The investment managers who will issue the Real Estate Investment Trust (REIT) are still awaiting the issuance of Government Regulation concerning tax provisions for REIT. This will lower the tax burden in the form of final Income Tax and Tax on Land and Building Rights, allowing investors to gain higher yield.
Nurhaida, Chief Executive of the Capital Market Supervision in FSA, said that final Income Tax rate for land and building asset sales in REIT issuance initially imposed 5%. This provision was later revised by the Minister of Finance Regulation No. 200/2015 which changes the final Income Tax calculation to capital gain tax rate of 25%. The regulation is considered to weigh on the financial industry players to issue REIT.
“If there is no capital gain, tax may be smaller, but if we look at the nature of the property at the time of the sale, it usually has capital gain and high value,” said Nurhaida. The provision will be modified in Government Regulations so the final income tax rate for property sales in REIT issuance will be 1%.
Additionally, the 5% Tax on Land and Building Rights that is burdened on property buyers is also an obstacle for REIT issuance. “The President has invited the head of the region to determine if the region will benefit if REIT is developed. Thus, each region has been requested to lower the Tax on Land and Building Rights,” said Nurhaida.
If the final Income tax and Tax on Land and Building Rights are decreased, the REIT unit holder will obtain higher yield, which is currently around 7%-9%. According to Nurhaida, there is one product from REIT that is being processed to get permission for its issuance in FSA. (*)
Add Comment