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MANILA, Philippines - The Aquino administration will not compromise the ruling covering real estate investment trusts (REIT) where the Bureau of Internal Revenue (BIR) will require substantial public ownership before they can avail of tax perks and incentives.
BIR Commissioner Kim Henares said the government would proceed with the implementation of the regulation.
In December 2009, Congress passed the REIT Act but its implementation has been put on hold as fiscal authorities and the Securities and Exchange Commission (SEC) failed to agree on how to divide the ownership between real estate companies and the public.
Alternative Investment Vehicle in Real Estate
Incentives under the REIT Act are expected to translate to losses of P10 billion for the government.
According to the DOF position, REITs must float at least 51 percent of the shares to the public to avail of tax incentives and other perks.
The local equities market, on the other hand, preferred 33 percent. After months of standoff, the government and the private sector reached a compromise deal requiring a minimum public float of 40 percent that will increase to 67 percent within three years after listing of the REIT companies.
Companies that own and operate income-generating real estate assets are considered REIT companies. These companies include offices, apartment buildings, hotels, warehouses, shopping centers and highways.
On Thursday, SM Prime Holdings, Inc. announced that it was dropping a plan to put up REIT because of the stiff regulations by the bureau.
The company said that the firm, which announced last year to raise some P500 million via REIT would be exploring other funding options. Other real estate companies such as the Ayala Land and Robinsons Land Corp. have earlier expressed interest in doing REIT offerings.
The BIR, the government’s main revenue agency has been assigned a revenue goal of P940 billion this year and P1.066 trillion in 2012.
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