Ten tax predictions for the global real estate industry in 2026

Speed read and background

The global tax landscape as it applies to the real estate industry sector becomes ever more complicated as each year passes and taxpayers are facing increasingly frequent and assertive challenges from global tax authorities.

We have highlighted ten topical tax predictions for the real estate industry sector in 2026 which are likely to be relevant to (i) M&A transactions, (ii) financings, (iii) capital raising and deployment and (iv) tax audits and enquiries.

Prediction 1. Increasing number and frequency of tax audits, enquiries and litigation

We expect an ongoing trend of increasingly frequent and assertive tax audits, enquiries and litigation from global tax authorities to continue in 2026.

Areas of particular ongoing scrutiny which are relevant to the real estate industry are expected to include:

(a) transfer pricing (particularly relating to intra-group financings and management services);

(b) thin capitalisation (relating to the amount of debt to equity in structures);

(c) VAT / GST;

(d) the purpose of borrowing (including the UK "unallowable purpose" regime);

(e) the application of general anti-avoidance rules (e.g. Part IVA of the Income Tax Assessment Act 1936 in Australia); and

(f) other specific anti-avoidance rules (e.g. section 75A Finance Act 2003, which HMRC is increasingly using to attack the UK stamp duty land tax treatment of transactions which would otherwise appear to have been undertaken for bona fide commercial purposes).

During the course of 2025 we saw clients focus increasingly on producing "defence files" (e.g. contemporaneous valuation evidence and robust, contemporaneous evidence forensically recording why, where, and by whom commercial decisions have been taken). We expect this trend to continue during 2026.

Prediction 2. Ongoing focus on "substance" and "beneficial ownership"

We expect an ongoing focus from real estate funds and other real estate groups in connection with (i) maintaining robust "substance" in the jurisdictions used in corporate holding structures and (ii) ensuring beneficial ownership of the funds received.

This is particularly acute in the context of challenges from different tax authorities (e.g. in Italy and Spain) in connection with the use of other jurisdictions (e.g. Luxembourg) which are frequently used as common fund vehicle and holding company jurisdictions and where such structures rely on obtaining access to benefits under double tax treaties and making treaty claims.

Prediction 3. Tax governance

Many real estate industry groups, and particularly private equity real estate funds, invested time during 2025 in reviewing and updating their internal tax governance policies and procedures.

In a number of cases, this review resulted in the establishment of specific and granular tax governance frameworks (e.g. relating to the composition of corporate and individual directors on boards, meeting protocols and the timeframe in which materials are shared prior to board meetings). We expect this trend to continue throughout 2026.

Prediction 4. VAT / GST challenges

VAT / GST legislation is fraught with complexity as it applies to the real estate industry sector and this remains a key area of challenge for global tax authorities. We expect an ongoing trend in 2026 of both sponsors and lenders continuing to increase their focus on how VAT / GST is being funded and recovered in structures, with particular complexities arising in the "living" sector.

Certain recently announced legislative amendments have sought to reduce elements of this complexity (e.g. in the UK in relation to the sale of land to housing associations prior to the so-called "golden brick" date) and we expect taxpayers and their advisers will pay close attention in 2026 as to whether these changes materially alter the structuring of transactions in the "living" sector.

Prediction 5. Intra-group leases in connection with UK living assets

We expect a continued focus in 2026 on the application of the UK "zero-rating" rules for UK VAT purposes and the validity of claims for stamp duty land tax "group relief" in the context of the grant of intra-group leases in connection with UK assets in the "living" sector.

Prediction 6. Increased focus on methods of financing

We expect ongoing scrutiny in relation to the manner in which global real estate groups fund their investment and development structures. For example, we expect particular scrutiny of real estate structures in Australia in connection with new Australian thin capitalisation provisions and in multiple jurisdictions in relation to the amount of tax deductible third party and related party interest costs which can be supported.

In a UK context, HMRC are currently reviewing their approach to scenarios in which borrowers have paid UK-source interest to non-UK third party and related party lenders without having completed the relevant UK procedural formalities (generally comprising the filing of UK DTTP2 forms).

This issue arises frequently in an M&A context and is expected to be an area of ongoing scrutiny in 2026 in the context of UK corporate real estate transactions as well as financings and refinancings.

Prediction 7. Tax compliance headaches

Groups in the real estate industry continue to grapple with the complexity of the reporting and tax compliance issues they face across multiple jurisdictions. For example, a perennial compliance issue for groups operating in the UK is the Construction Industry Scheme (CIS) regime. Unfortunately there have been relatively few meaningful recent changes to the UK CIS regime to significantly simplify its application and this is bound to cause ongoing compliance costs and complexity throughout 2026 for real estate industry groups operating in the UK.

Prediction 8. Focus on global data centre and technology sectors

We expect global investors, lenders and tax authorities to spend increased time focussing on the structuring of data centre investments. For example, we are increasingly seeing challenges in connection with whether data centres create "permanent establishments" for tax purposes in different jurisdictions. More broadly, we expect further "permanent establishment" challenges in the context of investment in the AI and technology sectors (e.g. AI factories).

Prediction 9. "Non-resident capital gains taxes" and "property richness"

In a joint venture (JV), platform and broader fund context we expect an ongoing focus in 2026 (including in investor "side letter" negotiations) on minimising tax payments and tax filing obligations for investors in connection with "non-resident capital gains" and "property richness" in a broad range of different jurisdictions.

This is an area of particular focus as many investors during 2025 increasingly sought to deploy capital through JV, platform and separate managed account (SMA) structures focussing on narrower "pools" of assets (e.g. targeting fewer jurisdictions, with limited "dilutive" effect for non-resident chargeable gains purposes of holding assets across a broad range of jurisdictions in a typical and more traditional pan-European real estate fund).

Investors are sensitive to incurring tax filing obligations, particularly in a "blind pool" fund context, but the protections they are able to achieve in alternative structures such as SMAs may differ.

From a fund manager's perspective, the practical monitoring of "property richness" in order to comply with any investor obligations is clearly important both from a tax compliance and an investor relations standpoint.

Fund managers should also monitor recent Australian Federal Court decisions in YTL Investments Ltd v Commissioner of Taxation and Newmont v Commissioner of Taxation which relate to the definition of "real property" for Australian tax purposes. These developments together with proposed legislative amendments are likely to significantly impact fund managers with exposure to Australian real estate and infrastructure assets.

Prediction 10. Ongoing growth in JV, platform and SMA structures

Throughout 2024 and 2025, many groups in the real estate industry sought to raise capital via JV, platform and SMA structures given the challenges faced by many sponsors in the global real estate fund capital raising environment.

While we are seeing certain examples of increased traditional real estate fund raising activity, we expect JV, platform and SMA structuring to continue to grow in popularity and scale during 2026.