REIT launch likely to be derailed anew

MANILA, Philippines - Plans to launch the long-delayed real estate investment trusts (REIT) in the country could be derailed anew as stringent tax rules will stay despite relaxation of public float requirements.

“BIR is bound by what is provided in the law as far as tax treatment is concerned. So we do not have flexibility as to tax treatment,” Bureau of Internal Revenue (BIR) assistant commissioner Marissa Cabreros told The STAR yesterday.

The tax rules, contained in Revenue Regulations 13-2011, spell out levies on transfer of properties and shares of stock as well as REIT operations themselves.

But Cabreros said in a text message regulations were consistent with the law and that BIR will “abide by it.”

Enacted in 2009, RA 9856 encourages investors to invest in property projects, instead of to firms undertaking them, and earn sustained revenue stream.

But five years after rules were released, no REIT project has been launched, blamed on its high public ownership requirement of 51 percent and taxes.

Finance Secretary Carlos Dominguez, upon taking over, ordered the Securities and Exchange Commission (SEC) to review REIT public float clause, which will now be reduced to 33 percent.

“We already finished with the study and we will definitely propose a lower minimum public ownership requirement,” SEC chair Teresita Herbosa told reporters last Tuesday.

Still, Philippine Stock Exchange president Hans Sicat said it is unlikely for REIT to push through without BIR revising its tax rules.

“I hope BIR and DOF (Department of Finance) can take out that tax. Otherwise, you won’t have a REIT product and government will continue to collect zero (revenues from it),” Sicat said in a text message.

“Again, all one has to do is look at empirical evidence around the region and world and see the net benefits of having a REIT asset class,” he said.

Sought for comment, SM Investments Corp. said REIT is still being considered under a “conducive environment.”

“For something that cannot be worked out, I think we just have to work with Congress for possible amendments to the law,” said Corazon Guidote, senior vice president for investor relations.