Republic of the Philippines

CONGRESS OF THE PHILIPPINES

Metro Manila

Fourteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two
thousand nine.

Republic Act No. 9856

AN ACT PROVIDING THE LEGAL FRAMEWORK FOR REAL ESTATE

INVESTMENT TRUST AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:

ARTICLE I
GENERAL PROVISIONS

Section 1. Short Title. - This Act shall be known as "The Real Estate Investment Trust
(REIT) Act of 2009".

Section 2. Declaration of Policy. - It IS the policy of the State to promote the

development of the capital market, democratize wealth by broadening the participation of
Filipinos in the ownership of real estate in the Philippines, use the2 capital market as an
instrument to help finance and develop infrastructure projects, and protect the investing
public by providing an enabling regulatory framework and environment under which real
estate investment trusts, through certain incentives granted herein, may assist in
achieving the objectives of this policy.

Section 3. Definition of Terms. - For the purposes of this Act, the term:

(a) "Adviser" means a lawyer, accountant, auditor, financial or business

consultant, and such other persons rendering professional advisory services to the
real estate investment trust.

(b) "Affiliate" means a corporation that directly or indirectly, through one or more
intermediaries, is controlled by, or is under the common control of another
corporation, which thereby becomes its parent corporation.

(c) "Associate" of a person includes:

i. Any relative of such person within the fourth (4th) degree of

consanguinity or affinity; and
Consanguinity refers to the relationship of people based on their bloodline. It is a trait shared by people who
came from the same ancestor.

Affinity refers to closeness or connection based on shared interests, characteristics, often unrelated to blood ties-
thru marriage.
 ii. Any company in which he/she and his/her relative within the fourth
(4th) degree of consanguinity or affinity, directly or indirectly, has an
interest of twenty - five percent (25%) or more.

(d) "Cash Equivalent Items" means instruments or investments that are highly
liquid and marketable and are considered good as cash as determined in
accordance with the rules and regulations prescribed by the Commission.
easily converted into cash
(e) "Commission" or "SEC" means the Securities and Exchange Commission of
the Philippines.

(f) "Constitutive Documents" means the articles of incorporation and bylaws of a

REIT.

(g) "Control" exists in favor of a parent corporation when it has the power to
direct or govern the financial and operating3 policies of an enterprise so as to
obtain benefits from Its activities. Control is presumed to exist when the parent
owns, directly or indirectly, through subsidiaries, more than one - half (112) of the
voting power of an enterprise, unless m exceptional circumstances, it can clearly
be demonstrated that such ownership does not constitute control. Control also
exists even when the parent owns one - half (112) or less of the voting power of
an enterprise when there is power

i. Over more than one - half (1/2) of the voting rights by virtue of an
agreement with investors;

ii. To direct or govern the financial and operating policies of the enterprise
under a statute or an agreement;

iii. To appoint or remove the majority of the members of the board of

directors or equivalent governing body; or

iv. To cast the majority votes at meetings of the board of directors of

equivalent governing body.

(h) "Corporation Code" refers to Batas Pambansa Bilang 68, otherwise known as
the Corporation Code of the Philippines.

(i) "Deposited Property" means the total value of the REIT's assets based on the
latest valuation determined m accordance with the rules and regulations
promulgated by the Commission.

(j) "Distributable Income" means net income as adjusted for unrealized gains and
losses/expenses and impairment losses and other items in accordance with
internationally accepted accounting standards. Distributable income excludes
proceeds from the sale of the REIT's assets that are re - invested in the REIT
within one (1) year from the date of the sale.

(k) "Exchange" means any entity registered with the Commission as a stock
exchange pursuant to the Securities Regulation Code.

(l) "Fund Manager" refers to the person responsible for the allocation of the
deposited property to the allowable investment outlets and selection of income -
generating real4 estate. It shall execute investment strategies for the REIT and
oversee and coordinate all of the following activities: property acquisition;
property management; leasing; operational and financial reporting (including
operating budgets); appraisals; audits; market review; accounting and reporting
procedures, as well as refinancing and asset disposition plans. For clarity, a fund
manager is considered independent from the REIT and its sponsors/promoters
under this Act if it is in compliance with the independence, corporate governance
(including the fit and proper rule) and other requirements prescribed by this Act,
its implementing rules and regulations and the Commission.

(m) "Income - generating Real Estate" means real property which is held for the
purpose of generating a regular stream of income such as rentals, toll fees, user's
fees and the like, as may be further defined and identified by the Commission.
The Commission may promulgate rules to include real rights over real property,
provided they generate interest or other regular payments to the REIT.

(n) "Independent Director" means a director who has the qualifications and none
of the disqualifications of an independent director specified in the Securities
Regulation Code and its implementing rules and regulations.

(o) "IRR" refers to the Implementing rules and regulations promulgated to

implement the provisions of this Act.

(p) "Investible Funds" refer to funds of the REIT that can be placed in investment
vehicles other than income generating real estate such as real estate - related
assets, managed funds, government securities, and cash and cash equivalents.

(q) "Investor" means the owner of investor securities or investor shares.

(r) "Investor Securities" or "Investor Shares" mean shares of stock issued by a

REIT or derivatives thereof.

(s) "Managed Funds" mean any arrangement whereby funds are solicited from the
investing public and pooled for the purpose of Investing in securities duly
registered with and/or approved by the appropriate regulatory agency of the
government for investment by the REIT.
(t) "Material Contract" refers to an agreement or arrangement where the amount
involved is at least five percent (5%) of the deposited property of the REIT or
which is not entered into in the ordinary course of business of the REIT:
Provided, however, That the following shall be deemed a material contract
regardless of the amount:

i. Related party transactions under Section 8.11 hereof;

ii. Contract between the REIT and fund manager;

iii. Agreement between the REIT and property manager;

iv. Agreements between and among shareholders such as voting trust

agreements, pooling agreements, joint venture agreements or other
shareholder agreements as may be determined by the Commission;

v. Any acquisition or disposition of real estate by the REIT;

vi. Contracts relating to investments of the REIT under Section 8.3 hereof;

vii. Any contract creating mortgages, encumbrances, liens or rights on the

real estate of the REIT;

viii. Contract of any nature that limits the declaration or distribution of

dividends by the REIT;

ix. Any contract relating to joint venture, spin - off, consolidation or

merger involving the REIT;' and

x. Any contract that may be expected to materially affect the market

activity and/or the price of the investor securities issued by the REIT as
may be determined by the Commission.

(u) "Net Asset Value" or "NAV" means the total '1ssets less total liabilities as
determined by the implementing rules and regulations (lRR) of the Commission.

(v) "Net Income" means net income as determined under the Philippine Financial
Reporting Standards (PFRS).

(w) "Overseas Filipino Investor" refers to an individual citizen of the Philippines

who is working abroad, including one who has retained or reacquired his
Philippine citizenship under Republic Act No. 9225, otherwise known as the
"Citizenship Retention and Re - acquisition Act of 2003".

(x) "Parent' means a corporation which has control over another corporation,
directly or indirectly, through one or more intermediaries.
(y) "Principal Officer" means the chairman of the board of directors, president,
chi(,'!f executive officer - , chief operating officer. treasurer, chief financial
officer corporate secretary, vice president, their equivalent positions, or such other
officers occupying positions of significant influence in a company as may be
determined by the Commission.

(z) "Principal Stockholder" means a stockholder who is directly or indirectly the

beneficial owner of more than ten percent (10%) of any class of security of the
REIT.

(aa) "Public Shareholder" means a shareholder of a REIT other than the following
persons (non - public shareholders):

i. The sponsor/promoter of the REIT;

ii. A director, principal officer or principal shareholder of the

sponsor/promoter of the REIT;

iii. A director, principal officer or principal shareholder of the REIT;

iv. An associate of a director, principal officer or principal shareholder of

the REIT or its sponsor/promoter;

v. A related corporation to the REIT or its sponsor promoter; and

vi. Any person who holds legal title to the shares of stock of the REIT for
the benefit of another for the purpose of circumventing the provisions of
this Act.

(bb) "Property Manager" refers to a professional administrator of real properties

who IS engaged by the REIT to provide property management services, lease
management services, marketing services, project management services, including
rent collection, tenant services, care of the physical plant, security, leasing,
marketing of the property to outside prospects, and other similar services
pertaining to the property under administration. For clarity, a property manager IS
considered independent from the REIT and its sponsor(s)/promoter(s) under this
Act if it is in compliance with the independence, corporate governance (including
the fit and proper rule) and other requirements prescribed by this Act, its IRR and
the Commission.

(cc) "Real Estate Investment Trust' or "RElT' IS a stock corporation established in

accordance with the Corporation Code of the Philippines and the rules and
regulations promulgated by the Commission principally for the purpose of owning
income - generating real estate assets. For purposes of clarity, a REIT, although
designated as a "trust", does not have the same technical meaning as "trust" under
existing laws and regulations but is used herein for the sole purpose of adopting
the internationally accepted description of the company in accordance with global
best practices.

(dd) "Real Property" shall have the same definition as "Immovable Property"
under Article 415 of the Civil Code of the Philippines. Real estate, when used in
this Act, shall have the same meaning as real property.

(ee) "REIT Plan" refers to the plan, including its amendments, of the REIT
registered with the Commission.

(ff) "Real Estate - Related Assets" mean:8 i. Debt securities and listed shares
issued by listed property companies; or Ii. Other funds and assets, including
personal property, incidental to the ownership of real estate.

(gg) "Related Corporation" means the parent, subsidiary or affiliate of the REIT.

(hh) "Related Party" includes:

i. The director, officer or principal stockholder. of the REIT or associate of

such persons;

ii. The sponsor/promoter of the REIT;

iii. The fund manager of the REIT;

iv. The adviser of the REIT;

v. The property manager of the REIT;

vi. A director, principal shareholder or principal officer of the

sponsor/promoter of the REIT, REIT's fund manager or property manager,
or associate of any such persons; and 1avvph!1

vii. Related corporation to the REIT.

(ii) "Securities Regulation Code" or "SRC" refers to the Securities Regulation

Code of 2000 and its implementing rules and regulations.

(jj) ,"Sponsor/Promoter" means any person who, acting alone or in conjunction

with one or more other persons, directly or indirectly, contributes cash or property
in incorporating a REIT.

(kk) "Subsidiary" means a corporation more than fifty percent (50%) of the voting
stock of which is owned or controlled, directly or indirectly, through one or more
intermediaries, by another corporation, which thereby becomes its parent
corporation.
 (ll) "Synthetic Investment Products" are derivatives and other securities created
exclusively out of one or more financial instruments to simulate the returns of the
underlying financial instruments, such as credit - linked notes, collateralized debt
obligations. total return swaps, credit spread options, credit default options, and
similar products determined by the Commission.

(mm) "Taxable Net Income" means the pertinent items of gross income specified
in Section 32 of the National Internal Revenue Code of 1997, as amended, less all
allowable deductions enumerated in Section 34 of the National Internal Revenue
Code of 1997, as amended, less the dividends distributed by a REIT out of its
distributable income as of the end of the taxable year as: (a) dividends to owners
of the common shares; and (b) dividends to owners of the preferred shares
pursuant to their rights and limitations specified in the articles of incorporation of
the REIT.

ARTICLE II
REAL ESTATE INVESTMENT TRUST

Section 4. Investment in the REIT. - Investment in the REIT shall be by way of

subscription to or purchase of shares of stock of the REIT. No shares of stock of the
REIT shall be offered for subscription or sale except in accordance with a REIT plan and
other requirements and restrictions as may be prescribed by the Commission.

Section 5. Registration and Listing. - The shares of stock of the REIT must be registered
with the Commission and listed in accordance with the rules of the Exchange.

Section 6. Nationality Requirement. - A REIT that owns land located in the Philippines
must comply with foreign ownership limitations imposed under Philippine law.

Section 7. Dividend Distribution. - A REIT must distribute annually at' least ninety
percent (90%) of its distributable income as dividends to its shareholders not later than
the last day of the fifth (5") month following the close of the fiscal 10 year of the REIT.
Subject to the provisions of this Act, the dividends shall be payable only from out of the
unrestricted retained earnings of the REIT as provided for under Section 43 of the
Corporation Code of the Philippines. The percentage of dividends received by the public
shareholders to the total dividends distributed by the REIT from out of its distributable
income must not be less than such percentage of their aggregate ownership of the total
outstanding shares of the REIT. Any structure, arrangement or provision which would
have the effect of diminishing or circumventing in any form this entitlement to dividends
shall be void and of no force and effect.

Distributable income excludes proceeds from the sale of the REIT's assets that are re -
invested by the REIT within one (1) year from the date of the sale.

Section 8. Requirements. - Unless the Commission provides otherwise and after public
hearing, taking into account public interest, the need to protect investors and develop the
country's real estate investment industry to make it globally competitive, the following
requirements shall apply:

8.1 Minimum Public Ownership - A REIT must be a public company and to be

considered as such, 'a REIT, must: (a) maintain its status as a listed company; and
(b) upon and after listing, have at least one thousand (1,000) public shareholders
each owning at least fifty (50) shares of any class of shares who in the aggregate
own at least one - third (1/3) of the outstanding capital stock of the REIT.

The Commission shall prescribe a recording and monitoring system that will
effectively ensure that the shares of the public shareholders are traceable to their
names and for their own benefit and not for the benefit of any of the non - public
shareholders mentioned above.

Compliance With the minimum public ownership requirement under this section
must be duly certified by a responsible person designated by the Commission
upon listing, as of record date for any dividend declaration or any qorporate action
requiring shareholder approval and other relevant times as may be required by the
IRR of this Act.

8.2 Capitalization - A REIT must have a minimum paid - up capital of Three

hundred million pesos (Php300, 000.000.00).

i. Real estate, whether freehold or leasehold, located In the Philippines. A

REIT may invest in income - generating real estate located outside of the
Philippines: Provided, That such investment does not exceed forty percent
(40%) of its deposited property and only upon special authority from the
Commission. The Commission in issuing such authority shall consider,
among others, satisfactory proof that the valuation of assets is fair and
reasonable. An investment in real estate may be by way of direct
ownership or a shareholding in an unlisted special purpose vehicle
constituted to hold/own real estate;

ii. Real estate - related assets, wherever the issuers, assets, or securities are
incorporated, located, issued, or traded;

iii. Managed funds, debt securities and listed shares issued by local or
foreign non - property corporations;

iv. Government securities issued on behalf of the Philippine government

or governments of other countries and securities issued by multilateral
agencies;

v. Cash and cash equivalent items; and

vi. Such other similar investment outlets as the Commission may allow.
8.4 Investment in Synthetic Investment Products - A REIT may invest not more
than five percent (5%) of its investible funds in synthetic investment products
such as, but not limited to, credit default swaps, credit - linked notes,
collateralized debt obligations, total return swaps, credit spread options, and credit
default options, and only upon special authority from the appropriate regulatory
authority.

8.5 Income - generating Real Estate - At least seventy - five percent (75%) of the
deposited property of the REIT must be invested in, or consist of, income -
generating real estate.

8.6 Property Development - A REIT must not undertake property development

activities whether on its own, in a joint venture with others, or by investing in
unlisted property development companies, unless it intends to hold the developed
property upon completion. The total contract value of property development
activities undertaken and investments in uncompleted property developments
should not exceed ten percent (10%) of the deposited property of the REIT.

8.7 Single Entity Limit - Not more than fifteen percent (15%) of investible funds
of the REIT may be invested in any one issuer's securities or anyone managed
fund, except with respect to government securities where the limit is twenty - five
percent (25%).

8.8 Foreign Assets - A REIT may invest in local or foreign, assets, subject to the
terms of its articles of incorporation. Where an investment in a foreign real estate
asset is made, the REIT should ensure that the investment complies with all the
applicable laws and requirements in that foreign country such as, but not limited
to, foreign ownership restrictions, if any, and requisites of having good and valid
title to that real estate.

8.9 Joint Venture - When investing in real estate as a joint owner, the REIT
should make such investment by acquiring shares or interests in an unlisted
special purpose vehicle constituted to hold/own the real estate and the REIT
should have freedom to dispose of such investment. The joint venture agreement,
memorandum and articles of association or other constitutive documents of the
special purpose vehicle should provide for a minimum percentage of distributable
profits of the special purpose vehicle that will be distributed and grant the REIT
veto rights over key operational issues of the special purpose vehicle. .

8.10 Aggregate Leverage Limit - The total borrowings and deferred payments of a
REIT should not exceed, 'thirty - five percent (35%) of its deposited property:
Provided, however, That the total borrowings and deferred payments of a REIT
that has a publicly disclosed investment grade credit rating by a duly accredited or
internationally recognized rating agency may exceed thirty - five percent (35%)
but not more than seventy percent (70%) of its deposited property.
8.11 Related Party Transactions - Any contract or amendment thereto, between
the REIT and related parties, including contracts involving the acquisition or lease
of assets and contracts for services, must comply with the following minimum
requirements:

i. Full, fair, timely and accurate disclosures on the identity of the parties
their relationship

with the REIT, and other important details of the transaction have been
made to the Exchange and the Commission;

ii. Be on fair and reasonable terms, including the contract price;

iii. Approved by at least a majority of the entire membership of the board

of directors, including the unanimous vote of all independent directors of
the REIT;

iv. Accompanied by a fairness opinion by an independent appraiser done

in accordance with the valuation methodology prescribed by the
Commission, in the case of an acquisition or disposition of real estate
assets and property or share swaps or similar transactions; and

v. Any other matter that may be materially relevant to a prospective

investor in deciding whether or not to invest in the REIT.

8.12 Valuation - A full valuation of a REIT's assets must be conducted by an

independent appraisal company, duly accredited by the Commission, at least once
a year In accordance with the applicable rules of asset valuation and valuation
methodology' as prescribed by the Commission.

8.13 Fund Manager - A REIT must appoint a fund manager that is independent
from the REIT and its sponsor(s)/ promoter(s) and shall be subject to the
following minimum requirements:

i. It must be a corporation duly organize under the laws of the Republic of

the Philippines or a foreign corporation engaged in the business' of fund
management with proven track record and duly licensed to do business in
the Philippines by the appropriate regulatory agency;

ii. It must have a minimum paid - up capital" stock or assigned capital of

Ten million pesos (Php10, 000.000.00), unless the Commission provides
otherwise;

iii. Its office in the Philippines must have a meaningful role in its business
activities and must perform accounting, compliance and investor relations,
services in the Philippines;
 iv. It must comply with the requirements of the relevant law or appropriate
regulatory authority on the number of independent directors;

v. It must comply with the corporate, governance requirements, including

the fit and proper rule, prescribed by this Act and its IRR;

vi. It must adopt measures as may be prescribed by the IRR of this Act to
avoid conflicts of interest in the discharge of its duties as fund manager for
the REIT; and

vii. It must employ a resident chief executive officer and at least two (2)
full - time professional employees who have a track record' and experience
in financial management as well as experience in the real estate industry.

8.14 REIT Property Manager - The. RElT must appoint a REIT property manager
who shall be responsible for managing the real estate assets such as apartment
buildings, office buildings, warehouses, hospital buildings" medical facilities,
hotel buildings, resort facilities, manufacturing plants and other physical assets of
the REIT. The contract between the REIT and the property manager must comply
with the disclosure and other requirements prescribed for related party
transactions.

The REIT property manager shall be independent from the REIT and its
sponsor/promoter and possess the qualifications and be subject to such functions
and responsibilities, restrictions and other requirements prescribed by the
Commission.

The property manager must comply with the following minimum qualifications:

i. It must comply with the requirement of the SRC or the Commission on

the number of independent directors;

ii. It must comply with the corporate governance requirements, including

the fit and proper rule, prescribed by this Act and its IRR; and

iii. It must adopt measures as may be prescribed by the IRR of this Act to
avoid conflicts of interest in the discharge of its duties as property
manager for the REIT.

8.15 Independent Directors - At least one - third (113) of the board of directors of
a REIT must be independent directors.

8.16 Fit and Proper Rule - To maintain the quality of management of the REIT
and afford better protection to REIT investors, the Commission, or the concerned
regulatory agency, shall prescribe or pass upon and review the qualifications and
disqualifications of individuals elected or appointed as directors or officers of the
REIT, REIT fund managers, REIT property managers, distributors and other
REIT participants and disqualify those found unfit. The appropriate regulatory
agency may disqualify, suspend or remove any director or officer who commits or
omits an act which renders him unfit for the position.

In determining whether an individual is fit and proper to hold the position, regard
shall be given to his integrity, experience, education, training, and competence:
Provided, however, That the following persons shall in no case be allowed to
serve or act in the capacity of officer, director or consultant of any REIT, REIT
fund manager, or REIT property manager:

i. Any person convicted of any crime involving any security or financial

product;

ii. Any person convicted of an offense involving fraud or embezzlement,

theft, estafa or other fraudulent acts or transactions;

iii. Any person who, by reason of any misconduct, is enjoined by order,

judgment, or decree by any court, quasi - judicial body or administrative
agency of competent jurisdiction from acting as a director, officer;
employee, consultant, or agent occupying any fiduciary position;

iv. Any person found by the appropriate regulatory agency to have

violated, or aided, abetted, counseled commanded, induced, or procured
the violation of this Act, the Corporation Code, the General Banking Law,
the Insurance Code, the SRC, or' any related laws and any rules,
regulations or orders thereunder; ,

v. Any person judicially declared to be' insolvent, or incapacitated to

contract; and

vi. Any person found guilty by a foreign court, regulatory authority or

government agency of the, acts or violations similar to any of the acts' or
misconduct enumerated in the foregoing paragraphs.

A conviction in the first instance shall be considered sufficient ground for

disqualification.:

8.17 Executive Compensation - The total annual compensation of all executive

officers of the REIT shall not exceed such percentage of the net income before
regular corporate income tax of the REIT during the immediately preceding
taxable year, as may be provided in the IRR of this Act and shall be governed by
the provisions on related party transactions.
 8.18 Fund Manager and Property Manager Fees - Fees received by the REIT fund
manager and the RET property manager from the REIT shall not exceed one
percent (1%) of the net asset value of the assets under management.

Section 9. Reportorial and Disclosure Requirements. –

9.1 Requirements - The REIT shall comply with the reportorial and disclosure
requirements prescribed by the Corporation Code, the SRC and the Exchange. At
the minimum, the REIT shall disclose the following information:

i. Material contracts as defined under Section 3 of this Act;

ii. Allowable investments of the REIT under Section 8.3 hereof;

iii. Related party transactions under Section 8.11 hereof;

iv. Contracts between the REIT and fund manager or the property
manager, including the identity of the parties, contract price, fees and the
other basic terms of the contract;

v. Valuation of the real estate properties of the REIT, including the

valuation methodology used therefore;

vi. Material changes in the income stream of the REIT;

vii. Any fee received by any party relating to the acquisition or disposition
of the real estate of the REIT;

viii. Merger, consolidation, joint venture, takeover or spin - off involving

the REIT;

ix. Any modification of the rights of the holders of any class of securities
issued by the REIT and the corresponding effect of such modification
upon the rights of the holders;

x. Any declaration of cash dividend, stock dividend, property dividend and

pre - emptive rights by the REIT;

xi. Appointment of a receiver or liquidator for the REIT;

xii. Change in control of the REIT;

xiii. Losses, or potential losses which amount to at least five percent (5%)
of the deposited property of the REIT;

xiv. Occurrence of any event of dissolution with details in respect thereto;

 xv. Acts or facts that might seriously impair the business activities of the
REIT;

xvi. Creation of mortgages, pledges or liens on the properties of the REIT;

xvii. Any development activity undertaken by the REIT, including the

essential details thereof;

xviii. Direct and indirect ownership of directors and principal officers in

the securities of the REIT;

xix. Any amendment to the articles of incorporation and bylaws of the

REIT; and

xx. Any planned acquisition of outstanding shares or disposition of

treasury shares of the REIT.

9.2 Special Quarterly and Annual Reports - In addition to the quarterly and annual
reportorial and disclosure requirements prescribed for public and listed
companies, the REIT shall make a report on and disclose the following to the
Commission and the Exchange:

i. Summary of all real estate transactions entered into during the period,
including the identity of the parties, the contract price, and their
valuations:' including the methods' used to value the assets;

ii. Summary of all the REIT's real estate assets, including the location of
such assets, their purchase' prices and the latest valuations, rentals
received and occupancy rates, and/or the remaining terms of the REIT's
leasehold properties;

iii. Comparative summary of the financial performance of the REIT

covering various time periods (e.g. quarterly, one (1) - year, three (3) -
year, five (5) - year or (l0) - year).

9.3 REIT Plan - The REIT plan or prospectus shall comply with the requirements
of the SRC and disclose the risks specific to investing in REITs.

9.4 Failure of Compliance - Failure to comply with reportorial and disclosure

requirements shall subject the REIT to the applicable penalties under the SRC and
the rules of the Exchange, without prejudice to the filing of the appropriate
administrative, civil or criminal action under this Act or existing laws.

ARTICLE III
TAXES AND OTHER RELATED ISSUES
Section 10. Income Taxation of REITs. - A REIT shall be subject to income tax under
Chapter IV, Title II of the National Internal Revenue Code of 1997, as amended, on its
taxable net income as defined in this Act: Provided, That in no case shall a REIT be
subject to the minimum corporate income tax, as provided under Section 27(E) and
Section 28(A)(2) of the same Code: Provided, further, That for purposes of computing
the taxable net income of a REIT, dividends distributed by a REIT from its distributable
income after the close of a taxable year and on or before the last day of the fifth (5")
month following the close of the taxable year shall be considered as paid on the last day
of such taxable year.

A REIT shall be subject to the income tax on its taxable net income as defined in Chapter
V, Title II of the National Internal Revenue Code of 1997, as amended, instead of its
taxable net income as defined in this Act, upon the occurrence of any of the following
events subject to such curing period as may be prescribed in the IRR of this Act:

i. Failure to maintain its status as a public company as defined in Section 8.1 of

this Act;

ii. Failure to maintain the listed status of the investor securities on the Exchange
and the registration of the investor securities by the Commission; and/or

iii. Failure to distribute at least ninety percent (90%) of its distributable income
required under Section 7 of this Act.

Section 11. Creditable Withholding Tax. - Income payments to a REIT shall be subject to
a lower creditable withholding tax of one percent (1%).

Section 12. Transfer of Real Property. - Any existing, law to the contrary
notwithstanding, the sale or transfer of real property to REITs, which includes the sale or
transfer of any and all security interest thereto, shall be subject to fifty percent (50%) of
the applicable Documentary Stamp Tax (DST) imposed under Title VII of the National
Internal Revenue Code of 1997, as amended.

All applicable registration and annotation fees to be paid, related or incidental to the
transfer of assets or the security interest thereto, shall be fifty percent (50%) 'of the'
applicable registration and annotation fees.

The incentives granted under this section can be availed of by an unlisted REIT, provided
it is listed with an Exchange not later than two (2) years from the date of the initial
availment of the incentives.

The fifty percent (50%) of the applicable DST shall nevertheless be due and demandable
together with the applicable surcharge, penalties, and interest thereon reckoned from the
date such taxes should have been paid upon the occurrence of any of the following events
subject to such curing period as may be prescribed in the IRR of this Act:
 i. Failure to list with an Exchange within the period prescribed in this section;

ii. Failure to maintain its status as a public company as defined in Section 8.1 of
this Act;

iii. Failure to maintain the listed status of the investor securities on the Exchange
and the registration of the investor securities by the Commission; and/or

iv. Failure to distribute at least ninety percent (90%) of its distributable income
required under Section 7 of this Act.

Section 13. Issuance and Transfer of Investor Securities. - The following rules shall
apply:

i. The original Issuance of investor securities shall be subject to DST under Title
VII of the National Internal Revenue Code of 1997, as amended;

ii. Any sale, barter, exchange or other disposition of listed investor securities
through the Exchange, including block sales or cross sales with prior approval
from the Exchange, shall be subject to the stock transaction tax imposed under
Section 127(a) of the National Internal Revenue Code of 1997, as amended;

iii. Any sale, barter or exchange or other disposition of listed investor securities
through the Exchange, including block sales or cross sales with prior approval
from the Exchange, shall be exempt from the DST prescribed under Title VII of
the National Internal Revenue Code of 1997, as amended; and

iv. Any initial public offering and secondary offering of investor securities shall
be exempt from the tax imposed under Section 127(b) of the National Internal
Revenue Code of 1997, as amended.

Section 14. Dividends Paid by REITs. - Cash or property dividends paid by a REIT shall
be subject to a final tax of ten percent (10%), unless: (a) the dividends are received by a
nonresident alien individual or a nonresident foreign corporation entitled to claim a
preferential withholding tax rate of less than ten percent (10%) pursuant to an applicable
tax treaty; or (b) the dividends are received by a domestic corporation or resident foreign
corporation, or an overseas Filipino investor in which case, they are exempt from income
tax or any withholding tax: Provided, That in the case of overseas Filipino investors, they
are exempt from the dividends tax for seven (7) years from the effectivity of the tax
regulations implementing this Act.

Section 15. VAT on Gross Sales or Gross Receipts of RElTs. - A REIT shall be subject to
value - added tax (VAT) imposed under Title IV of the National Internal Revenue Code
of 1997, as amended, on its gross sales from any disposal of real property, and on its
gross receipts from the rental of such real property. A REIT shall not be considered as a
dealer in securities and shall not be subject to VAT on its sale, exchange or transfer of
securities forming' part of its real estate - related assets.

Section 16. General Application of the National Internal Revenue Code of 1997, as
amended. - Unless otherwise provided under this Act, the internal revenue taxes under"
the National Internal Revenue Code of 1997, as amended, shall apply.

Section 17. Delisting of REITs. - In the event the REIT is delisted from the Exchange,
whether voluntarily or involuntarily, for failure to comply with the provisions of this Act
or rules of the Exchange, the tax incentives granted under this Act shall be ipso facto
revoked and withdrawn as of the date the delisting becomes final and executory and any
tax incentives that may have been availed 'of by the REIT thereafter shall immediately be
refunded to the Government and the surcharge and penalty prescribed by Section 19
hereof shall apply. If the delisting is for causes highly prejudicial to the' interest of the
investing public such as violation of the disclosure and related party provisions of this
Act or insolvency of the REIT due to mismanagement or misappropriation, conversion,
wastage or dissipation of its corporate assets, the responsible persons shall refund to its
investors at the time of final delisting the value of their shares.

ARTICLE IV
PENAL PROVISIONS

Section 18. Revocation of Registration. - If the Commission finds out that the REIT was
established so as to seek the benefits of this Act without a true, intention to carry out its
provisions and/or the IRR, the Commission shall revoke or cancel the registration of the
securities of the REIT. The REIT shal1 pay the applicable taxes plus interests and23
surcharges under the National Internal Revenue Code of 1997, as amended.

Section 19. Penalties. - A fine of not less than Two hundred thousand pesos
(Php200,000.00) nor more than Five million pesos (Php5, 000.000.00) or imprisonment
of not less than six (6) years and one (1) day nor more than twenty - one (21) years, or
both at the discretion of the court, shall be imposed upon any person, association,
partnership or corporation, its officer, employee or agent, who, acting alone or in
connivance with others, shall:

i. Understate or overstate the financial statements of the RElT;

ii. Cause any loss, conversion, misappropriation of the assets, securities or income
of the REIT;

iii. Use another person to hold the legal title of the shares of the REIT for his
benefit for the purpose of circumventing the minimum public ownership
prescribed in Section 8.1 of this Act;
 iv. Allow himself to be used by another person to hold legal title to the shares' of
the REIT for the purpose of circumventing the minimum public ownership
prescribed m Section 8.1 of this Act;

v. Submit false or misleading certification on the minimum public ownership

required by this Act; or

vi. Violate any of the provisions of this Act, or the rules and regulations
promulgated under authority hereof.

If the offender is a corporation, partnership or association or other juridical entity, the

penalty may, at the discretion of the court, be imposed upon such juridical entity and/or
upon the officer or officers of the corporation, partnership, association or entity
responsible for the violation, and if such officer is an alien, he shall in addition to the
penalties prescribed, be deported without further proceedings after service of sentence.

The prosecution and conviction of the offender under this Act and the imposition of the
above penalties shall be without prejudice to the administrative, civil and criminal
liabilities of the offender under the SRC.

ARTICLE V
MISCELLANEOUS PROVISIONS

Section 20. Corporate Governance. - The REIT property manager and the REIT fund
manager shall be subject to the principles of corporate governance adopted by the proper
regulatory body.

Section 21. Use of Registration Fees. - To carry out the purposes of this Act, the.
Commission shall retain and use fifty percent (50%) of all fees paid to it relative to the
establishment of REITs and the registration of their securities in addition to its annual
budget.

Section 22. Implementing Rules and Regulations. - Within ninety (90) days from the
effectivity of this Act; the Commission, in coordination with the Bangko Sentral ng
Pilipinas (BSP) and the Department of Finance (DOF) and in consultation with other
stakeholders such as the Philippine Stock Exchange and the real estate industry, shall
promulgate the implementing rules and regulations of the provisions of this Act:
Provided, That the Commission, the BSP and the DOF may continue to issue separate
regulations that will apply exclusively to the institutions under their, respective
jurisdiction, consistent with the implementing rules and regulations: Provided, further,
That the Commissioner of the Bureau of Internal Revenue shall issue the lRR regarding
all tax provisions of this Act (Tax Regulations), subject to the review of the Secretary of
Finance, in accordance with Section 4 of the National Internal Revenue Code, as
amended, after full and complete consultation with all concerned.1avvphi1
Section 23. Separability Clause. - If, for any reason, any article or provision of this Act
or any portion therefore or application of such article, provision or portion thereof to any
person, group or circumstance is declared invalid or unconstitutional, the remainder of
this Act shall not be affected by such decision.

Section 24. Repealing Clause. - All laws, executive orders, rules and regulations and
parts thereof which are inconsistent With this Act are hereby repealed or amended
accordingly.

Section 25. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in at least two (2) newspapers of general
circulation in the Philippines.

Approved,

PROSPERO C. NOGRALES JUAN PONCE ENRILE

Speaker of the House of President of the Senate
Representatives

This Act which is a consolidation of Senate Bill No. 2639 and House Bill No. 6379 was
finally passed by the Senate and the House of Representatives on September 29, 2009
and September 30, 2009, respectively.

MARILYN B. BARUA-YAP EMMA LIRIO-REYES

Secretary General House of Secretary of the Senate
Representatives

Approved:

GLORIA MACAPAGAL-ARROYO
President of the Philippines

Lapsed into law on DEC 17 2009

without the signature of the President,
in accordance with Article VI
Section 27 (1) of the Constitution

The Lawphil Project - Arellano Law Foundation