By VG Cabuag, Businessmirror, Feb. 7, 2017
The Department of Finance would not allow itself to be rushed into adopting a set of rules and regulations for so-called real-estate investment trusts (REITs) no matter the continued absence of such a mechanism some eight years since its legislative framework passed.
This surfaced on Tuesday in an interview with Finance Secretary Carlos G. Dominguez III who began such a study when he took over the helm of the agency last June.
“There’s already a law. It’s just a matter of writing the IRR [implementing rules and regulations]. We are thinking about it very well because we don’t want it screwed up,” he said.
“We don’t want to be gamed [by the industry],” he quickly added.
The REIT relates to ongoing efforts to expand public participation in the real-estate industry by granting participating units tax perks and privileges and in this manner help build long-haul capital that redounds to a more robust economy.
As early as October last year, Securities and Exchange Commission (SEC) Chairman Teresita J. Herbosa said the agency completed an internal study and concluded it was amenable to a 33-percent minimum public float.
The public ownership of REITs has since become a contentious issue between the regulators, on one hand, and prospective participants, on the other, in that while the legislation allows a minimum float of only 33 percent within three years from listing, the proposed IRR mandated twice that number.
“What we’ll put in the IRR will be something like…we will review it within five years and see if there’s a need to increase,” Herbosa said.
Herbosa also said the SEC may issue a new IRR but needs to coordinate with the Bureau of Internal Revenue on taxation issues of the product, passed during the Arroyo administration in 2009 but failed to gain traction during the Aquino administration due to so-called additional requirements.
The REIT was enacted on 2009 and designed to recycle real-estate assets by placing them in another REIT company that the public can invest into by purchasing shares. Such shares may also be traded at the Philippine Stock Exchange (PSE).
“Our own view is that not much more analysis needs to be done. It’s just a simple thing of taking out the last two things that they added,” Hans Sicat, PSE president and CEO, said of the IRR much earlier.
The regulatory bodies under then-President Benigno S. Aquino III insisted on the imposition of a 12-percent value-added tax on the transfer of assets to the REIT on top of a 30-percent income tax.
REITs are also required to sell to the public a majority, or at least 67 percent, within three years from the listing date.
As a result of these additional rules, property firms that earlier planned to launch their own REIT abandoned the product and waited for the government to change its mind.