Issuance of REIT tax rules postponed to July -- BIR

By Neil Jerome C. Morales, BusinessWorld Tax Rules on real estate investment trusts (REIT) should be ready next month instead of end-June after Senate decided it wanted a say on the issue, Bureau of Internal Revenue (BIR) Commissioner Kim Jacinto-Henares said late last week. “[Publication] might be delayed a bit because there is a special request to give it to the committee on oversight,” Ms. Henares told reporters in a chance interview, referring to the tax policy for stock corporations that pool investor funds to manage real estate assets. “It has to be July,” Ms. Henares said. Senator Ralph G. Recto, chairman of the Congressional Oversight Committee on the Comprehensive Tax Reform Program, had last week required the state agency to seek lawmakers’ clearance before issuing the tax rules. This, after the Securities and Exchange Commission (SEC) approved only last month implementing rules that required a 40% public float for REITs after the framework law was passed roughly two years ago. The minimum public ownership should increase to 67% within three years from its listing. Ms. Henares said the BIR rules will be in line with the revised requirements of the SEC. “You can deduct dividends as an expense before you deduct the tax,” Ms. Henares said, referring to the perks of the REIT. REIT firms are required to pay shareholders 90% of its distributable income as dividends, meaning only the remaining amount will be subject to the 30% income tax rate. “It is a tax-eroding measure because of the dividends that you can deduct as an expense. I think that is P10 billion in tax eroding measures per year,” Ms. Henares said. But observers said the higher public float might give some property giants pause. “Our view was that the shift to 67% float in three years might be too quick from the market perspective,” PSE President and Chief Executive Hans B. Sicat told reporters late last week, noting that REITs in Thailand and Malaysia have lower public float levels. 14 Jun 2011