MANILA, Philippines - The Philippine Stock Exchange (PSE) welcomes the passage of the Real Estate Investment Trust (REIT) Act into law, the fourth landmark legislative measure proposed by the local bourse to boost the local stock market.
“We are extremely grateful to our Congress led by Sen. Ed Angara and Congressman Sonny Angara and President Arroyo for making R.A. 9856 or the REIT law a reality. We are getting a lot of interest from many of our property firms for REIT listings. This landmark law will put the Philippines at par with the rest of the world which has had REITs for over 20 years,” said PSE president and chief executive officer Francis Lim.
The Department of Finance (DOF) recommended presidential veto of the bill basically because of its impact on the tax collection efforts of the government but the PSE pushed for the bill to become a law.
“We worked extremely hard on this piece of legislation for the past three years and we were seriously concerned that our time and efforts would go down the drain when we were informed that the DOF recommended presidential veto of the bill.
But we think that Congress had already addressed the concerns of the DOF even up to the bicameral conference committee,” Lim said.
Contrary to fears that the fiscal incentives in the law may undermine the revenues of government, Lim explained that the REIT law can even help contribute to the government coffers. “The REIT law promotes transparency for tax reporting purposes.
Moreover, the new business opportunities that will be created should translate to a broader tax base for government,” Lim said.
“An independent study conducted by a team from the University of Asia and the Pacific concluded that the government will not only recover every peso of tax incentive but stands to gain between P0.15 and P0.35 more over a 15-year period. This conclusion was made on the basis of the March 28, 2009 version of the bill, which granted far more liberal tax incentives than the enrolled version,” Lim said.
Lim said the REIT law will develop the capital markets in the Philippines and provide much needed investment opportunities for institutional and retail investors to increase the wealth of the population through a lower risk instrument. “It will also boost the development of real estate in the country by releasing capital for reinvestment into land and buildings, leading to increased productivity and more jobs,” Lim said.
To encourage investments in REITs, the law provides certain tax incentives to the REIT. However, in order to enjoy these incentives, the REIT must be listed with a stock exchange and maintain its status as a listed company and annually give out at least 90 percent of its distributable income to shareholders.
Aside from the REIT law, another landmark capital market reform was the law permanently abolishing the documentary stamp tax (DST) which was passed last June 30. The Personal and Equity Retirement Account Law and Credit Information System Law were also enacted last year to further enhance the capital markets.