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DOF clears tax rules for REIT Act

By Katrina Mennen A. Valdez, Reporter
[manilatimes.net] July 7, 2011

THE Department of Finance has approved the delayed and disputed taxation rules of the Real Estate Investment Trust Act, with the guidelines to take effect within two weeks.

Finance Secretary Cesar Purisima told reporters on Wednesday that he already approved the revenue regulation prepared by the Bureau of Internal Revenue.

“I have already signed the RR, and it will be published within two days, and hence, would take effect after two weeks upon its publication,” Purisima said.

The REIT Act lapsed into law in December 2009 but its implementation has been put on hold as fiscal authorities and corporate regulators failed to agree on the proportion of ownership between the real estate firms and the public.

REITs are companies that own and operate income-generating real estate assets, which include offices, apartment buildings, hotels, warehouses, shopping centers and highways.

Property developers led by Ayala Land Inc., SM Prime Holdings Inc. and Robinsons Land Corporation had expressed interest in undertaking REIT offerings.

The DOF had insisted that REIT companies float at least 51 percent of their respective shares, saying the market’s original proposal of 33 percent was too low.

The government and the private sector struck a compromise of 40-percent minimum public float for the first year, with public ownership gradually rising to 67 percent within three years from the REIT listing.

BIR Commissioner Kim Jacinto-Henares had said that since the REIT law would incur a revenue lesion of at least P10 billion a year for the government, its very essence, which is to expand the public’s ownership and enjoyment of the fruits from this sector, shall be the basis of the tax relief given to real estate companies.
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