MANILA, Philippines - Income payments to real estate investment trusts (REITs) will be subject to a creditable withholding tax of one percent, the Bureau of Internal Revenue (BIR) reiterated.
This after the Philippine Stock Exchange (PSE) expressed interest to revive talks on the REIT framework, which property developers strongly objected to due to exorbitant taxation and tedious ownership requirements.
Since it was passed into law in 2009, the REIT Act has yet to take off as no corporation has firmed up interest to register as a REIT corporation.
PSE president Hans Sicat late last month said the exchange would ask the government to ease a BIR ruling that will impose value added taxes on the transfer of real estate from property owners to the REIT. Previously, these transfers were VAT-exempt.
This means that property owners who want to tap the REIT would need to shell out an additional cost of 12 percent.
Another issue being strongly opposed by property firms is the requirement that REIT firms must increase its minimum public ownership to 67 percent in the third year after the listing of the REIT. The private sector wants this brought down to 33.33 percent.
The rules of the BIR state that REITs could avail of tax incentives if they maintain the required minimum public ownership and allocate to shareholders at least 90 percent of their distributable income.
REITs are companies that own and operate income-generating real estate assets, including offices, apartment buildings, hotels, warehouses and shopping centers.
Among the property firms that earlier signified interest to sell shares in public real estate trusts were Ayala Land Inc., Robinsons Land Corp. and SM Prime Holdings.
The REIT law was envisioned to democratize wealth by allowing the investing public to share in the returns of income-generating real estate currently owned by the few.
