MANILA - The Philippines' tax bureau Tuesday released rules detailing the tax incentives for real estate investment trusts, the last hurdle for the creation of REITs locally.
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| Tax Bureau Issues Rules |
To qualify for such tax perks, these trusts must initially sell at least 40% of their stock to the public, the Bureau of Internal Revenue said, a requirement that mirrors that imposed by the Securities and Exchange Commission for the formation of such trusts.
The tax bureau had wanted the trusts to sell at least 51% to qualify for the tax breaks, delaying the implementation of the 2009 law that allows for the creation of REITs.
The tax bureau said the minimum public float must rise to 67% after three years before the trust can deduct dividends paid to shareholders from gross income when filing corporate taxes.
Dividends paid by the trusts to foreigners, corporations and overseas Filipino investors will be exempt from the 10% dividend tax for seven years.
Property transfers under such trusts will also be charged income tax, value- added tax, capital gains tax and documentary stamp tax, although the amount charged will be discounted.
While the trusts are exempt from paying the 12% value-added tax on the sale, swap or transfer of securities forming part of its real estate-related assets, their gross sales from disposal of real property and gross receipts of rental of such property will be subject to VAT.
The BIR said the tax incentives enjoyed by a REIT, however, will be withdrawn and the company asked to return the incentives to the government if it fails to list on the stock exchange within two years from the transfer of the real estate assets; fails to maintain its status as a public company; fails to maintain its listed status; or if it fails to distribute to shareholders 90% of its income.
The tax bureau had wanted the trusts to sell at least 51% to qualify for the tax breaks, delaying the implementation of the 2009 law that allows for the creation of REITs.
The tax bureau said the minimum public float must rise to 67% after three years before the trust can deduct dividends paid to shareholders from gross income when filing corporate taxes.
Dividends paid by the trusts to foreigners, corporations and overseas Filipino investors will be exempt from the 10% dividend tax for seven years.
Property transfers under such trusts will also be charged income tax, value- added tax, capital gains tax and documentary stamp tax, although the amount charged will be discounted.
While the trusts are exempt from paying the 12% value-added tax on the sale, swap or transfer of securities forming part of its real estate-related assets, their gross sales from disposal of real property and gross receipts of rental of such property will be subject to VAT.
The BIR said the tax incentives enjoyed by a REIT, however, will be withdrawn and the company asked to return the incentives to the government if it fails to list on the stock exchange within two years from the transfer of the real estate assets; fails to maintain its status as a public company; fails to maintain its listed status; or if it fails to distribute to shareholders 90% of its income.
A REIT is a company created to own and manage income-generating properties such as office buildings, residential towers, shopping centers, hotels, warehouses, hospitals, airports and tollways. Several listed companies, including Ayala Land Inc. (ALI.PH), Robinsons Land Corp. (RLC.PH) and SM Prime Holdings Inc. (SMPH.PH), have made preparations to launch such trusts.
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