DENMARK - Denmark could be the next European market to introduce real estate investment trusts (REITs), if lobbying by the Danish Property Federation (DPF) proves successful.

A report published next week will urge the government to mitigate a tax regime which requires investors to pay both corporation tax and income tax on indirect real estate investments.

"Tax transparency is the issue," said DPF chief executive Rolf Norstrand. "Everything else must be flexible."

Although Denmark is unlikely to introduce a REIT in the short term, Norstrand said discussions around an EU REIT directive and OECD criticisms of double taxation had bolstered his case.

"A year ago, when we first raised the issue, the minister was afraid of losing tax revenues. Since then other countries have introduced REITs and the Danish government has been able to see there's a tax-competitive aspect to it. That will help," he said.

Property tax anomalies remain in some markets that have introduced REITs. REIT-style legislation in Finland in 2006, for instance, failed to lift double-taxation provisions.

The UK Treasury announced in July it would remove tax penalties on investment in UK property authorised investment funds (PAIFs) from 2008 in a move that will give them the same tax status as REITs introduced at the beginning of the year.

REITs have turned in a credible performance in European markets that have introduced them, although the UK has bucked a largely positive trend, with REITs among the worst performers in the FTSE All-Share index since their introduction.