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The government will extend the income tax and GST concessions for Real Estate Investment Trusts (REITs), Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said in the Budget 2015 statement yesterday.
“To support the listing of REITs in Singapore, I will extend the income tax and GST concessions for five years, and enhance the GST concession to facilitate fundraising by special purpose vehicles set up by REITs,” he said.
This means the package of income tax concessions for these trusts will be valid until 31 March 2020. Income from foreign properties owned by these REITs will also be exempted from taxes so long as the property is acquired by the trust or its fully-owned Singapore tax resident subsidiary during the aforementioned period.
However, the stamp duty concessions currently enjoyed by REITs will be allowed to lapse after 31 March 2015. This is because the objective of the stamp duty concessions, which is to enable the industry to acquire a critical mass of local real estate, has already been achieved.
“Overall, Singapore’s tax regime for REITs continues to remain very competitive relative to those elsewhere in Asia, and will help anchor the sustainable growth of the S-REIT industry,” Tharman added.
The Monetary Authority of Singapore (MAS) will also release further details on the new tax treatment for REITs by May 2015.
Commenting on the new measures, JLL said the extension of the tax concessions for REITs would further develop Singapore’s REIT market, but the incremental demand for office spaces by any new REIT listings will be marginal given the large supply.
As for the discontinuation of the stamp duty concession, it is unlikely to have any negative impact on the city-state’s property market, as this would have been factored previously, explained the property consultancy.
However, CBRE believes that the non-extension of the stamp duty concessions would reduce the volume of property acquisition by REITs.
“The lapse of stamp duty concessions for REITs will pose another barrier amongst the already comprehensive checklist for the acquisition of properties by S-REITs,” said Desmond Sim, Head of CBRE Research for Singapore and Southeast Asia.
“Generally, this works out to about a 3 percent increase in acquisition costs. Last year, S-REITs transacted S$3.2 billion in investment sales (19 percent of the total investment tally for 2014). With this lapse in the stamp duty concession, CBRE expects the volume of REITs acquisitions to be under pressure,” he added.
Muneerah Bee, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email muneerah@propertyguru.com.sg
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