REIT – South African Tax Guide (2024)

Authors: Kelsey Biddulph and Tessmerica Moodley.The South African Real Estate Investment Trust (REIT) structure is a listed property investment vehicle, similar to internationally recognised REIT structures, where a tax dispensation ensures a flow through of net property income to investors. A REIT is essentially a company that owns and operates income-producing immovable property.

Authors: Tsanga Mukumba and Louis Botha. Recently, the South African Property Owners Association (SAPOA) released its Office Vacancy Report for the first quarter of 2019. According to one of the key findings of the report, there has been a quarter on quarter decline in SAPOAs assessment of the square meterage of commercial property under development from 559,000 sqm to 404,000 sqm.

Always be conscious of risk in your approach to the Real Estate Investment Trust (Reit) sector, according to Andrew Parsons, MD of Resolution Capital Australia. At a recent conference hosted by the SA Reit Association Parsons said key lessons to be learnt from the Australian Reit experience is that one ignores history at your own peril. “History may not repeat itself, but it does rhyme,” he cautioned. “Always be conscious of risk. We grew our platform in a measured way, building on our Australian operations and experience to what is a mature and stable real estate market. At the same time we accessing opportunities in new markets through relatively modest investments in smaller platforms, which can achieve scale and diversity in a measured way without undue risk,” explained Parsons.

The introduction of tax legislation pertaining to Real Estate Investment Trusts (REITs) has resulted in significant development of this industry over the last few years. Apart from the fact that a REIT is not subject to capital gains tax in respect of properties that it disposed of, an additional consequence is that dividends declared by a REIT to South African shareholders are not exempt, but are in fact part of taxable income. The distribution is also deductible in the hands of the REIT on the basis that a flow-through principle is essentially adopted with reference to rentals and similar income that are received by the REIT.

Author: Ben Strauss (Director at CDH). Real estate investment trusts (REITs) are subject to a special tax regime in South Africa. Put simply, a REIT may deduct for income tax purposes distributions made to its shareholders. As a REIT by its nature distributes most of its net income to its investors, the REIT itself usually pays little or no income tax; instead, the shareholder pays income tax on the distributions received from the REIT.

Summary SARS issued a binding private ruling that determines the relevant year of assessment when considering whether a “qualifying distribution” is made by a REIT. Relevant tax laws This is a binding private ruling issued in accordance with section 78(1) and published in accordance with section 87(2) of the Tax Administration Act No. 28 of 2011. In this ruling references to sections are to sections of the Act applicable as at 29 June 2015. Unless the context indicates otherwise, any word or expression in this ruling bears the meaning ascribed to it in the Act. This is a ruling on the interpretation and application of the provisions of –

The provisions in the Income Tax Act No. 58 of 1962 (the Act) pertaining to the taxation of Real Estate Investment Trusts (REITs) are contained in section 25BB and were introduced into the Act with effect from 1 April 2013. Deduction of “qualifying distributions” A REIT is a resident company which shares are listed on an exchange as shares in a REIT (as defined in the JSE Listings Requirements). Essentially, section 25BB allows for a “qualifying distribution” to be made by a REIT or a controlled company (a company that is a subsidiary of a REIT) for which the REIT or controlled company (that is a resident) gets a deduction from its income for the year of assessment to which that qualifying distribution relates.

Section 25BB of the Income Tax Act was adopted in South Africa with effect from 1 April 2013 to govern the taxation of real estate investment trusts (REITs). A REIT is a company that owns and operates income-producing immovable property. The definition of a REIT in the Income Tax Act refers to a company that is a South African tax resident whose shares are listed on the JSE as shares in a REIT, as defined in the JSE Limited Listing Requirements.

Author: Toinette Beckert The provisions in the Income Tax Act No. 58 of 1962 (“the Act”) pertaining to the taxation of Real Estate Investment Trusts (“REITs”) are contained in section 25BB and were introduced into the Act with effect from 1 April 2013. Deduction of “qualifying distributions” A REIT is a resident company which shares are listed on an exchange as shares in a REIT (as defined in the JSE Listings Requirements). Essentially, section 25BB allows for a “qualifying distribution” to be made by a REIT or a controlled company (a company that is a subsidiary of a REIT) for which the REIT or controlled company (that is a resident) gets a deduction from its income for the year of assessment to which that qualifying distribution relates.