Finance dep’t review of REIT rules still ongoing

THE Finance department remains undecided on relaxing tax policy on real estate investment trusts (REITs), which have languished since the rules governing the sector came into force more than seven years ago.

“We’re studying it,” Finance Secretary Carlos G. Dominguez III told reporters after leading the induction of the new officers and board members of the Economic Journalists Association of the Philippines in Pasay City late Monday.

Mr. Dominguez has expressed a willingness to review the implementing rules and regulations ( IRR) of Republic Act No. 9856 or the REIT Act even before assuming the leadership of the Department of Finance (DoF) in the middle of 2016.

The measure, which allows for the creation of a stock corporation that owns and finances income- generating real estate, lapsed into law in December 2009.

The previous administration, however, imposed stringent rules to prevent possible revenue erosion from the tax perks mandated by law.

For instance, the government subjected the transfer of assets into REITs to taxation and levied a 12% rate on additional income generated. It also set the minimum public ownership of such trusts at 40% for the first two years of their listing and 67% thereafter.

Upon taking the helm of the Finance department, Mr. Dominguez ordered a review of the IRR. The Securities and Exchange Commission ( SEC) has since committed to lowering the public ownership requirement to the 33% minimum mandated by law.

In July, SEC Chair Teresita J. Herbosa announced that the DoF set a target to release the revised IRR within the first six months of the Duterte administration.

However, when asked for an update on the review particularly of the tax provisions of the IRR, Mr. Dominguez said: “That’s why we’re studying it; we don’t want to be gamed.”

“The [problem with] REIT is not the tax, it’s an IRR issue. There’s already a law; it’s just a matter of writing the IRR. So, we are thinking about that very well because we don’t want it screwed up,” Mr. Dominguez noted.

The establishment of REITs is expected to spur activity in the property sector and generate employment, supporting the government’s plan to accelerate spending on public infrastructure.

SM Prime Holdings, Inc., Megaworld Corp., Century Properties Group, Inc. and other property developers have expressed an interest in forming REITs in the wake of plans to review the IRR. —