The extension of tax transparency to REITs ETFs would help to align the tax treatments for investors investing in REITs and REITs ETFs.
Without tax transparency, REITs ETFs would be subject to tax at 17% on distributions made by REITs that hold Singapore properties. As such, although distributions by REITs ETFs are tax free, investors would have suffered tax at an effective tax rate of 17%.
In contrast, investors especially individuals and foreign corporate investors who invest directly in REITs holding Singapore properties would be exempted from tax and taxed at 10% respectively. This means such investors would “lose out” if they had invested through REITs ETFs. As such, the granting of tax transparency to REITs ETFs effectively aligns the tax treatment for such investors.
This would enhance the vibrancy of the REITs ETF market in Singapore.
Leonard Ong, Tax Partner