South Africa saw the introduction of its first REIT tax legislation in 2013. The introduction of this legislation was welcomed by the industry, as it brought the local legislation in line with global trends. However, the 2013 REIT tax legislation brought with it some significant teething problems, some of them providing for severe tax implications for REITs and/or its investors. In addition, the legislation applies to listed REITs only. Whilst initial indicators were that the REIT legislation would be expanded to unlisted entities, we are yet to see such draft proposals.
KPMG's team of REIT specialists lobbied for several improvements to the initial legislation, and several submissions were made. Therefore, it is rather disappointing that the only proposed amendments to REIT legislation in the Draft Bill appear contextual in nature. Nevertheless, KPMG will continue to actively address the issues with National Treasury with the aim to have the existing problems corrected, as well as to suggest improvements. It is hoped that the final 2014 Tax Laws Amendment Bill (expected later this year) will contain the requested amendments.
(Comments on the Draft Bill are to be submitted to National Treasury by 17 August 2014, with the final Bill expected towards the end of 2014.)