By
Krista A. M. Montealegre
National
Correspondent
Posted
on April 03, 2017 [ bworldonline.com ]
THE
REVIVAL of talks to kickstart the real estate investment trust (REIT) market
may take a back seat for now as the Finance department’s tax reform program
faces rough sailing in Congress.
Laborers
are seen at a construction site for a high-rise building project in Manila.
Amendments to the rules on real estate investment trust are still up in the air
as Congress focuses on a key tax reform package. -- AFP
During
the fifth Asia Pacific Real Estate Investment Summit Philippines in Makati City
last Friday, Philippine Stock Exchange President and CEO Hans B. Sicat said
amendments to the implementing rules and regulations of the REIT Law may not
move forward until the tax reform package -- a priority, he said, of the Finance
department -- is first passed.
“Once
they get that, it will be a refocus on the REIT topic,” Mr. Sicat said.
SEC
Chairperson Teresita J. Herbosa said in an interview that Finance Secretary
Carlos G. Dominguez III has committed to “look into this in the latter part of
the year, around the third quarter.”
“The
tax reform package will close some leakage and generate a little more tax
collection so whatever will be lost when you remove the VAT (value-added tax)
in the REITs will be covered,” Ms. Herbosa said.
The
four-package tax reform program is designed to shift overall tax burden away
from low wage earners toward those who can better afford such levies, while
yielding more net revenues to help finance the administration’s infrastructure
drive.
The
REIT Act lapsed into law in December 2009, but none of the major property
developers had come forward with their prospective offerings amid issues on
ownership and taxation on asset transfers.
For
instance, the government subjected the transfer of assets into REITs to
taxation and levied a 12% rate on additional income generated. It also set the
minimum public ownership of such trusts at 40% for the first two years of their
listing and 67% thereafter.
The
Aquino government had imposed these stringent REIT rules to limit revenue
lesions caused by laws that grant generous tax perks.
“The
issue for government is on fiscal reform. By stopping this asset class, what
the government has gotten is zero pesos in the last five years which is the
opposite to what we wanted to do,” Mr. Sicat said.
LOWER
PUBLIC FLOAT
The
SEC reiterated it is amenable to bringing down the public float level required
for REIT firms to 33%, Ms. Herbosa said.
“We’ll
let market forces (move) in the first five years,” she said.
Since 2009,
the Philippines has missed the launch of 323 REITs, 82 of which are in Asia
Pacific, with rising population and urbanization providing the “muscles” to
spur demand for real estate in this region, Asia Pacific Real Estate
Association (APREA) CEO Peter Verwer said.
Governments,
however, are waking up to the advantages of having a REIT market.
“As we
are waiting for the REIT rules to be refined because we are waiting for tax
laws to be passed, a lot of us are reaching the 20% limit. So as not to curtail
growth, we must look at alternative instruments to raise capital,” BDO Capital
and Investment Corp. President Eduardo V. Francisco said.
REITs
are companies that own and operate income-generating real estate assets, which
include offices, apartment buildings, hotels, warehouses, shopping centers and
highways.
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