[ manilatimes.net ] June 13, 2011
THE Bureau of Internal Revenue intends to come out with the taxation rules of the Real Estate Investment Trust Act by next month, but the debate over the minimum public ownership requirement is far from over.
BIR Commissioner Kim Jacinto-Henares told reporters that the REIT revenue regulations will be released immediately after the bureau secures a clearance from the Congressional Oversight Committee on the Comprehensive Tax Reform Program, which is reviewing the proposed tax rules before they are made public.
Prior to the congressional review, the bureau had planned to come out with the tax rules by June 30.
“From our end, [everything will be released within the year]. I don’t know the market,” Henares said.
After the government and the private sector arrived at a 40-percent compromise for the minimum public float requirement of REITs for the initial year, the Philippine Stock Exchange is now contesting the provision to raise the public float to 67 percent within three years from listing, saying the shift may be too quick for the market.
“Unless we’re a very large economy, 67 percent might be too much or too soon,” Hans Sicat, PSE president and chief executive, said, adding that the high public float requirement may prevent interested issuers from putting their quality assets in the REIT.
“If the developers lose control of the REIT very fast, they might say ‘I will not put my best asset in the REIT. I will put a less- than-prime asset.’ We have to balance it,” he said.
Sicat said the PSE wants to harmonize all the different views to come up with a market-friendly version of the implementing rules.
The Department of Finance had insisted that a lower public float would only entitle the private sector to tax perks, eroding as much as P10 billion in revenues for the government every year.
“It is a tax-eroding measure because of the dividends that you can deduct as an expense. I think that is P10 billion in tax-eroding measures per year,” Henares said.
The REIT Act lapsed into law in December 2009 but its implementation remained in limbo amid a deadlock between fiscal authorities and corporate regulators over its implementing rules.
In the absence of clear tax rules, potential issuers were unable to come forward and pursue their REIT offerings.
Early last month, the Securities and Exchange Commission released revisions to the implementing rules of the REIT, which now require issuers to sell at least 40 percent of their outstanding capital stock at the initial year, higher than the original 33 percent but lower than the proposed amendment of 51 percent.
Property developers led by Ayala Land Inc., SM Prime Holdings Inc. and Robinsons Land Corp. had expressed interest in doing REIT offerings.
REITs are companies that own and operate income-generating real estate assets which include offices, apartment buildings, hotels, warehouses, shopping centers and highway.
KRISTA ANGELA M. MONTEALEGRE
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