REITs bill okayed by bicam panel

Business World Online
September 23, 2009

A BICAMERAL PANEL yesterday approved a bill allowing the establishment of Real Estate Investment Trusts (REITs), which would give investors a new means of making money.

Legislators said the measure — a consolidation of Senate Bill 2639 and House Bill 6379 — could be ratified by Congress as early as Monday next week.

Its signing into law, they said, could happen before lawmakers go on an October 17 to November 8 break.

"I can schedule its ratification on Monday [next week]. This is a historic and landmark measure," Senator Edgardo J. Angara said.

Cebu Rep. Ramon "Red" H. Durano IV said he was looking to "schedule it in the committee on rules for ratification on Monday."

Legislators yielded to calls by the Finance department to limit incentives, dropping a preferential corporate income tax rate of 25% in favor of the regular 30% which will be applied to the taxable 10% income of REITs.

REITs — corporations that pool investors’ funds and invests these in real estate ventures — must distribute at least 90% of its income to investors. This 90% is exempt from income tax.

Lawmakers also dropped proposed value-added, creditable withholding (CWT), and documentary stamp tax (DST) exemptions, settling on a 1% CWT and half the applicable DST.

Overseas Filipino workers were exempted from paying the dividend tax for seven years.

Lawmakers compromised on a P300 million minimum paid-up capital requirement for REITs. The Senate version had set this at P100 million while the House put the figure at P1 billion.

Philippine Stock Exchange President Francis Ed. Lim welcomed the bill’s approval, saying "The Philippines is already behind the REIT industry by almost 10 years and we don’t have a share in the global REIT market."

"The question is how to really jumpstart this industry in a way to attract international investors," he added.

CB Richard Ellis Philippines, Inc. Director Victor J. Asuncion said he expects the reception of REIT products to be positive given reduced risks and guaranteed returns.

"This will open investors to more investment avenues where they can put their money. This will likely invite the retail investors because of its lucrative compensation," he said.

Claro G. Cordero, Jr. of Jones Lang LaSalle Leechiu also welcomed the bill’s approval, saying REITs will be a good way to balance the investment climate.

"It should be able to attract new property players while existing ones will be challenged to keep up to the competition," he said. — B. U. Allauigan and K. J. R. Liu