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capital appreciation and
annuity income
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Do REITs qualify for an exemption on stamp duty/tax when the shares themselves are traded?

When you trade REIT shares, you don't pay Securities Transfer Tax.

What is the effective tax of a REIT payment to an international shareholder at this stage?

Right now, offshore investors will hold/own either linked units in PLS companies or participatory interests in PUTs. The interest distributed from these investments doesn’t attract tax. But, this is changing. A new withholdings tax (WHT) will be levied on interest and dividends. Foreign shareholders of SA REITs will be levied a WHT from 1 January 2014 – the current rate is 15% or the applicable double tax agreement rate could apply. This only applies to foreign investors.

From which countries has South Africa “borrowed” the tax legislation? I have read many articles which say South Africa arrived at its “best of breed” structure by looking at international REITs. I am curious to know if National Treasury used, for example, a combination of the USA and UK REIT structure?

As the REIT structure is internationally recognised, the SA REIT has many common features with REITs from all over the world. However, it is most strongly influenced by the US where the REIT structure is also a tax dispensation. The US has the most mature, proven, prosperous and growing REIT market in the world and the sector, and National Treasury, was ultimately most comfortable with this structure. When it comes to the structure of the SA REIT Association, we are modelled on NAREIT (National Association of Real Estate Investment Trusts) in the US and EPRA (European Public Real Estate Association) in Europe.

Can my company become a member of the SA REIT Association?

To quality for membership, you must hold REIT status from the JSE or have been a member of the former Property Loan Stock Association. The Executive Committee of the SA REIT Association can also invite JSE listed property entities (non REITs) with interests strongly aligned to SA REITs to become a conditional member. The membership joining fee is R11,400 (including VAT) plus annual subscription of R50,000 (including VAT).

How do you know if you’re investing in a Company REIT or a Trust REIT?

The name of a Company REIT will always have “Limited” or “LTD” behind it and it will also have a company registration number. Right now, there are only six potential Trust REITs in the sector. These entities were Property Unit Trusts before the SA REIT tax dispensation. They are: Sycom Property Fund (SYC)
Emira Property Fund (EMI)
Fountainhead Property Trust (FPT)
Capital Property Fund (CPL)
SA Corporate Real Estate Fund (SAC)
Oasis Crescent Property Fund (Listed on JSE Alt X)

How are the company and trust REIT’s taxed?

Both benefit from the REIT tax dispensation, but Trust REITs are taxed as trusts and the Company REITs taxed as companies.

I'm interested in investing in SA REITs. Please direct me to an online website where I can create an account

There are several ways of investing in REITs listed on the JSE. Your current bank, stockbroker or financial advisor may be able to help you with these options.

Direct – this means direct ownership of SA REIT shares.

1. Open a stock broking account with a stockbroker. By doing this you can pick and buy shares in SA REITs yourself or by telling your stockbroker to do it for you.

2. Open an online trading securities account with a bank. Once you’ve opened your account and transferred funds, you can the trade in SA REITs and in any share on the JSE, online.

Indirect - this means investing in a fund that owns SA REIT shares

1. Invest in a property unit trust fund. Many institutions and fund managers offer property unit trust funds, which invest in several REITs at the same time. You can make smaller investments in property unit trusts, but the professional management of the investment comes at an extra cost. To invest, contact the asset manager of a property unit trust. Several asset managers offer the choice to manage your investment online.

2.Buy shares in a property index fund. You buy it directly like an SA REIT share, but it is a property unit trust that tracks the SA Property Index by investing in every REIT on the SA Property Index on the JSE, in proportion to the size of each REIT. There is a lower cost to these funds as the manager does not stock pick, but rather buys the index.

Key words for understanding

  • Conduit = An organisation that acts as a channel for transmission of rental income.
  • Distribution/s = An income a company pays out to their investors/shareholders.
  • Capital Gains Tax (CGT) = Tax that has to be paid to SARS when an investor and/or an organisation sells shares or property for profit.
  • Equity stake = A stake in a company that gives you rights to the profits of the company.
  • Debentures = An unsecured loan certificate issed by a company, backed by general credit rather than by specified asset.
  • Securities tax = Tax paid when buying shares sold on the JSE.
  • Direct tax = Tax implications that directly effect investors.
  • Indirect tax = Tax implications that indirectly effect investors.
  • Effective tax rate = The maximum tax an investor has to pay.