, both RETT and MPT are increased to 10% and 7.5%, respectively, without any possibility for applying any RETT rate reduction or exemption, whenever acquirers are directly or indirectly dominated or by an entity domiciled (for tax purposes) in a blacklisted jurisdiction.

Moreover, whenever real estate assets are licensed as residential, the ownership will also trigger an annual tax levy of Additional to MPT at a rate of 0.4%, imposed, in similar terms to MPT, on the property tax value of the relevant real estate assets.

With regards to CIT, Portuguese companies engaged in the provision of student housing are, in general terms, subject to CIT at a standard rate of 21%. This rate may be increased by the application of a Municipal surcharge of up to 1.5% and a State surcharge, up to a maximum rate of 9%, this latter imposed on the taxable profits in excess of EUR 1.5 million.

Investors also need to consider (partial) non-deductibility of interest expenses when financing their investments. Moreover, and although exemptions are foreseen, Stamp Tax may also apply to financing and securities at rates which vary on the duration and may go up to 0.6%.

Another key issue to be considered is VAT as the respective framework may differ depending on how the investment is structured. Indeed, considering that leases are generally exempt, VAT due on construction may lead to a VAT additional burden (of 23% or 6%) whenever the student accommodation is explored by means of a lease. Notwithstanding, in some cases, it is possible to overcome this burden resorting to exceptions foreseen in Portuguese VAT legislation (v.g., waive of exemption). Conversely, when the student accommodation is explored directly and similarly to a hotel activity, VAT framework to be applicable should correspond to such activity, thus being subject to taxation at VAT under the applicable standard (23%), intermediate (13%) and reduced (6%) rates, depending on the type of services being effectively provided.

Furthermore, also when referring to tax benefits, no specifications apply to developers and landlords engaged in the provision of student housing services. Notwithstanding, general benefits on rehabilitation construction works may apply thus providing for VAT reduced rate of 6% and exemption of RETT and MPT. 

Finally, and for the time being, we also note that there are no foreseeable changes to the tax framework applicable to Portuguese companies engaged in the provision of student housing services. 

5. Are there any other specific aspects in your country with respect to student housing?

The provision of student accommodation services by professional private owners is still a new reality in Portugal. Because of that, lawmakers have not yet enacted any specific laws applicable to this type of activity. This lack of regulation is not something that exclusively affects the student accommodation sector. On the contrary, all these alternative / disruptive forms of “residential” use, such as the student accommodations, the senior housing, the co-living models, among others, are yet to be regulated.

Nevertheless, as the supply of student accommodation grows it is more than natural that lawmakers will start to produce legislation in this respect, notably to ensure an harmonization of the licensing requirements but also to establish minimum standards for the operation of these facilities. Albeit such legislation will eventually reduce the high degree of flexibility that exists today for the development and operation of PBSA’s, is a necessary step towards a more stable market.

In this respect, it should be mentioned that the Covid-19 outbreak already propelled lawmakers to create temporary rent relief measures for students. Such measures were in force for a limited period and allowed students to either defer their rent payment obligations or to resort to a financial aid from a public institution to make such payments. On the other hand, the rise in the private offer of student accommodation fostered the development of new student residences by public entities and the issuance of some legislation in this respect by the Government. Although the solutions contained in such legislation cannot be replicated for the private sector, it shows that lawmakers are conscious of this recent trend and that this matter will be in their agenda in the future.

1. What is the general status of student housing in your country?

Is there a shortage for student housing residentials? Are developers encouraged to develop student housing constructions? What is the position of the public authorities / municipalities towards student housing? Do many students live in PBSA’s (Purpose Built Student Accommodation) or mostly in private buildings/apartments (e.g. of their parents).  


Investment in student housing has been very active in recent years, and it continues to attract domestic and international investors despite the COVID-19 pandemic. Although investment initially focused on the largest cities (Madrid and Barcelona), it has recently spread to other main cities such as Bilbao, Seville, Valencia, San Sebastián and Zaragoza due to the shortage of student housing residences. 

The high ranking of Spanish universities and business schools, together with an interesting cultural and leisure offer, makes Spain an attractive destination for students.

According to recent reports, despite the new purpose-built student accommodation (PBSA) developments, there is an extraordinary demand still to be met. In Spain, there are more than 500,000 university students who wish to be present during the university course, 40% of the total, and there are fewer than 100,000 beds in student housing, which is not enough to cover the demand. 

Zoning plans impose conditions on establishing new PBSA. Regarding the existing ones, the authorities are currently focused on preventing student housing from also being used to accommodate guests visiting the city for tourist purposes.


2. What is the legal framework for student lease contracts in your country? 

Is there special lease law for student tenants? Are there rent control regulations applicable to student housing? Are the student leases contracts flexible? Are the student lease contracts rather landlord or tenant friendly?


There is no special lease law for student tenants. Student lease contracts are governed by the general provisions of property lease contained in the Spanish Civil Code, which provides for great flexibility.

Student lease contracts are often very protective of landlord interests, as the landlord must ensure peaceful coexistence of students in the property, provide services to students, and maintain the property’s value. Therefore, landlords generally reserve certain rights to enter students’ rooms, and they may terminate the lease if there is a breach.

There are no rent control regulations applicable to student housing. Determining and reviewing the rent are subject to no limitations, although they must be expressly set out in the lease.


3. In which manner is student housing regulated from a zoning and planning perspective in your country?

Are there certain restrictions from a zoning and planning perspective for student housing in your country? Is it possible to develop student housing or use residences as a student house if the area is marked as a residential area under the zoning plan? Does zoning plans include regulations on rent levels which may have an effect on student housing? Is it possible to deviate from a zoning plan so that student housing can be developed.  

 

Local and regional authorities are entitled to pass the relevant planning and zoning plans, which specify the urban parameters and uses allowed in each location. In general, student housing can be developed in urban plots where residential and facilities uses are allowed. When regulating the residential and facilities uses, zoning plans can establish limitations or conditions for student housing.

Also, to regulate tourism, some cities have passed zoning plans in which student housing is regulated together with tourist accommodation, imposing further requirements on developing student housing. For example, Barcelona is processing a zoning plan regulating student housing together with tourist accommodation, in which restrictions on developing student housing mainly consist of limiting the number of student housing in the same area and prohibiting their use for tourist purposes. Agreements with universities or educational centers are also required. 

At least for the time being, zoning plans do not establish limitations on implementing PBSA based on rental levels. 

Consequently, when selecting a location for PBSA, an analysis from a town planning perspective is required. 

4. Are there specific tax considerations to take into account for student housing in your country?

Which tax rules are relevant when engaging in student housing? For instance, what tax bases and rates apply for RETT and CIT? When financing investments, could one encounter (partial) non-deductibility of interest expenses? Are there any (specific) levies or benefits for developers and landlords engaged in student housing? What VAT consequences do student leases trigger? Are the prices of student housing or rents regulated? Are new tax rules expected that may affect student housing?

Acquisition/construction of properties for student housing usually levies a 21% recoverable value-added tax (VAT). 

According to the Spanish tax authorities’ criteria, student housing services are taxed at a 10% VAT rate, similar to providing hotel services, as they include several hotel-like services and other services for students. Therefore, the property owner can deduct VAT on costs, including the acquisition or construction of the building.

Stamp duty has to be paid on certain public deeds (e.g., acquisition of the property or new works declaration).

The corporate income tax (CIT) rate applicable to student housing activities is the general 25% rate. Interest expenses is tax deductible, up to 30% of the operating profits (with a minimum €1 million always tax deductible). Non-deductible interest can become tax deductible in the following tax years, subject to the same limits and conditions. 

Certain local taxes also apply to ownership, construction and use of PBSA. 

5. Are there any other specific aspects in your country with respect to student housing? 

Since the outbreak of the COVID-19 pandemic, operators have taken measures to retain students. In 2020, operators offered discounts to secure reservations for 2021 and are doing so again for the 2021-2022 period. 62% of operators reimbursed all or part of the rent to students, and offered discounts or credits, and 14% offered students to change rooms without any costs.

There are no recent or expected changes to student housing law due to the COVID-19 crisis.

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