July 1, 2011
TAX RULES for two much-awaited investment vehicles will be finalized by next week, Bureau of Internal Revenue (BIR) Commissioner Kim S. Jacinto-Henares said.
The BIR is already crafting the revenue regulations required for the implementation of the Real Estate Investment Trust (REIT) and Personal Equity and Retirement Accounts (PERA) laws, she told BusinessWorld on Thursday.
After the tax rules are drafted they will be signed by Finance Secretary Cesar V. Purisima before being issued.
Ms. Henares explained that it was taking the BIR a lot of time building safeguards into the tax rules for the PERA Act or Republic Act 9505, which was signed into law in 2008.
“PERA is a difficult tax administration law. It involves giving tax credits, which is open to a lot of fraud,” she said.
“The tax credits can be forged, falsified or traded. We want to ensure that only qualified people get the tax credits,” she added.
The law encourages Filipinos to save for their retirement by granting income tax credits equivalent to 5% of their total PERA contributions. All income earned from PERA investments are likewise tax-exempt.
The REIT Revenue Regulations, meanwhile, once finalized by the BIR, will have to take a detour to the Congressional Oversight Committee on the Comprehensive Tax Reform Program, Ms. Henares noted.
Legislators announced last month that they wanted to review the required public float granted to REIT ventures, stock corporations that pool investor funds to manage real estate assets.
Ms. Henares admitted this was a “source of delay,” pushing back the target release date of the REIT rules to July from June.
Finance Undersecretary Gil S. Beltran has said, however, that legislators cannot do much as the REIT Act had already become law in 2009. It is also the BIR’s jurisdiction to interpret the Implementing Rules and Regulations issued (IRR) by the Securities and Exchange Commission (SEC) in May, he claimed.
According to the SEC, REITs must have a 40% minimum public ownership, increasing to 67% after three years. This was the compromise set after the Department of Finance wanted a higher float of 51%, while the private sector requested for only 33.33%, as initially set in Republic Act 9856 or the REIT Act’s IRR.
Legislators had raised concerns that a high minimum float requirement would dissuade companies from participating in REITs, which the government says will help deepen the country’s capital markets.
Several property giants have already expressed interest in REIT ventures. These include SM Prime Holdings, Inc., the country’s largest mall operator, Ayala Land, Inc. and Gokongwei-led Robinsons Land Corp. — Diane Claire J. Jiao