Special purpose vehicles to get income tax exemption

ISLAMABAD: The government has decided to grant income tax exemption to the special purpose vehicles (companies) of the Real Estate Investment Trusts (REITs) through the Tax Laws (Fourth) Amendment Bill, 2021.

Sources told Business Recorder here on Monday that the government may restrict the scope of agricultural income tax exemption within the Income Tax Ordinance 2001.

The Federal Board of Revenue (FBR) may restrict the definition of “agricultural income” under the Income Tax Ordinance, 2001.

One of the proposals is to restrict the income tax exemption only to the cultivator of the land and the absentee landlords may be taxable.

Another proposal is to restrict income tax exemption to essential food crops. However, no final decision has been taken regarding restricting the scope of the scope of agricultural income tax exemption.

Presently, there are 7-8 REIT projects in the pipeline and the SECP may grant registration to them as REIT management companies (RMCs) to boot housing sector.

The FBR has already granted corporate income tax exemption to the REITs, which would be extended to the special purpose companies.

The aim of the reforms in the REITs to move towards disclosure-based issuance, providing requisite support for growth of REIT schemes, reducing entry barriers and attracting PPP-based infrastructure projects into the realm of REITs.

Major reforms proposed with regard to revamping of conventional REIT model, allowing REITs to invest either in real estate directly or through investments in Special Purpose Companies, introducing the concept of public-private partnership-based infrastructure projects under the REIT umbrella, etc.

Additionally, the regulatory amendments include facilitating REIT companies with removal of a number of approval processes and rationalising requirements for submission of various documents. —SOHAIL SARFRAZ