RR No. 3-2020: Amends certain provisions of RR No. 13-2011 implementing tax provisions under RA No. 9856, otherwise known as “The Real Estate Investment Trust (REIT) Act of 2009”

Summary

RR No. 3-2020, issued January 29, 2020, amends provisions of Revenue Regulations (RR) No. 13-2011, which implements the tax provisions of RA No. 9856 (The Real Estate Investment Trust [REIT] Act of 2009).

Key points

1. Definitions and registration. Section 3 adds or revises definitions, including Public Company, Reinvestment Plan, Taxable Net Income and Unlisted REIT. A REIT registers once with LTRAD 3 on or before commencing business and submits its constitutive documents, REIT Plan, Reinvestment Plan and shareholder list.
2. Documentary Stamp Tax. Transfer of real property to REITs bears fifty percent (50%) of the applicable DST. Share transfers bear DST at Seventy-five centavos (P0.75) per Two Hundred pesos (Php200.00) of par value, or 25% of the DST paid on original issuance for no-par stock.
3. Listing requirement. If the transfer occurs before listing, the REIT executes an Affidavit of Undertaking to list within two (2) years from initial availment of the incentive. Otherwise the 50% DST, with surcharge, penalties and interest, is due and demandable, as it is for failure to keep listed status or to distribute at least ninety percent (90%) of distributable income.
4. Taxes on REIT and securities. Transfer of property to a REIT for its shares is VAT-exempt under Section 109 (X) of the NIRC. A REIT pays 30% income tax under Section 27 (A) on taxable net income, with no minimum corporate income tax. Sales of investor securities outside the Exchange are subject to capital gains tax.
5. Dividends deduction. Dividends distributed from distributable income not later than the last day of the fifth (5th) month after the taxable year count as paid on the last day of that year. From listing, the REIT must stay a public company and follow its Reinvestment Plan, or dividends are not deductible.
6. Reports and withdrawal of incentives. The Commission’s certification of Reinvestment Plan compliance and other reports go to LTRAD 3 on or before April 15 (or the 15th day of the 4th month after fiscal year end). Failure to list within two years, revocation of securities registration or failure to submit the certification leads to applicable taxes, interest and surcharges. Deficiency DST of 50% is due without assessment.

Who is affected

• Real Estate Investment Trusts (REITs)
• Sponsors/Promoters transferring real property to REITs

Deadlines and effectivity

• Listing: within two (2) years from initial availment of the DST incentive
• Reinvestment: within one (1) year from receipt of proceeds
• Reports: on or before April 15 (or the 15th day of the 4th month following fiscal year end)

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.