Tuesday, December 02, 2008 [ manilatimes.net ]
THE House Committee on Economic Affairs approved the bill that allows wider investor participation in the ownership of real estate and related assets, according to the Philippine Stock Exchange (PSE).
The Real Estate Investment Trust (REIT) bill is one of the market-friendly legislation pushed by the local bourse, along with the Personal and Equity Retirement Account Act and the Credit Information System Act. The latter two have since been enacted into law.
“Under [REIT] system, ordinary Filipinos will not only own a part of a mall or hotel but will share annually in the income of these establishments. The REIT system is a win-win for our economy. It will help develop our capital markets and at the same time provide investors with a stable source of dividend income,” Francis Lim, PSE president and chief executive officer, said in a statement.
The proposed law would allow the establishment of companies that will own income-generating real estate assets and real estate-related assets, the shares of which will be available to the public as an investment instrument.
The REIT bill will mandate the corporations to list these stocks with the local bourse but limits the concentration of the ownership of its shares to ensure that no particular group of people wholly owns and controls the entity.
The House version included provisions to protect investors such as a cap in investments in synthetic products, mandatory disclosure of material information relating to the REIT and mandatory return of investment in case of delisting of the REIT by the stock exchange.
Investors are also guaranteed that 90 percent of the REIT’s distributable income will be declared and paid out as dividends to its shareholders. This will be done no later than the 15th day of the fourth month following the end of its fiscal year. The bill also expanded the membership of the body that will draft the REIT law’s implementing rules and regulations.
Earlier, the PSE said the proposal would cause no tax leakage despite the perks that it has provided as incentives for companies and investors alike.
Under the proposal, if the income of a REIT company reaches P100 million, 90 percent of that should be declared as dividends to shareholders and the remaining P10 million will be subject to a tax of 25 percent for 7 years. In contrast, ordinary corporations are subject to 30 percent corporate income tax by next year.
The dividends received by the shareholders are also subject to a 10- percent tax, unless exempted by law. Under the Senate version of the bill, domestic firms, resident foreign companies and overseas Filipino investors are exempt from the 10- percent income tax.
Also exempted from taxes are the initial and secondary offerings of REIT securities wile transfers of real property to a REIT are exempted from paying documentary stamp tax and creditable withholding tax.-- Likha Cuevas-Miel
