Proposed changes to REIT rules coming out in October
The Securities and Exchange Commission (SEC) is set to introduce changes to a law regulating real estate investment trusts (REITs) next month. This is in hopes of attracting more investors to the growing industry and make the Philippine corporate sector “one of the best in Southeast Asia.”
SEC Commissioner McJill Bryant Fernandez told the Inquirer last week that they were working on amendments to the law’s provision on tax income deductibility.
However, he did not elaborate on the exact changes they would introduce. The draft amendments will be released for public comment by “early October,” according to Fernandez.
Republic Act No. 9856, or the REIT Act of 2009, introduced a tax incentive for REITs. These are corporations that invest in income-generating real estate assets.
REITs encourage and give investors an option to directly invest in projects that are already finished and earning money.
The REIT law currently requires these companies to distribute at least 90 percent of their taxable income as dividends annually. This substantially reduces a REIT’s taxable income, meaning it pays relatively less tax.
“The general theme is we really want to unleash [the capital market] … we are liberal, we have been consistent in sharing that,” Fernandez said.
In July, SEC Chair Francis Lim met with Finance Secretary Ralph Recto to introduce key reforms meant to deepen the capital market and promote ease of doing business in the country.
In revisiting the REIT law, Lim said they wanted to “better meet market demands.”
“The SEC remains steadfast in its commitment to transform the Philippine corporate sector into one of the best in Southeast Asia by fostering an inclusive capital market, capable of strongly contributing to overall economic growth and nation-building,” Lim said in an earlier statement.
While the REIT law was passed in 2009, the country only saw its first REIT in 2020. This was when Ayala Land Inc.-sponsored AREIT Inc. listed on the local bourse.
Others are Citicore Energy REIT Corp.; DDMP REIT Inc. of DoubleDragon Corp.; and Filinvest REIT Corp.
There are also MREIT Inc., which is sponsored by Megaworld Corp.; Premiere Island Power REIT Corp. and VistaREIT Inc. of the Villar Group; and RL Commercial REIT Inc. of Robinsons Land Corp.
Apart from REIT reforms, the SEC also intends to craft a road map for alternative investment products and derivatives. These include options, futures and, potentially, a commodity futures market.
