Real Estate Thin Capitalization

The Situation

A client with operations in Spain requested assistance with evaluating the capital structure of a real estate special purpose vehicle to comply with the Spanish thin capitalization requirements.

NERA's Role

To assess whether the tested party's level of gearing was consistent with the arm's length outcome, NERA experts calculated interquartile range for gearing levels reported by companies comparable to the client's special purpose vehicle. The results of this analysis were substantiated using the Capital Asset Pricing Model.

The Result

The study formed part of the client's APA with the Spanish tax administration.