THE REAL ESTATE INVESTMENT TRUST (REIT) ACT OF 2009

Published — May 9, 2021

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Real Estate Investment Trust or REIT is a stock corporation established in accordance with the Corporation Code of the Philippines and the rules and regulations promulgated by the Securities and Exchange Commission (Commission) principally for the purpose of owning income-generating real estate assets.
Investment in the REIT shall be by way of subscription to or purchase of shares of stock of the REIT.
A REIT must distribute annually at least ninety percent (90%) of its distributable income as dividends to its shareholders not later than the last day of the fifth (5^th) month following the close of the fiscal year of the REIT.

What is a Real Estate Investment Trust (REIT)?

Under the Republic Act No. 9856 or the Real Estate Investment Trust (REIT) Act of 2009:

Real Estate Investment Trust or REIT is a stock corporation established in accordance with the Corporation Code of the Philippines and the rules and regulations promulgated by the Commission principally for the purpose of owning income-generating real estate assets.

The Real Estate Investment Trust (REIT) Act of 2009 aims to promote the development of the capital market, democratize wealth by broadening the participation of Filipinos in the ownership of real estate in the Philippines, use the capital market as an instrument to help finance and develop infrastructure projects, and protect the investing public by providing an enabling regulatory framework and environment under which real estate investment trusts, through certain incentives granted.

Investment in the REIT shall be by way of subscription to or purchase of shares of stock of the REIT. A REIT must distribute annually at least ninety percent (90%) of its distributable income as dividends to its shareholders not later than the last day of the fifth (5^th) month following the close of the fiscal year of the REIT. The dividends shall be payable only from out of the unrestricted retained earnings of the REIT. The percentage of dividends received by the public shareholders to the total dividends distributed by the REIT from out of its distributable income must not be less than such percentage of their aggregate ownership of the total outstanding shares of the REIT. Any structure, arrangement or provision which would have the effect of diminishing or circumventing in any form of the entitlement to dividends shall be void and of no force and effect. Distributable income excludes proceeds from the sale of the REIT’s assets that are re – invested by the REIT within one (1) year from the date of the sale.

As to taxes, a REIT shall be subject to income tax on its taxable net income. Income payments to a REIT shall be subject to a lower creditable withholding tax of one percent (1%). The sale or transfer of real property to REITs, which includes the sale or transfer of any and all security interest thereto, shall be subject to fifty percent (50%) of the applicable Documentary Stamp Tax (DST) imposed under the tax code. The incentives granted under the law can be availed of by an unlisted REIT, provided it is listed with an Exchange not later than two (2) years from the date of the initial availment of the incentives.

Cash or property dividends paid by a REIT shall be subject to a final tax of ten percent (10%), unless: (a) the dividends are received by a nonresident alien individual or a nonresident foreign corporation entitled to claim a preferential withholding tax rate of less than ten percent (10%) pursuant to an applicable tax treaty; or (b) the dividends are received by a domestic corporation or resident foreign corporation, or an overseas Filipino investor in which case, they are exempt from income tax or any withholding tax: Provided, That in the case of overseas Filipino investors, they are exempt from the dividends tax for seven (7) years from the effectivity of the tax regulations implementing the Act.

Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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Investment in the REIT shall be by way of subscription to or purchase of shares of stock of the REIT.

A REIT must distribute annually at least ninety percent (90%) of its distributable income as dividends to its shareholders not later than the last day of the fifth (5th) month following the close of the fiscal year of the REIT.

A REIT must distribute annually at least ninety percent (90%) of its distributable income as dividends to its shareholders not later than the last day of the fifth (5^th) month following the close of the fiscal year of the REIT.