Helen Saulnier 
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Originally found in the United States of America, Real Estate
Investment Trusts (REITS) were aimed at allowing and facilitating
small to medium type investors to invest indirectly in commercial
property investments which they normally would not have access to.
Since then, REITS have spread across the world in many
jurisdictions including Zimbabwe where they were provided and
enabled by the Finance Act , Statutory Instrument 172 of 1998 as
read with Statutory Instrument 240 of 2019 , Securities Exchange
Act through General Notices 469 of 2020 and Income Tax Act (Chapter
23:06). Typically REITS operate income-producing real estate or
related assets which may include among , office buildings, shopping
malls, apartments, hotels, resorts and warehouses with the Highland
Shopping Complex owned by TIGERE REIT being an example.
Before looking at the tax benefits of REITS it is important to
note that in terms of the Finance Act (No.2) Act, 2020 a REIT must
meet the following requirements: –
- Must be listed on a stock exchange in terms of the Securities
Exchange Act [Chapter 24:25] - in the case of investors other than pension funds, income must
accrue from new real estate projects; - a minimum of 80% of taxable income must be distributed in the
form of shareholder dividends each year; - Must not have more than fifty per centum of its shares held by
five or fewer individuals during a taxable year, with the exception
that pension funds may be permitted to hold more than fifty per
centum of its shares held by five or fewer individuals during a
taxable year - Must have a minimum of 100 shareholders after the first year of
the date when it qualifies in respect to benefit in terms of the
Act.
On the Tax benefits the most critical benefit is that REITS are
exempt from Income Tax which is payable by other corporate entities
and persons in business which means more income and for the REIT
which supports investment. Investors being REITs security holders
pay 1% capital gains withholding tax on disposal of their
securities and 10% withholding tax on dividends earned. Initially
in the 2023 budget the Minister of Finance and Economic development
had limited the group of property developments which could attract
these tax incentives which was reversed.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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