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BIR Approves Philippines' REIT Tax Incentives

Thursday, June 24, 2010

The Philippines’ Bureau of Internal Revenue (BIR) has approved draft rules and regulations, including tax provisions, for the establishment of real estate investment trusts (REITs).

The new regulations will allow companies to obtain capital by listing their Philippines income-producing property assets on the Philippine Stock Exchange (PSE) within a REIT. It is required to maintain that listing and to distribute annually at least 90% of its income to its shareholders.

Investors would take shares in the REIT which would have a minimum share capital of PHP300m (USD6.6m) and, at all times after listing, have at least 1,000 shareholders with at least 30% in total of its outstanding shares.

At least 75% of the REIT must be invested in, or consist of, property located in the Philippines. The total borrowings and deferred payments of a REIT must not exceed 35% of the value of its deposited property, unless it has an investment-grade rating, in which case it may borrow not more than 70% of the value of its deposited property.

To encourage the establishment of REITs, the regulations provide tax incentives to a REIT and its shareholders. For example, its 30% company income tax rate will be based on the REIT's net taxable income, but only after deducting the 90% dividend distribution to its shareholders.

Transfers of property to the REIT will be subject to only 50% of the applicable documentary stamp tax (DST). Nor will the transferor of such property be subject to income tax or capital gains tax. Value added tax (VAT) will be payable, unless the transferor is a taxpayer engaged in real estate business.

Sale of shares of the REIT through the stock exchange will be exempt from DST, and the REIT will also be exempt from the initial public offering tax when it offers its shares to the public through a local stock exchange.

In general, dividends paid by the REIT will be subject to a final tax of 10%, unless paid to a domestic or resident foreign corporation or an overseas Filipino investor (OFW). In the case of OFWs, the exemption will remain for a period of seven years from the implementation date of the regulations.

A REIT will be subject to VAT on sales arising from any disposal of property, and on its gross receipts from the rental of property, but it will not be considered as a dealer in securities and will not be subject to VAT on the sale, exchange, or transfer of securities forming part of its property-related assets.

The BIR will now accept comments on the rules and regulations, before issuing a final version.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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