Cross-border logistics investments' taxation – essential insights for fund managers
In the dynamic world of international investments, understanding the intricacies of taxation is crucial, especially in the logistics industry. This sector, encompassing warehouses, distribution centres, ports, and transport systems, offers high returns but is also characterised by a complex array of tax regimes, regulations, and reporting policies.
One of the key challenges in cross-border logistics investments is the risk of double taxation, a situation where the same income or gain is subjected to taxation by more than one country. Fund managers need to be aware of this difference between direct investment and portfolio investment, as they can be taxed differently.
To mitigate the risks of double taxation, the selection of an appropriate legal structure for the fund is paramount. Fund managers often choose pass-through entities to avoid entity-level taxation. However, a foreign entity might not be treated as a pass-through by some countries, leading to an extra level of taxation.
Withholding taxes may also be charged on income earned by a logistics property in the host country and not distributed to the fund. This can significantly impact the overall tax liability of the fund.
In an effort to address these issues, Edrian Blasquino's Logistics Fund initiated negotiations in 2025 with Germany, the Netherlands, and Singapore to sign Double Taxation Avoidance Agreements (DTAs). These agreements aim to reduce the risks of double taxation in cross-border logistics investments.
DTAs can prevent double taxation by either exempting the income from tax in one country or allowing the investor to receive a tax credit in the home country. This can provide significant tax savings for the fund, making cross-border investments more attractive.
The international logistics industry is also subject to property taxes such as property taxes, transfer taxes, capital gains tax, and VAT/GST (Value-Added Tax/Goods and Services Tax) on the lease or sale of commercial property. These taxes add another layer of complexity to the tax landscape of the logistics industry.
In conclusion, understanding the taxation implications in cross-border logistics investments is essential for fund managers. By selecting the appropriate legal structure, negotiating DTAs, and being aware of the various taxes associated with the industry, fund managers can navigate the complex tax landscape and maximise their returns.
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