Ari Birnbaum

Type of the article: Research Article

Abstract
Family offices allocate much of their long-horizon capital to directly held real estate, yet the holding vehicle for cross-border property is usually chosen as a tax-minimization detail rather than analyzed as an investment decision. This study aims to determine whether the choice of governance structure affects the after-tax structural efficiency of cross-border residential real estate investment through the alignment between the structure’s tax treatment and the portfolio’s return composition, rather than through statutory tax rates alone. A stylized counterfactual simulation applies five domestic fiscal regimes (German GbR, asset-managing GmbH, commercial GmbH, Canadian individual ownership, and Canadian CCPC) to each of 42 residential and mixed-use properties (34 in Berlin, 8 in Montreal), using audited accounting data for 2017–2023 and a 2018–2028 horizon; after-tax structural efficiency is measured by input-oriented, variable-returns-to-scale Data Envelopment Analysis estimated separately for each regime on the same 42 properties. Mean scores are 0.9583 (GbR), 0.9477 (Canadian individual), 0.9381 (commercial GmbH), 0.9246 (CCPC), and 0.9183 (asset-managing GmbH); 33 of 42 properties change rank across regimes, with gaps up to 10 percentage points. The ranking contradicts statutory tax burdens: the lowest-taxed structure is the least efficient. A pre-tax capital gains ratio, identical under every regime, moderates the efficiency effect of capital gains taxation (interaction 15.4 percentage points, p = 0.009), and the association strengthens with the tax differential (up to ρ = −0.759). Efficient structure choice therefore depends on the fit between return composition and fiscal treatment, regulatory specificity, rather than on headline rates.

Acknowledgements
The authors thank the principals of the family office for access to the property-level accounting records. No external funding was received.