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| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| UNITED STATES | REIT (Real Estate Investment Trust) | Enacted 1960 |
I.R.C. § 856-860 |
• 100 or more shareholders |
• At least 75% of gross income annually (excluding prohibited
income) must come from real estate related sources • At least 95% gross income annually (excluding prohibited income) must come from real estate related sources plus passive sources such as dividends and interest • Rents may be disqualified if: (i) based on net income or profits of tenant; (ii) rents from a related party (10 % or more ownership threshold); or (iii) > 1% of amounts derived from each property is from performance of impermissible tenant services by REIT |
• At least 75% of assets comprised of real estate, cash
or cash items, and Government securities • Not more than 20% of assets consist of securities of all taxable REIT subsidiaries (TRSs) combined • Not more than 5% of assets consist of securities of any one issuer (other than Government and TRS securities) • Not more than 10% of outstanding vote or value of the securities of any one issuer is held (except for Government and TRS securities) |
• At least 90% of taxable income must be distributed
annually • Certain distributions treated as paid in prior year to meet requirement • Receives dividends paid deduction for qualifying dividend distributions • Subject to 4% excise tax on certain undistributed amounts • Subject to corporate tax on amounts retained and not distributed |
• 30% withholding on foreign distributions unless lowered
by treaty (usually to 15%) • Under the Foreign Investment in Real Property Taxes Act (FIRPTA) 35% tax is withheld on distributions of REIT capital gain dividends to foreign shareholders attributable to the sale of real estate assets by the REIT |
• No restrictions | • Loss of REIT status requires 5 year waiting period
to re-elect unless waived by Government for reasonable cause • Reasonable cause exception for income failure to avoid loss of REIT status |
• Enactment of TRS rules to permit partially or wholly
owned taxable subsidiary corporations to provide impermissible services
to REITS other than hotel or lodging activity • REIT subject to 100% tax on non-arm's length transactions with TRSs • Subject to 100% tax on gain from 'dealer' activity |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
AUSTRALIA |
ALPT (Australian Listed Property Trust) |
• No specific ALPT rules • ALPT must comply with Australian Stock Exchange Listing Rules, Corpora-tions Act 2001 and Income Tax Assess-ment Act |
Div. 6, 6B, 6C of Part III of Income Tax Assessment Act of 1936; Corporations Act of 2001 |
• No minimum/maximum shareholder requirement • Managed by a corporate trustee/fund manager • Must invest primarily in land (either in or outside Australia) • Must not be a Corporate Unit Trust or a Public Trading Trust; must not directly or indirectly carry on a trading business, (i.e., a business that does not consist wholly of an eligible investment business including investing in land for the primary purpose of deriving rent.) • To be a publicly traded trust, 20 related members cannot own more than 75% of the trust |
• Taxed as flow-through vehicle (i.e., the net income
of the ALPT is taxed in the hands of the unitholders upon distribution and
not in the trust) • Trustee of ALPT must pay tax in respect of Australian source income distributed to foreign unitholders • Foreign unitholders are taxed on an assessment basis (i.e., must file an Australian tax return) and receive a credit for tax paid by trustee. |
Must invest in property for the purpose of deriving rental income | • No minimum distribution requirements • Income that is not distributed to unitholders is taxed in the ALPT at corporate rate (30%) |
• Foreign unitholders taxed on an assessment basis and
not a withholding basis (i.e., must file Australian tax return) • Disposal of units by foreign unitholders only subject to Australian capital gains tax if foreign unitholder owns 10% or more of issued units of ALPT |
Thin capitalization rules will apply if the ALPT is foreign controlled (either 5 or fewer foreign entities own 50% or more of the ALPT or a single foreign entity owns at least 40% of issued units); if thin capitalization rules apply, permissible debt/equity ratio is 3:1 | • Differences between the net income of the ALPT for
income tax and accounting purposes due to variances in depreciation rates
and capitalization policies, will give rise to 'tax-preferred' distributions
to unitholders. Broadly, this is a cash distribution that should not be
subject to tax at either the trustee or beneficiary level. • The receipt of a tax-preferred amount by a unitholder will reduce the Capital Gains Tax (CGT) cost base of the ALPT units held by the unitholder. Where the tax-preferred distribution exceeds the cost base of the ALPT units, a taxable capital gain will arise. |
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| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| BELGIUM | SICAFI (Société d' Investissement à Capital Fixe Immobilière) | Enacted 1995 | Act of December 4, 1990 and Royal Decree of April 10, 1995. | Must be recognized by the Bank and Finance Commission • At least 30% of shares must be offered to the public with voting rights within one year following the registration | • The value of an individual asset in which a SICAFI
invests may not exceed 20% of the value of the entire investment portfolio.
After recognition as a SICAFI a two-year period may be granted to meet this
condition. • A SICAFI is in principle subject to the normal corporate tax regime and as such subject to the general corporate income tax rate of 33.99%. However, the taxable base is determined in a specific way. The regulations governing the SICAFI state that the taxable base is limited to: • Disallowed expenses (i.e., specific expenses that are not tax deductible within the common corporate tax regime such as 25% of car costs, 50% of restaurant costs, and certain regional taxes). The impact of these for SICAFI's is normally almost nil. • Advantages received by the SICAFI (i.e., advantages granted to the SICAFI by other companies that would not have been granted under normal market circumstances (e.g., a rent paid to the SICAFI that exceeds the normal market rent for the asset concerned). The taxable base of a SICAFI will normally be close to nil and thus no tax charge results there from. Rental income and capital gains on assets do not enter into the scope of any of the above categories and thus do not contribute to the taxable base of a SICAFI. |
• Permitted real estate investments include participations
in real estate companies, holding of long leaseholds on real estate assets,
debt-instruments etc. • May invest in other non-real estate assets provided the investment is secondary or temporary |
• At least 80% of income must be distributed annually
• Realized capital gains may, however, be retained with the company provided they are timely reinvested |
15% withholding on distributions (but several exemptions and reductions apply) | Maximum debt/equity ratio | • The SICAFI must be quoted on a stock exchange • Capital gains are not treated as net profits if reinvested within four years • An "exit tax" of 20.085% of the inherent capital gains will be payable by companies wishing to convert to SICAFI status • Annual tax of 0.06% on net book value of shares |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| BRAZIL | FII (Fundos de Investimento Imobiliário) | • Enacted 1993 | Law 8668 – 1993 and 9779, 1999, Instruction CVM n. 205 e n. 206, 1994 | • The creation, operation and distribution of Brazilian
FII quotas (group of shares) must be authorized by the CVM (Securities and
Exchange Commission), and will correspond to ideal portions of its equity
• The quotas may only be traded in capital markets upon the payment of the issue price. The quotas may be traded off the Stock Exchanges or over the counter market when intended for public or private trade • Must be generated by management institutions duly authorized by the CVM, which should exclusively be banks with investment portfolios, real estate credit portfolios, investment banks, or savings and loan associations • Constructors Companies can not have more than 25% of shares |
The trusts are not taxable in invoicing by PIS, COFINS, ISS, CPMF and IR. | • At least 75% of equity must be invested in real estate
assets, otherwise must get approval from CVM • The portion of the FII equity that is not invested in real estate must be invested in financial fixed income funds or fixed income securities |
• At least 95% of income must be distributed every six
months • The fund is taxed directly at a rate of 20% before the distribution of income to shareholders • The fund is close and the shareholders cannot rescue the shares only when receive the income or sell in the market or when the fund was finalized. |
No specific restriction | N/A | N/A | Capital caught in the market must pay IOF (1,5 % to 8 % of amount) – Tax for financial operation. It depends the financial policy of the financial institution. |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| CANADA | REIT | Amended 1994 and 2003 | Income Tax Act (Canada)132(6), 132(6.1), 108(2); Regulation 4801 | • Must be a unit trust resident in Canada; no more than
49% foreign ownership • Only undertaking must be acquiring, holding, maintaining, improving, leasing, or managing real property (or an interest in real property) that is capital property of the trust • Must have at least 150 unit holders of the trust with respect to any one class of units; each unit holder must hold not less than one unit of the class • Units of the trust must be listed on a prescribed stock exchange by the following tax year |
At least 95% of income must be derived from qualified investments (see Asset Rules column for description of qualified investments) | • Units must have an aggregate fair market value of
at least $500 • At least 80% of its property must consist of any combination of shares; property conferring right to acquire shares; cash; bonds, debentures, mortgages, notes and other similar obligations; marketable securities; real property in Canada and interests in such property; and rights to and interests in any rental or royalty computed by reference to the amount or value of production from a natural accumulation of petroleum or natural gas in Canada, from an oil or gas well in Canada or from a mineral resource in Canada • No more than 10% of its properties may be shares, bonds, or securities of any one corporation or debtor (other than the Crown or a Canadian municipality) |
Class of units must be qualified for distribution to the public by being listed on a prescribed stock exchange | • 25% withholding on foreign distributions • Pursuant to the Canada-US treaty article XXII(2) rate is 15% |
No restrictions | • Provides investors with flow-through of income in
underlying real estate assets held by the trust • Losses cannot be allocated to unit holders • If the trust qualifies as a mutual fund trust before the 91st day after the end of its first tax year, and it makes an election in its return for that year, the trust is deemed to be a mutual fund trust from the beginning of the year when the election is made |
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| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| EUROPEAN UNION | EuroREIT | Proposed | N/A | Purpose to meet increasing demand for European investment exposure with cross-border tax and management efficiency | N/A | N/A | N/A | N/A | N/A | N/A | |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| FRANCE | SIIC (Sociétés d’Investissements Immobiliers Cotées) | Enacted 2003 | 2003 Budget Law | • Must be a listed company on the French regulated market
• Minimum share capital of 15 million euros • Main corporate purpose must be the acquisition or construction of buildings for rental purposes and/or the direct or indirect holding of shares in companies having the same corporate purpose |
N/A | N/A | • At least 85% of rental income must be distributed
annually • At least 50% of capital gains must be distributed within two years. |
25% withholding on foreign distributions on dividends and 15% on interest; under French-US treaty, 5% (15% if US entity owns less than 10% of SIIC’s share capital) | No restrictions | The loss of the SIIC status by the quoted company within ten years from the election triggers a recapture of the capital gains realized during this period upon the sale of real estate assets that were held at the time of entry into the regime. These capital gains become retroactively taxable to standard corporation tax rate. The exit tax paid upon election is however creditable against the corporation tax. This recapture does not apply to the SIIC’s qualifying subsidiaries that have elected the regime. | • The SIIC regime is elective. SIIC qualifying subsidiaries
may also elect for the regime under certain conditions. • Upon election, a 16.5 % exit tax is due on latent real estate capital gains. This exit tax is paid over four years in four equal installments. • The SIIC may perform non-qualifying activities within certain limits. These activities remain taxable under the standard income tax rules. |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| GERMANY | KAGG Fund (Fund pursuant to the “Gesetz über Kapitalanlagegesellschaften”) | Enacted 1957 | 1957 Act concerning the Gesetz über Kapitalanlagegesellschaften, as of June 21, 2002 | • Fund must be independently managed by German “Kapitalanlage-gesellschaft”
(KAGG), which is a licensed banking institution, typically owned by major
German banking conglomerates • Fund’s assets and income are supervised by separate custodian bank • Comprehensive regulatory rules govern investment obligations of the KAGG, for example, obligation to obtain appraisal from designated appraiser prior to each investment • Fund units are publicly offered, but not traded. Fund can be also structured as “special fund” for institutional investors (maximum 10 investors) • Fund units must be redeemable at any time at the option of the unit owner. Special rules govern deferral of redemption for up to two years if there is insufficient liquidity |
Fund can generate income from permitted assets | • Must only own real estate or investments in real estate
property companies (max. 3 properties allowed for each property company)
• Property company must be resident of the same jurisdiction in which the real estate is located • Acquisition value of each property must not exceed 15% of the fund’s total value, other risk diversification rules apply (including rules concerning permitted foreign investments) and interim rules govern the treatment of newly set up funds • Interim investment of excess liquidity in short term financial instruments permitted |
The distribution rules are generally set by the Fund’s organizational documents. | There is generally no withholding, since the income is attributed to the unit holder | Although each property can be leveraged up to 100%, the aggregate leverage limit for all the fund's properties can not exceed 50%. | The Fund will not lose its tax status if the KAGG deviates from its investment obligations. However, all activities of the KAGG are subject to regulatory scrutiny, and any deviation could result in regulatory action (e.g., penalty, withdrawal of license, etc.). | • Concerning foreign (non German) investments, the Fund
is typically in a position to avail itself to the benefits of a tax treaty.
For example, direct investments of the fund in the US are taxed only in
the US, and the foreign income attributed to the German unit holder is exempted
from German taxation. • The Fund itself is an exempt entity. There are distributing and re-investing KAGG funds. For tax purposes, it is irrelevant whether the income is distributed or not: the Fund’s income is apportioned to each unit holder at the end of the fund’s fiscal year, whether distributed or not. Complex rules govern the attribution of the so called interim gain, which prevents German resident unit holders from realizing capital gains through a sale or redemption of units during the fund’s fiscal year. |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| HONG KONG | REIT (Real Estate Investment Trust) | Enacted 2003 | Code on Real Estate Investment Trusts; Securities and Futures Ordinance, §§ 104, 105 | • Must be structured in the form of a trust • Must appoint a trustee that is functionally independent of the management company of the REIT, and that acts in the best interest of unitholders • Must appoint a management company acceptable to the Securities and Futures Commission (SFC) • Must appoint an independent property valuer • Must hold its real estate for a period of no less than 2 years unless otherwise approved by its unitholders • Must be listed on the Stock Exchange of Hong Kong • Can hold real estate through wholly-owned special purpose vehicles • Valuation of REIT must be done on an annual basis • If the name of the REIT indicates a particular type of real estate, it must invest at least 70% of its non-cash assets in such type of real estate |
• Must have dedicated investment in real estate that
generates recurrent rental income • Greater proportion of income must be derived from rentals of real estate • Must not hold non-income generating real estate in excess of 10% of the total net asset value of the REIT |
• Must only invest in real estate in Hong Kong which
must generally be income generating • Must not invest in vacant land or engage in property development activities, except refurbishments, retrofittings, or renovations • Investment in hotels and recreation parks is allowed if held by special purpose vehicles • Must not lend or become contingently liable for any indebtedness of any person or use its assets to secure any obligations without prior written consent of the trustee • Must not acquire any asset that involves the assumption of any liability that is unlimited • No limit on cash holdings |
Must distribute at least 90% of net income as dividends to unitholders annually | The SFC will set up a task force to examine the minimum benchmarks that REITS should set for investing in foreign properties; a public consultation process will also be set up regarding foreign investment | Loans limited to 35% of the value of gross assets | N/A | Funds seeking REIT status apply for a license through the Securities and Futures Commission (SFC) |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| JAPAN | J-REIT (Japanese Real Estate Investment Trust) | Enacted 2000 | Investment Trust Law art. 63, 187 | • Registration based on Investment Trust Law is required
• One of the following must be met with regard to the investment certificates: • The certificates must be publicly offered and the issuing amount must be at least 100 million yen at the time of the incorporation • The certificates must be owned by at least 50 investors at the end of the fiscal year • In the case of listed J-REITS, (i) the net asset value must be at least 1 billion yen, (ii) the total asset must be at least 5 billion yen, (iii) the number of units must be at least 4,000 and (iv) the number of unit holders must be at least 1,000 • At least 50 individual investors or qualified institutional investors hold units • The articles of incorporation must evidence that more than 50% of the issuing investment certificates have been offered within Japan • The 3 largest investors must own less than 50% • The 10 largest investors must own less than 75% in order to be listed on the Exchange (not required for tax purposes) |
At least 75% investment in real estate required for listing on the Exchange (not required for tax purposes). | • At least 50% of total assets must be income producing
and not likely to be sold within a year in order to be listed on the Exchange
(not required for tax purposes) • Must not hold 50% or more of the equity in other companies • Any borrowings must be financed from qualified financial institutions. |
At least 90% of profits must be paid as dividends to satisfy the requirements for the dividends deduction | • 20% withholding on foreign distributions • In the case of listed J-REITS where the foreign investor owns less than 5% of total units, reduced withholding tax rates (10% or 7%) are applicable in certain periods |
No restrictions, but loans must be extended from qualified institutional investors | N/A | • Dividends paid are deductible against J-REIT’s taxable
income • J-REITS are generally formed as a corporation rather than a trust |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| KOREA | REIT (Real Estate Investment Trust) | Enacted 2001 | Real Estate Investment Act | • Minimum capital requirement of KRW 50 billion (approximately
$42 million) • Founders must own at least 10% and up to 30% of shares issued at the time of set-up • At least 30% of shares must be offered to the public at the time of set-up • In-kind contribution is generally not allowed at the time of set-up • One shareholder (including its related parties) is not allowed to own more than 10% of shares |
N/A | • At least 70% of assets must be comprised of real estate
as of the end of each quarter of a year • At least 90% of assets must be comprised of real estate, securities and cash related to real estate as of the end of each quarter of a year |
At least 90% of income must be distributed annually in the form of cash dividends | 27.5% withholding on foreign distributions | Generally, long-term debt financing is not allowed, except for certain cases | It is taxed as a company and not treated as a flow-through entity | |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| LUXEMBOURG | REIT-like legal forms are:
1) Investment Funds (International and Domestic Real Estate):
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Enacted 1988; amended 2002 | • The Law of March 30, 1988, Part II; • The Law of December 20, 2002, Part II, which abrogates the 1988 law; • The Law of July 19, 1991. |
• Regulated by Luxembourg CSSF (Commission d Surveillance
du Secteur Financier/Commission for the Supervision of the Financial Sector)
• Requires an external auditor • Minimum equity: EUR 1,250,000 (to be raised during a six month period following the agreement of the CSSF) • FCP has no separate legal personality and requires a management company |
N/A | No more than 20% of net assets may be invested in any one property (not applicable during a start up period not exceeding 4 years) | • There is no restriction on the amount which may be
distributed except that the net assets after distribution must exceed the
minimum EUR 1,250,000 • SICAF is required to create a legal reserve (5% of net profit until the accumulated reserve equals 10% of the subscribed capital) |
• No withholding tax applies on distributions • The new Tax Saving Directive, which implements an exchange of information between Member States in respect of cross border interest payments to EU individuals might be an issue – the Directive applies based on paying agent rather than debtor however. |
Basic rule is that total borrowings may not exceed 50% of the value of all properties; extensions are granted by the CSSF however | In case of any violation, the Fund will lose its tax status | • No profit or capital taxes except the initial capital
duty on incorporation of EUR 1,250 and an annual subscription tax of 0,05%
of total net asset value (reduced to 0,01% for institutional investors)
• No stamp duty on share issues or transfers • Status is not elective but subject to the approval of the CSSF (regulator) |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| MALAYSIA 1 | REIT (Real Estate Investment Trust)/ Property Trust Funds | Enacted late 1980s | Securities Commission Act 1993; Securities Commission Guidelines on Property Trust Funds of 2002 | • Listed funds are subject to requirements of the Kuala
Lumpur Stock Exchange, i.e., unit spread, continuing obligations, and disclosures
• Shareholding spread requirements |
• At least 50% of assets must be invested in real estate
• May also invest in real property-related assets, liquid assets, non-real property assets and asset-backed securities |
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| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| NETHERLANDS | FBI (fiscal investment institution/ Fiscale Beleggingsinstelling) | Enacted 1969 | Article 28 Dutch Corporate Tax Act; Resolution on Investment Institutions | • Companies must be regulated by Dutch Central Bank
• FBIs can be either listed (quoted) or unlisted (unquoted) companies If listed: • Must be listed on Amsterdam Stock Exchange • Shareholder that is a corporation subject to profits tax must own less than 45%, unless shareholder is a listed FBI • Shareholder that is a Netherlands corporation must own less than 25% (directly or through related entities) • Shareholder that is an individual must own less than 25% • If unlisted: • Shareholder that is a taxable corporation (either Dutch resident or foreign) must own less than 25% • Shareholder that is a Netherlands corporation must own less than 25% (directly or through related entities) • Shareholder that is an individual must own less than 5% (i.e. cannot have a substantial interest in the FBI) |
• No restrictions as long as it is derived from passive
investment (e.g. not from property development) • Profit is subject to 0% Dutch corporate tax rate |
Can invest in any type of passive investment | Annual profit must be distributed within 8 months after book year-end | • 25% Dutch dividend withholding tax on distributions to foreign shareholders (can be mitigated under applicable tax treaties) | • 60% of book value of real estate property • 20% for other investments |
• Capital tax of 0.55% on capital contributions • Capital gains can be reinvested in reinvestment reserve • Dutch resident public company (NV), or limited company (BV), and funds for joint account can opt for the Dutch FBI status • Does not qualify for the EU parent-subsidiary directive • Qualifies for tax treaty benefits |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| PUERTO RICO | REIT (Real Estate Investment Trust) | Enacted 1972; amended in 2000 |
P.R. Code § 1500 to 1502 | • At least 50 shareholders or partners • 50% or more of total value of outstanding shares must be owned by more than 5 individuals based on the attribution rules of section 1024 of the PR IRC • Not a financial institution or a life insurance company subject to taxation under Subchapter G of the PR IRC • Otherwise taxable as a domestic corporation • Managed by one or more trustees or directors |
• 95% or more of gross income must be derived from
dividends; interest; rents from real property; gain from the sale of real
property and rights to real property; and payments received or accrued for
entering into agreements to execute loans guaranteed with mortgages on real
property, or acquire or lease real property • 75% or more of gross income must be derived from rents derived from real property located in Puerto Rico; interest on obligations secured by mortgaged on real property or rights to real property located in Puerto Rico; gain from the sale or other disposition of real property that is not of the type of property that qualifies as inventory; dividends or other distributions derived from, and gains derived from, the sale or other disposition of shares of transferable stock, certificates, or participation in another REIT; amounts received or accrued as consideration for entering into agreements to make loans secured by mortgages on real property and/or rights to real property located in Puerto Rico, and/or to buy or lease real property and/or rights to real property located in Puerto Rico |
• At the end of each quarter of a each taxable years:
- At least 75% of the value of total assets is represented by real estate assets, cash or equivalents, and securities and obligations of PR - Not more than 25% of the value of total assets is represented by securities other than those mentioned above |
At least 90% of income must be distributed annually | 17% withholding on foreign distributions | No restrictions |
Income from prohibited transaction (sales or other dispositions of: 1) stock in trade or other property of a kind that would properly be included in inventory; and 2) property held primarily for sale to customers in the ordinary course of a trade or business) is taxed at 100% | |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| SINGAPORE | S-REIT (Singapore Real Estate Investment Trust) | • Regulatory frame-work was first released in 1999.
• First REIT to be listed on the Singapore Exchange was in 2002 |
• Securities and Future Act – Code on Collective Investment
Schemes (regulatory framework) • No special income tax regime for S-REIT |
No regulatory requirement | At least 70% investment in real estate and real estate related assets | At least 70% investment in real estate and real estate related assets | At least 90% of income must be distributed annually | 22% withholding on foreign distributions | Maximum debt/equity ratio 1:2 |
• Regulatory requirements apply to public REITS only
(whether or not listed) • REIT cannot engage in property development activities |
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| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| SPAIN | • REIF (Real Estate Investment Funds; Fondos de inversión
inmobiliaria) • REIC (Real Estate Investment Companies; Sociedades de inversión inmobiliaria) |
Enacted 1994 | General Investment Institutions Act; Law 46/1984 governing Real Estate Investment Institutions; Specific rules by Law 19/1992 and its regulations | • REIC/REIF: • Main purpose to invest in real property for the leasing of the premises • Minimum stock capital: approximately 9 million Euro • Minimum number of investors: 100 • Supervised by the Spanish authorities • REIC: • Organized as a corporation • REIF: • No legal entity • Administered by a separate managing company jointly with the entity holding the deposit of the investment |
Income must be derived from qualified assets as described in Asset Rules column | • REIF: • At least 70% of the total assets invested in real state properties. Remainder may be invested in listed fixed-income securities • REIC: • At least 90% of the total assets invested in real estate property • Remainder may be invested in listed securities • Maximum value of single real estate asset: 35% of the value of the total assets • Minimum real estate units: 3 • REIC/ REIF: • Additionally, in order to benefit from the special tax regime, 50% of the total assets must be invested in specific leased residential real estate • Properties must be owned at least three years unless the Spanish authorities, for exceptional reasons, agree to reduce this period |
Distribution rules applicable to Collective Investment Institutions and those stated by Corporate Law | • REIC: • Dividends distributed by REIC to foreign investors are subject to a 15% withholding tax • REIC/REIF: • Capital gains distributed to foreign investors are subject to 35% tax rate |
• REIC: • External financing cannot exceed 50% of the assets of the company • General Spanish thin capitalization rules should also be considered |
• REIC/REIF: • Corporate Tax: • Tax rate: 1% • No entitlement to any deduction • Transfer tax: • Rebate of 95% for housing purchased for subleasing • Capital Tax: • Exemption in relation to incorporation, capital increase and merger transactions |
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| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| TAIWAN | REIT (Real Estate Investment Trust) | Enacted 2003 | Real Estate Security Statute, Chapters 1 & 2 (July 9, 2003) | Minimum capitalization: NT$1 billion | To be determined by Taiwan’s Ministry of Finance (MOF) and published in the Fall of 2003 | To be determined by MOF and published in the Fall of 2003 | To be determined by MOF and published in the Fall of 2003 | N/A | N/A | N/A | • MOF enacted the REIT legislation in July 2003 and
announced that rulings would be published in the future to provide income,
asset, and distributions rules. The rulings are expected to be published
in the Fall of 2003. • Taiwan’s first REITS are expected to launch in the fourth quarter of 2003.2 |
| Country | Structure | Legal Status | Citation | Organizational Rules | Income Rules | Asset Rules | Distribution Rules | Foreign Considerations | Restrictions on Long-Term Debt | Loss of Status Rules | Other Tax Consequences |
| TURKEY | REIT (Real Estate Investment Trusts/Gayrimenkul Yat *'r*'m Ortakligi | Enacted 1998 | Communique of Capital Markets Law; Commercial Law |
• Must deal primarily with portfolio management • Names must include real estate investment trusts • One of the shareholders must be “leader entrepreneur” • Beginning capital should not be less than the amount determined by CMB (Capital Markets Board) • Shares should be quoted to the Stocks Exchange • Administered by Board of Directors and Board of Auditors • Must not be involved in commercial, industrial, or agricultural activities • Must not be involved in any capital markets other than portfolio management • Must not be involved in construction activities • Can buy and sell securities and do reverse-repo transactions |
Can buy and sell real estate in order to gain trade profits or rental income | • Capital must not be less than 1 trillion TL • At least 49% of the capital should be offered to public |
N/A | Withholding rate is 0% pursuant to Income Tax Law | N/A | N/A | Exempt from corporate tax pursuant to Corporate Tax Law, art. 8-4/d |
Note: Greece also has REIT-like entities, which are called REICs.
1 Susan Gordon, Regional Financial Services Newsletter, 1st ed. (April 2003), at http://www.deacons.com.hk/eng/knowledge/knowledge_148.htm#1.