By Iris C. Gonzales (The Philippine Star) Updated December 09, 2009 12:00 AM
MANILA, Philippines - The Department of Finance (DOF) has reiterated its previous position that a bill seeking to grant hefty tax perks to publicly-listed companies operating as a real estate investment trust (REIT) would translate to billions in yearly losses for the government.
In a letter to Malacañang, the Finance department reiterated that the REIT bill would mean annual foregone revenue losses of P2.7 billion once it is fully implemented. For the first year of implementation alone, the government expects to lose P1 billion.
Malacanang is set to sign the REIT bill soon following ratification by the Senate and the House of Representatives last September.
Sources at the Finance department conceded that the measure would be implemented soon following the ratification by Congress and the scheduled signing of President Arroyo. Fiscal authorities nonetheless reiterated the amount of revenues that would be lost once the measure is fully implemented.
The Department of Finance was able to trim down its projected annual revenue losses from the soon-to-be-enacted law providing incentives on investments related to financing
and big-ticket real estate projects to P2.7 billion from the original estimate of P5.3 billion after Congress heeded some of the recommendations of the Finance department to reduce the tax perks.
Nonetheless, the revenue losses are still in billions, sources said.
A company operating as a REIT finds investors and buys real property. It also gives each investor either a percentage interest in the property itself or an interest in a loan secured by a mortgage or deed of trust on the property. The loan is usually for developing property and to build upon it, and then there is a division of profits upon sale, if there is a profit.
According to the ratified REIT measure, overseas Filipinos investing in REITS are exempt from payment of dividend tax for seven years from the effectivity of the law. The transfer of properties to REIT companies is also entitled to lower documentary stamp tax (DST) by 50 percent. Furthermore, the measure also grants lower creditable withholding tax (CWT) of one percent on income payments to the REIT.
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