Singapore REITS to reap huge tax savings
One Raffles Quay to be possibly turned into a more tax efficient structure, says DBS.
K-Reit and Suntec Reit had announced that they have successfully converted the vehicle which holds Marina Bay Financial Centre Towers 1 & 2 and Marina Bay Link Mall Phase I (collectively known as MBFC Phase I), into a
Limited Liability Partnership (BFCD LLP) structure.
Under the previous structure, both K-Reit and Suntec Reit pay a17% corporate tax rate on the rental income generated on the property. Upon conversion, the operational rental income (excluding income support) generated by MBFC Phase 1 will no longer be subjected to corporate taxes.
The new structure will take effect from 16 June 2012 and is not retrospective.
According to DBS Group Research, based on their estimates, both Reits should reap tax savings of close to
S$2.2 m and S$4.5m in FY12 and FY13 respectively.
"Netting off administration fees, we estimate that FY12 DPU should increase by 1-2% and FY13 DPU by about c4-5%. We think this conversion is a positive step as it would also pave the way for the possible restructuring of One Raffles Quay’s (ORQ) into a similar more tax efficient LLP structure in the longer term Currently, the payable tax for ORQ is estimated to be close to S$3m p.a," DBS said in a report.