BIR asked to release implementing rules on tax incentives for REIT

MANILA, Philippines - A global association for investment professionals has urged the Bureau of Internal Revenue (BIR) to release its implementing rules on the tax incentives for real estate investment trusts (REIT) law which was passed by Congress last year.

The study conducted by Chartered Financial Analyst (CFA) also proposes important changes to existing REITs regulations under the current regulatory structures including limiting the potential for acquisition of a REIT at favorable prices because of conflicted interests of the dominant unit holder.

CFA Institute has more than 100,000 members, who include the world’s around 90,000 CFA charterholders, in 135 countries and territories, as well as 135 member societies in 58 countries and territories.

Lee Kha Loon, CFA, head of Standards and Financial Market Integrity – Asia Pacific at CFA Institute, said REIT sponsors, managers, and unit holders often have different and occasionally conflicting interests, therefore, structural reforms are called for to protect investor interests in REITs.

REITs in the Philippines are governed by Republic Act 9856 including the implementing rules and regulations while the Security and Exchange Commission is the responsible regulatory body.

REITs are also subject to the Philippine Stock Exchange listing rules, the Corporations Code of the Philippines, and the Securities Regulation Code of 2000.

Although there is already interest from property companies to raise funds through spinning off assets into the REIT structure, the BIR, however, still had not released its implementing rules on the tax incentives for REITs.

The Department of Finance is also delaying the implementation of REITs because it wants the SEC to change the minimum public ownership requirements for REITs.

The BIR wants the SEC to update its IRR to increase the public float to more than 50 percent instead of only 33 percent. The rationale is that it is not an effective recycling of capital if the sponsor still owns 67 percent of the REIT.