BIR firm on REIT law stand

MONDAY, 23 JANUARY 2012 22:20 MIGUEL R. CAMUS / REPORTER

The Philippine Stock Exchange (PSE) is ready to restart talks with the government on the Real Estate Investment Trust (REIT) law, which has failed to take off after the Department of Finance (DOF) last year imposed stringent tax and public ownership requirements.

But this could prove difficult with the Bureau of Internal Revenue (BIR) insisting that further discussions regarding REITs are no longer necessary, BIR commissioner Kim Jacinto-Henares said.

“We have already come out with a revenue regulation. And I think that’s it. We cannot keep going back there,” Henares said in an interview.

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PSE president Hans Sicat signaled last week that the bourse plans to reopen discussions given the dearth of applications for REITs.

“We have zero [ REIT applications] right now. There is no participation from any of the developers,” Sicat said at the sidelines of The Urban Land Institute’s presentation of emerging real estate trends in Asia held in Makati City.

“There is no way about it but to bring REITs back up for discussion. Hopefully we can get to a structure that is more market friendly,” he said.

The BIR’s tax regulations for REITs, which contained a contentious provision that one time property transfers will be subject to the 12 percent value added tax (VAT), thus increasing the costs for establishing a REIT firm, was widely blamed by market participants as a major reason property developers shunned the law.

A second issue, the requirement for a REIT to sell at least 67 percent of its outstanding capital in three years, was separately imposed by the Securities and Exchange Commission (SEC), but only under the directive of the DOF.

Those provisions caused major developers like Ayala Land Inc., Robinsons Land Corp. and SM Prime Holdings Inc. to shelve plans to tap the REIT law, forfeiting an estimated $1 billion that could have been raised in the capital markets.

Sicat said the PSE would continue to push for the removal of VAT and possible compromises on the public float requirement.

He said discussions would likely be brought up with the Capital Market Development Council, a public-private sector outfit that is co-chaired by the heads of the DOF, SEC and a private sector representative, namely, Eduardo Francisco of BDO Capital and Development Corp.

For his part, Francisco confirmed that early moves are being made to reopen REIT talks with the government.

“A small group of CMDC members are working on it. We hope to remove VAT but we looking at other tax angles also,” Francisco said without elaborating.

The REIT law provides a framework for companies to establish and sell shares in public real-estate trusts for assets like shopping centers or office buildings that will pay dividends to shareholders.

Henares said earlier that the agency implemented the tax measures for REITs fairly and any move to adjust these will be done only if lawmakers amend the REIT Act.