[ Malaya.com.ph ] December 21, 2009
GMA nixes DoF veto recommendation
The Real Estate Investment Trust measure is now a law, RA 9856, after President Arroyo let lapse the 30-day period within which to veto the bill.
The Department of Finance had recommended veto of the bill basically because of its impact on tax collection but the Philippine Stock Exchange lobbied with Malacanang.
"We are getting a lot of interest from many of our property firms for REIT listings. This landmark law will put the Philippines at par with the rest of the world which has had REITs for over 20 years," PSE president Francis Lim said.
"We worked extremely hard on this piece of legislation for the past three years and we were seriously concerned that our time and efforts would go down the drain when we were informed that the DOF recommended presidential veto of the bill. But we think that Congress had already addressed the concerns of the DOF even up to the bicameral conference committee," Lim said.
In a last-ditch effort to save the bill, the PSE filed position papers with the Office of the President citing various reasons why the bill should become a law.Real investment trusts are an investment outlet
REITs are securities listed on the stock exchange which represent holdings in a corporation investing in real estate. The income of such a corporation is mainly distributed among investors. Because of the underlying income stream and the potential for appreciation, REITs offer high yields.
Lim said that contrary to fears that the fiscal incentives in the law may undermine the revenues of government, the REIT law can even help contribute to the government coffers.
"The REIT law promotes transparency for tax reporting purposes. Moreover, the new business opportunities that will be created should translate to a broader tax base for government."
"The perceived tax revenue loss is more imaginary than real. There is at present no REIT industry to speak of. Without a REIT law in place, there would be no REIT transactions and, therefore, there would be no tax revenues. Furthermore, an independent study conducted by a team from the University of Asia and the Pacific concluded that the government will not only recover every peso of tax incentive but stands to gain between P0.15 to P0.35 more over a 15-year period. This conclusion was made on the basis of the March 28, 2009 version of the bill, which granted far more liberal tax incentives than the enrolled version."
The REIT Act lapsed into law on December 17, 30 days from receipt of the enrolled bill by the Office of the President from Congress.
"The REIT law will develop the capital markets in the Philippines and provide much needed investment opportunities for institutional and retail investors to increase the wealth of the population through a lower risk instrument. It will also boost the development of real estate in the country by releasing capital for reinvestment into land and buildings, leading to increased productivity and more jobs," Mr. Lim said. "It will attract foreign investment into the country and broaden control of a key sector of the economy, putting it into the hands of investors."
Aside from the REIT law, another landmark capital market reform was the law permanently abolishing the documentary stamp tax (DST) which was passed last June 30. The Personal and Equity Retirement Account Law and Credit Information System Law were also enacted last year to further enhance the capital markets.
The REIT law will provide the regulatory and tax framework for REITs, which are companies that own and operate income-producing real estate assets. Shares of these REITs are to be listed on and traded at the PSE.
To encourage investments in REITs, the REIT law provides certain tax incentives to the REIT. However, in order to enjoy these incentives, the REIT must be listed with a stock exchange and maintain its status as a listed company and annually give out at least 90 percent of its distributable income to shareholders.
In the Senate, the REIT law was authored by Senator Edgardo Angara. At the House, versions of the REIT law were filed by Representatives Juan Edgardo Angara, Abraham Kahlil Mitra, Paul Daza, Hermilando Mandanas, Ramon Durano VI, Eduardo Nonato Joson and Roman Romulo.
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