REITs - getting ready for scrip dividend

Name of Tax Change
Liberalising the cash distribution requirement for tax transparency for Real Estate Investment Trusts (“REITs”)

Current Treatment
To enjoy tax transparency, REITs must distribute at least 90% of taxable income in the same financial year in which such income is derived. The distributions to the unit holders must be made fully in cash.

New Treatment
To enhance our tax regime for REITs, a REIT that makes distributions to unit holders in the form of units can continue to enjoy tax transparency. This is subject to the following conditions:

(i) Before the distribution, the trustee of the REIT grants the unit holders the option to receive the distributions either in cash or units in that REIT; and

(ii) On the date of distribution, the trustee of the REIT must have sufficient cash to make the entire distribution fully in cash had no option been given to those unit holders to receive the distribution in units in that REIT.

Unit holders that elect to receive distributions in units will be taxed in the same manner as if they had received the distribution in cash.

This change will take effect for distributions made on or after 1 April 2012.