RR No. 13-2011: Implements the tax provisions of Republic Act No. 9856, otherwise Known as “The Real Estate Investment Trust Act of 2009”

Key points

1. Registration and documents. A REIT, including its branches, registers once with Large Taxpayers Regular Audit Division (LTRAD) 3 on or before it starts business. It submits certified true copies of its constitutive documents and the REIT Plan, and a list of shareholders with TIN, shares held and percentage of holding. It sends LTRAD 3 a quarterly sworn statement of shareholders.
2. DST incentive on transfers. Real property owned by a REIT is an ordinary asset, and transfers to a REIT pay 50% of the applicable DST. Transfers of real property pay P7.50 per P1,000.00 of consideration in excess of P1,000.00, and transfers of shares in the real property pay P0.375 on each P200.00 of par value. For a sale before listing, the REIT must undertake to list within two (2) years from initial availment and place the 50% DST in escrow with an AAB, released to the REIT only on proof of listing, otherwise to the government.
3. Tax on transfers to a REIT. Sales of real property to a REIT are subject to Income Tax/CGT and VAT, if applicable. For exchanges of property for REIT shares, the transferor recognizes no gain or loss and pays no CGT, IT or creditable withholding tax, but pays VAT on ordinary-asset property at fair market value. The exchange is exempt from DST.
4. Taxes on the REIT. A REIT pays income tax at 30% of taxable net income with no Minimum Corporate Income Tax. Dividends distributed within 5 months after year-end can be deducted, subject to 40% minimum public ownership for the first two years and 67% by the end of the third year. Expanded withholding tax payments to a REIT are subject to 1% creditable withholding tax, and its dividends generally bear a 10% final tax, with exceptions for treaty-entitled non-residents, domestic or resident foreign corporations, and Overseas Filipino Investors (exempt for seven (7) years from effectivity).
5. Conditions and loss of incentives. To qualify, a REIT must be and stay a public company, list within two (2) years and maintain its listing and SEC registration of investor securities, and distribute at least 90% of its distributable income. There is a 30-day curing period, after which the 50% DST and income tax become due with surcharge, interest and penalties. If a REIT is delisted, the incentives are revoked as of the date the delisting becomes final and executory.
6. Other requirements and penalty. Investor securities are subject to DST on original issuance, and to stock transaction tax when sold through the Exchange. A REIT submits further documents to LTRAD 3, such as an SEC certification of public ownership compliance and a dividend payment schedule. Each failure to file an information return, statement or list carries P1,000.00, up to P25,000.00 a calendar year, unless due to reasonable cause.

Who is affected

• Real Estate Investment Trusts (REITs)
• Transferors of real property to REITs
• Overseas Filipino Investors

Deadlines and effectivity

• List with an Exchange within two (2) years from initial availment of the DST incentive
• Cure failures within 30 days
• Submit new titles or certificates within 90 days from issuance of CAR/TCL
• Overseas Filipino Investor dividend exemption: seven (7) years from effectivity