REIT

The National Treasury has published the Income Tax (Real Estate Investment Trusts) Rules, 2020 which has made minor changes to the income tax exemption regulations for REITs in Kenya.

The new law requires all REITs to apply to the Kenya Revenue Authority for exemption from income taxes during the authorization of the REIT Scheme by the Capital Markets Authority (CMA) or during the process of acquiring a REIT.

“The Commissioner shall upon consideration of the application, communicate its decision in writing within thirty days of submission of the application, to the REIT or the REIT Controlled Entity,” it says.

According to the rules, REITs that fall short of the requirements by CMA and the Income Tax Act shall forfeit the exemption from tax payments. Previously, REITs only required authorization from the CMA in order to effect the income tax exemptions.

The move is also a step by KRA to close all possible gaps for loss of revenue.

At the same time, the Capital Markets Authority (CMA) has issued new guidance for Collective Investment Schemes (CIS) on valuation, investment performance measurement, reporting and other related matters.

The new standards require fund managers of special funds that invest predominantly in real estate to present the CIS fund and benchmark component returns for all periods presented.

“The fund manager shall disclose all significant events that would help a prospective investor interpret the CIS performance report. This disclosure shall be included for a minimum of one year and for as long as it is relevant to interpreting the track record,” it says.

In addition, the new regulations require portfolios to be valued daily and in accordance with the definition of fair value as set out in IFRS 13. External valuations for real estate investments shall be performed by an independent registered property valuer.

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