Vol. XXII, No. 184 [ BusinessWorld Online ]
Wednesday, April 22, 2009 | MANILA, PHILIPPINES
THE HOUSE ways and means committee has approved giving tax incentives to real estate investment trusts (REITs), a mechanism that will allow investors to co-own income-generating property.
Antique Rep. Exequiel B. Javier, committee chairman, said tax perks sought by the bill authored by Aurora Rep. Juan Edgardo M. Angara, were necessary to promote REITs.
Under the measure, a REIT be will exempted from the following taxes: corporate income tax, creditable withholding taxes of income payments; documentary stamp tax (DST) and creditable withholding tax on the transfer of real property; DST on the sale, barter, exchange or other disposition of listed investor securities though the stock exchange, including block sales or cross sales for five years; and the tax on initial public offering and secondary offering of securities.
REITs will have to pay the DST on the original issuance of investor securities; the stock transaction tax on the sale, barter, exchange or other disposition of securities through the stock market, including block sales or cross sales; the final tax of 10% on cash or property dividends.
Francis Ed. Lim, president of the Philippine Stock Exchange (PSE), said the bill has safeguards so that tax incentives would not be abused. "[The] apprehension is valid, but we already have put safeguards in place to avoid concentration of wealth in the hands of a few," he said during the committee’s meeting yesterday.
The bill states that to qualify as a public company, a REIT must have at least 1,000 shareholders.
Half of the stock should not be owned, directly or indirectly, by five persons or less and no person must beneficially own or control, directly or indirectly, more than 30% of the outstanding stock in a REIT.
The House bill requires a REIT to have a minimum paid-up capital of P1 billion, higher than the P100 million required under the Senate version earlier approved on second reading.
Finance Undersecretary Gil S. Beltran reiterated the Finance department’s opposition to the bill, saying that "even without incentives, the instrument would be attractive to investors."