CMA wants VAT on property trusts removed

THE Capital Markets Authority wants transfer of assets through the Real Estate Investment Trusts exempted from value added tax to encourage development of the new investment segment.

CMA’s assistant manager for strategy, policy and regulatory Framework Daniel Warutere said the 16 per cent VAT on transfer of a REIT property should be changed.

“The VAT charges upon transfer of property is an area that still needs looking at,” Warutere told a forum of developers, regulators and financiers on Monday.

Transfer of REIT assets has already been exempted from stamp duty

charges in this year’s Finance Act, following a successful proposal by the Treasury CS Henry Rotich.

“We think taxation on asset transfers into REITs was slowing development of this market,” Nairobi Securities Exchange chief executive Geoffrey Odundo said following the move by the Treasury in June.

Through Development REITs, investors can acquire land and develop residential and commercial properties for sale or letting.

They can also do so through Income REITs in which they acquire or invest in already-developed property for regular income.

CMA requires D-Reits to have a minimum of seven investors and a minimum initial capital of Sh100 million, while I-REITs must have Sh300 million in minimum capital.

Fund manager Stanlib Investments, owned by South Africa’s Liberty Group, last Friday became the first scheme to be allowed to list a REIT, after waiting for almost a year.

Warutere said the approval process took longer because of the tax treatment of the new investment vehicle – the first in Kenya. South Africa is the only other market where retail investors can participate in a REIT.

“Being the pioneer issue, we also took time to ensure everything was okay in terms of the investor’s interest,” he said. “But we can assure you other applications currently under consideration will not take as much time because of the experience we have had.”

Stanlib’s Fahari I-REIT is expected to raise a minimum of Sh2.6 billion and a maximum of Sh12.5 billion through an initial public offering. The listing date is yet to be made public.

Source: the star

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