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SARS Issues Draft Interpretation Note On REITS

Monday, May 16, 2016

The South African Revenue Service (SARS) has issued a draft interpretation note providing guidance on Section 25BB of South Africa's Income Tax Act, which deals with the taxation of real estate investment trusts (REITs).

Section 25BB went into effect for years of assessment commencing on or after April 1, 2013. In order to qualify as a REIT, a company or a portfolio of a collective investment scheme in property must be a resident of South Africa, listed on the Johannesburg Stock Exchange (JSE) as a REIT, and meet the JSE's listings requirements.

South African REITs own several kinds of commercial property like shopping centers, office buildings, factories, warehouses, hotels, hospitals and, to a lesser extent, residential property, in South Africa. Some REITs also invest in property in other countries.

SARS noted that the effect of Section 25BB is to treat a REIT or a controlled company as a flow-through entity for income tax purposes. This treatment is achieved by allowing the REIT, or a REIT's resident controlled company, a deduction for a "qualifying distribution."

The deductible amount of the qualifying distribution is limited to the taxable income of the REIT or controlled company before taking into account the qualifying distribution, any assessed loss brought forward from the previous year of assessment, and any taxable capital gain.

A distribution by a REIT or a controlled company will constitute a deductible qualifying distribution only if at least 75 percent of any gross income derived by the REIT or controlled company for the preceding year of assessment consisted of "rental income." Rental income includes dividends from another REIT, dividends or foreign dividends from a property company, a qualifying distribution from a controlled company, and income from the use of immovable property.

Comments on the draft interpretation note should be received by SARS on or before July 29, 2016.

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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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