Real Estate Investment Trusts (REITs) haven’t taken off due to stringent rules and more delays can be expected given the Duterte government’s concerns over investor profits.
“We estimate that we will be giving up in a sense about P100 billion,” Finance Secretary Carlos Dominguez 3rd told reporters, referring to tax incentives covering asset transfers.
The Finance department is already reviewing the 2009 REIT Act’s implementing rules and regulations (IRR) given conflicting provisions.
Among others, Republic Act 9856 states that REITs should be one-third owned by the public, while the IRR calls for 66 percent public ownership three years.
Property developers were expected to have begun offering REITs once the law took effect in December 2009 but none have done so given concerns over taxation and the public ownership requirement.
“If you read it there it says … [the law will]make property development easier. The REIT essentially is a measure to exempt from taxation transfer of real assets into qualified structures,” Dominguez said.
“The problem is you are giving a tax incentive in the hope that the yield … will be reinvested in the real estate business. But it is a hope, it is not a certainty,” he added.
Dominguez, who last year said the government would be looking into why the REIT law had not taken off, said they had yet to figure out a way make sure that providing tax incentives would be worthwhile.
“So at this point in time I am not ready… unless I am sure that the money is going to be recycled back… we will give up potentially P100 billion. So I don’t think its fair to the Filipino public…,” he said.
“[If] we end up giving P100 billion away and nothing gets reinvested here or very little… we are not doing the country good,” he said.