Cross-border property investment: The hidden compliance risks in 2026 

Cross-border property deals may be back on the radar for some investors now, amid a new landscape of rules for successful international real estate investment. After several years shaped by disrupted deal flow, uncertain valuations, and higher interest rates, capital is ready to move.

The 2026 Investment Intentions Survey from INREV, ANREV, and PREA shows that global investor confidence in real estate is now at its highest level since 2019. The report goes on to say that 38% of investors should increase allocations over the next two years, but at the same time, those investors are likely to make their moves more selectively. 

Real estate has long been attractive to institutional investors, private clients, family offices, developers, and asset managers seeking diversification and long-term capital preservation alongside income. But shrewd decision-makers understand that an overseas property asset is only the beginning of the investment story. They know they must compare headline returns with realised value and account for factors like regulatory delays, compliance costs, tax leakage, ownership disclosure obligations, and repatriation friction. And these are the silent value eroders that sit around the asset, not in it. 

The new risk landscape in 2026 

In the new era, property investors face a more fragmented regulatory environment when looking at cross-border transactions. This is partly due to governments that are under pressure to raise tax revenue, improve financial transparency, and monitor ownership more closely. Those rules can often diverge across jurisdictions, to create a much more complex operating environment than the one that existed before the pandemic.  

International real estate assets are often owned through special-purpose vehicles like trusts, funds, holding companies, or joint ventures. Alongside these complex structures, financing vehicles may also involve complicated parent company loans, offshore lenders, or hybrid instruments. Each new layer exposes an investor to further challenges related to transfer pricing, substance, reporting, tax, or beneficial ownership rules.  

In December 2025, the OECD recognised the pledge by 26 jurisdictions to implement a new tax transparency framework for offshore real estate. This should provide tax authorities with information related to:  

• Ownership details 

• Transaction data 

• Rental income  

• Property values 

The result is that deal details that may once have remained within a private financial model may now be visible to tax authorities and regulators.  

Hidden tax frictions that erode returns 

Taxation often muddies the water for major property investors because it applies at several points in the property investment life cycle. Investors may need to model purchase price, rental income, operating costs, and expected exit values without fully understanding the cumulative effect of taxes. Those taxes could apply at acquisition, ownership, financing flows, distributions, and disposal to give an idea of the level of complexity. 

Withholding tax on rental income is a pertinent example. Local rules may require tax to be withheld before owners can distribute income to foreign parties. And while there may be treaty relief to consider, that’s not always automatic and may depend on many factors, such as beneficial ownership, economic substance, and timely documentation. 

Capital gains tax can further complicate matters depending on how each jurisdiction applies the rules. Some may realise tax during the sale of the real estate, but others may tax indirect transfers, like share sales within a property-rich company. Then, transaction taxes can apply at acquisition and, in some markets, at restructuring or disposal. Local property taxes, sector-specific charges, and municipal levies can also reduce net returns over any holding period. 

VAT or goods and services tax treatment can affect how developers view cash flow recoverability and pricing, and even if tax treaties exist, there is still a risk of double taxation. Some treaty requirements may not apply to certain entities or may be subject to domestic anti-avoidance rules.  

The key lesson when it comes to cross-border tax is that obligations can span the full investment cycle, from acquisition all the way through to exit. 

Structuring cross-border investments and getting it right 

From the very beginning, investors must set up the right business structure to protect value, improve governance, and support efficient cash flows. Special-purpose vehicles and holding companies are a strong approach here, because they isolate liability, support co-investment, and make future disposals easier. That said, a structure that worked well five years ago may no longer be compliant or efficient today. 

Regulators may challenge a holding company established in a low-tax jurisdiction if it lacks sufficient substance. A specific financing model may also run into thin capitalisation limits or hybrid mismatch provisions.  

There's a danger that one jurisdiction may view a specific entity as transparent while another sees it as opaque. And a financing instrument that represents debt in one country could be treated as equity in another.  

These challenges underscore the importance of creating a good structure in 2026 rather than taking the most aggressive route toward tax efficiency. The best structure will be a resilient, commercially defensible model that aligns tax, regulatory, financing, legal, and reporting requirements across all relevant jurisdictions.