MANILA, Philippines - The Bureau of Internal Revenue (BIR) said Wednesday it was open to another dialogue with the securities regulator and real estate industry players on the issuance of Real Estate Investment Trusts (REITs), but the tax on asset transfers was off the table.
BIR Commissioner Kim Henares said the tax agency has taken a firm position against scrapping the 12% value-added tax (VAT) on the initial transfer of property assets to REITs.
"They can insist all they want but on VAT, there's nothing we can do. It's non-negotiable because it is the law," Henares said.
REITs are companies that own and operate income-generating real estate assets such as offices, apartment buildings, hotels, shopping centers and highways. Their shares are to be listed and traded on the Philippine Stock Exchange.
Market watchers had expected REITs to be exempt from VAT. Earlier, the private sector and the Department of Finance disagreed on another issue -- the minimum public float of REITs -- but reached a compromise later on.
On VAT, Henares said: "We're coming up with the law. It's up to them if they don't think it is feasible."
"They should not earn money out of government revenue. They should earn money because their doing business and there are business risks that they have to take," she added.
Without the VAT, Henares said the REIT law will be a mere income tax holiday measure for a specific sector. "Their REIT law is wrong."
Industry players had raised concern that the VAT on property transfers to REITs would result in significant costs. In previous years, property transfers to a company in exchange for shares in that company were not subject to VAT, under certain conditions.