Philippines To Announce REIT Tax Exemptions
Thursday, May 19, 2011
It is expected that the much-delayed approval by the Bureau of Internal Revenue
(BIR) of the proposed tax incentives for real estate investment trusts (REITs)
in the Philippines will be available shortly.
The latest delay was caused by a stipulation that the government would not
be able to consider approving the proposed regulations for the operation of
REITs, unless it was agreed to increase their minimum percentage listing on
the stock exchange.
Under the previous regulations, investors would take shares in a REIT, established
as a company with a minimum share capital of PHP300m (USD6.9m), which would
have, at all times after listing, a public float of at least 33% of its outstanding
shares. It now appears to have been agreed by the BIR that a REIT will be required
to maintain a 40% minimum public float on the stock exchange, to be raised to
at least 67% within three years from the REIT’s initial listing.
The new vehicles have been allocated certain tax benefits, including the basing
of the 30% company income tax rate on their net taxable income, but only after
the distribution of a minimum 90% dividend to their shareholders. There would also
be, for example, an exemption from the initial public offering tax when listing
A further discussion has recently arisen around the applicability, or not,
of value added tax (VAT) on properties transferred into a REIT. It is now believed
that VAT will not be charged as long as the properties can
be classified as capital assets – that is, they could never have been
considered part of the property owner’s trading assets. This could mean
that such assets as shopping malls and offices may not be eligible for insertion
into a REIT.
Kim Henares, its Commissioner, has said that the BIR would issue the relevant
REIT revenue regulations next month.