By Neil Jerome C. Morales (The
Philippine Star) | Updated January 3, 2014 - 12:00am
MANILA, Philippines - The Philippine
Stock Exchange (PSE) is seeking the revival of the real estate investment trust
(REIT), an investment option stalled by tight taxation framework.
The stock market operator is pushing
for the relaxation of tax rules to make Philippine REITs more competitive in
the region, its top official said.
Revisions in the implementing rules
and regulations of the REIT were discussed during the most recent Capital
Market Development Council (CMDC) meeting, said PSE president and CEO Hans B.
Sicat.
CMDC is chaired by Finance Secretary
Cesar V. Purisima. “But at the end of the day, it requires the Securities and
Exchange Commission (SEC) to update and change the implementing rules and
regulation and also the taxation authorities,” Sicat said.
The REIT Law took effect in December
2009, approving the creation of REIT corporations that use a pool of investor
funds to purchase and manage real estate assets.
However, implementing rules of the
Bureau of Internal Revenue (BIR) and SEC relating to the minimum public
ownership, the imposition of value-added tax on property transfers and the
requirement of escrow dampened the interest of property firms.
“If we have a product that has an
extremely high friction cost and very difficult rules to comply with, they
simply won’t happen,” Sicat said.
Property firms and the PSE oppose the
tax on transfer of assets to the REIT company, a rule that is not present in
other jurisdictions, Sicat said.
To set up a REIT, the potential issuer
must form a REIT corporation to which the issuer will have to transfer its
REIT-able assets.
“[The revision] becomes more important
now because our colleagues at the stock exchange of Thailand are launching
their own REIT product soon,” Sicat said.
Hence, regional and global investors
looking for REITs might go to other jurisdictions.
Several property giants earlier
expressed interest in REIT ventures, among them SM Prime Holdings Inc., Ayala
Land Inc. and Robinsons Land Corp. However, no REIT companies have yet to list
in the local bourse given restrictive taxation policies.
“The focus should be, from a policy
perspective, on trying to be supportive of an end result where you have a
deeper market,” Sicat said.
The PSE estimates that the Philippines
can generate at least $2.4 billion in new investments from the private sector
because of the additional capital that the REIT structure can provide.
In the first year of implementation
alone, foregone revenues of the BIR will be more than compensated by higher
taxes from increased transactions in the local bourse, Sicat said.
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