By CHINO S. LEYCO
Finance Secretary Carlos G. Dominguez III expects the real estate investment trust (REIT) to spur additional investments in the country’s booming property development and infrastructure sectors following the release of the amendments to the implementing rules and regulations of the REIT Act of 2009 that include ownership and taxation requirements.
On Monday, the Department of Finance (DOF), Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), and Philippine Stock Exchange (PSE) launched the amendments to the regulations governing REITs.
The SEC issued amendments to the implementing rules and regulations (IRR) of the REIT Act of 2009.
The DOF and the BIR also released a new revenue regulation updating the tax treatment of REIT transactions, specifically on tax incentives for REIT companies and the exemption from value-added tax of the transfer of property to a REIT company in exchange for its shares of stocks, among others.
The PSE also issued amendments to the Listing Rules for REITs that provide the appropriate mechanisms, internal controls, and procedures to monitor the compliance of REITs with the applicable rules and regulations.
In his opening remarks, Dominguez referred to REITs as “a powerful financial concept, enabling the creation of investment trusts that purchase, develop, and operate income-generating real estate assets.”
The listing of REIT companies on the stock exchange creates “a secure opportunity for small investors to participate in the growth of property development in the country,” and is “a big step forward for greater inclusiveness in the financial system.”
The government has revised regulations governing REIT companies in response to concerns of stakeholders, while ensuring that the gains from the implementation of the law would still redound to the benefit of the Filipino people.
“We took on this challenge but had to be sure that the tax incentives would not be prone to abuse. We had to be very clear in our revenue regulations. This is why we needed to recast the existing revenue guidelines,” Dominguez said.
“We likewise wanted to be sure that the large investment funds to be raised using this mechanism will be reinvested exclusively within the country’s real estate and infrastructure sector,” he added.
Meanwhile, SEC Chairman Emilio Aquino echoed that the amendment of the REIT IRR advances the state policy to democratize wealth by broadening the participation of Filipinos in the Philippine real estate market.
“REITs allow Filipinos to invest in the real estate market without owning actual property or the disadvantages of high transaction costs and illiquidity,” Aquino said.
“They also help investors achieve better returns or volatility outcomes by allowing property developers to diversify their portfolios,” he added.
The revised issuances are also welcome news to private sector players that have been anticipating the amendments that will allow REIT companies to take off.
REITs were previously required to maintain a 40 percent public ownership in the first year of their listing. Prior to its amendment, Rule 4 of the IRR further required REITs to increase their public float to 67 percent within three years from their listing.