BIR issues tax rules on REIT
The Bureau of Internal Revenue (BIR) on Thursday issued the much-awaited amended guidelines on the Real Estate Investment Trust (REIT) Act of 2009, which clarified the contentious tax issues that had delayed the law’s implementation.Revenue Regulations No. 3-2020 signed by Finance Secretary Carlos Dominguez III and Internal Revenue Commissioner Caesar Dulay amended certain provisions of the earlier issued RR 13-2011.
In a nutshell, the new BIR rules on REIT exempt transfer of real or personal property from value-added tax (VAT), reduce the minimum public offering (MPO) requirement, no longer have the escrow requirement, and require mandatory submission of REIT reinvestment plans, Internal Revenue Deputy Commissioner Marissa Cabreros earlier said.In particular, Cabreros said transfer of properties, especially those classified as ordinary assets, were exempted by the new BIR rules from VAT if made pursuant to Section 40(C)(2) of the Tax Code.
On the MPO requirement, Cabreros said the initial 40 percent had been lowered to one-third of the outstanding capital stock of REIT, as originally provided in the law.
As for the reinvestment plan, Cabreros said the BIR would now require its submission alongside the certificate of compliance from the Securities and Exchange Commission during the annual filing of the REIT’s income tax return.“The BIR RR still bears a strong mandate for the REIT’s compliance with the REIT law and the BIR’s administrative reportorial requirement. Otherwise, noncompliance would mean withdrawal of tax incentives,” Cabreros said.
In a speech on Thursday, Dominguez 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. This is a big step forward for greater inclusiveness in the financial system,” the finance chief said. —Ben O. de Vera
