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Budget 12: Treasury to consult on relaxing Reit tax rules

The Treasury has announced it will consult on relaxing income taxation rules for real estate investment trusts that invest in other Reits.

The Treasury’s Budget statement, published this week, says the Government will consult this year on the Reits tax regime, specifically on whether to change the treatment of income received by a Reit when it invests in another Reit.

To qualify as a Reit, 75 per cent of a trust’s income and assets must qualify as tax exempt property rental business. Currently, a Reit is not allowed to treat income from an investment in another Reit as tax exempt.

Reita director of policy Peter Cosmetatos says Reits should be brought into line with property authorised investment funds, the unlisted open-ended equivalent of a Reit, which can invest in other Reits as part of its tax exempt property rental business.

He says: “A correction in the rules would help stimulate the formation of new Reits and improve liquidity in the property sector, as there would be higher trading of property shares.”

The Treasury said it is also considering launching social housing Reits.

It says if social housing associations can covert to Reit status, it would spare them from paying any corporation or capital gains tax on the profits made from property investment.

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