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Philippines Stock Exchange To Press For REIT Tax Changes

Friday, January 3, 2014

The Philippine Stock Exchange's (PSE) President and Chief Executive Officer Hans Sicat has disclosed that the exchange will now make a concerted effort to convince the Government to relax the regulations, including tax rules, applying to real-estate investment trusts (REITs).

Sicat pointed out that, under the present rules, REITS were so unattractive to investors that no such structure had yet been floated on the PSE. In addition, in competition with the PSE, foreign investors will shortly be able to invest in REITs on the Stock Exchange of Thailand.

In particular, Sicat is hoping to change the mind of the Department of Finance (DOF) and the Bureau of Internal Revenue over the 12 percent value added tax payable on assets transferred into a REIT, and its 30 percent income tax rate, which are both said to compare unfavourably with competing tax structures in neighbouring countries.

Furthermore, the PSE is concerned at the minimum 67 percent public majority stake required in a REIT after three years, after a 40 percent minimum at initial listing.

The DOF has previously insisted on strict rules governing the establishment of REITs, to ensure that they are not used purely for their tax incentives and to minimize their tax-eroding effect. Its intent has been that the real estate sector should not unduly benefit from the transfer of property assets into a REIT.