BIR issues new guidelines seen to boost property developments in PH
The Bureau of Internal Revenue (BIR) on Thursday (Jan. 30) issued the much-awaited amended guidelines of the Real Estate Investment Trust (REIT) Act of 2009, which clarified contentious tax issues that had delayed the law’s enforcement.
Revenue Regulations (RR) No. 3-2020 signed by Finance Secretary Carlos G. Dominguez III and Internal Revenue Commissioner Caesar R. Dulay amended certain provisions of the earlier guidelines RR 13-2011.
In a nutshell, the new BIR rules on REIT exempt transfer of real or personal property from value-added tax (VAT) and reduce the minimum public offering (MPO) requirement.
It also removed the escrow requirement but required submission of REIT reinvestment plans, according to Internal Revenue Deputy Commissioner Marissa Cabreros earlier.
Cabreros said transfer of property, especially those classified as ordinary assets, were exempted by the new BIR rules from VAT if pursuant to the Tax Code.
The MPO requirement, Cabreros said, was lowered from 40 percent to one-third of outstanding capital stock of REIT which was the original intent of the law.
The BIR official added that the BIR, under the new rules, would now require submission of reinvestment plans together with certificate of compliance from the Securities and Exchange Commission (SEC) at the annual filing of REITs’ income tax return.
The new rules, Cabreros said, “still bears a strong mandate for the REIT’s compliance” with the law and BIR’s “administrative reportorial requirement.”
She said noncompliance “would mean withdrawal of tax incentives.”
In a speech on Thursday, Finance Secretary Carlos G. Dominguez III said that “after 11 long years, we finally released the set of regulations that will allow the country’s REIT market to finally take off.”
“This is a powerful financial instrument that will boost investments in property development in the country as well as democratize wealth by opening access to thousands of small investors wanting to be shareholders in secure and profitable real estate projects,” Dominguez said.
“This is a big step forward for greater inclusiveness in the financial system,” he added.
Funds that would be raised through the new REIT rules “will be reinvested exclusively within the country’s real estate and infrastructure sectors, thereby ensuring that the money invested by Filipinos will stay in our domestic economy,” Dominguez said.
