How are REITs taxed in South Africa?
How are REITs taxed in South Africa?
Special legislation allows REITs to pay out a qualifying dividend without incurring income tax within the company, which is then taxed in the hands of the investor as taxable income. This allows all earnings to flow through to investors without attracting income tax at the company level.
How does REIT get taxed?
The majority of REIT dividends are taxed as ordinary income up to the maximum rate of 37% (returning to 39.6% in 2026), plus a separate 3.8% surtax on investment income. Taking into account the 20% deduction, the highest effective tax rate on Qualified REIT Dividends is typically 29.6%.
Is income from REIT taxable?
The REIT is also exempt from tax on its rental income, which it may have earned if it owned property directly. Rental income of the REIT is exempt in its hands, but taxable in the hands of the investors. With appreciated stock, you can sell your shares over a number of years to spread out the capital gains.
How do REITs work in South Africa?
To qualify as an REIT on the JSE in South Africa, the REIT must own at least R300m in property, debt must be below 60% of its gross asset value, at least 75% of the income must come from real estate activities, and a minimum of 75% of the income they receive must pass through to investors (90% in the US).
How are REIT ETFS taxed?
How are REIT ETF dividends taxed? Most REIT ETF dividends will be taxed at your ordinary income tax rate after the 20% qualified business income deduction is applied to those distributions. In some cases, you might owe capital gains tax on some REIT ETF earnings, which will be noted on Form 1099-DIV.
Where do I report REIT income on tax return?
Investors who receive dividends from a REIT will receive IRS form 1099-DIV, Dividends and Distributions, to report their qualified REIT dividends to the IRS. You can file this information via a Schedule B form or put it directly onto your Form 1040 tax return.
How are REIT ETFs taxed?
Do REITs pass-through losses?
Finally, a REIT is not a pass-through entity. This means that, unlike a partnership, a REIT cannot pass any tax losses through to its investors.
How do I invest in a REIT in South Africa?
What is a South African REIT?
In South Africa, a REIT receives special tax considerations and offers investors exposure to real estate through shares listed on the Johannesburg Stock Exchange (JSE). Find out more about our members Why invest in a REIT?
What is the REIT tax legislation?
REIT tax legislation was introduced into the South African Income Tax Act in 2012 in order to create a unified system for both the PUT and PLS regimes. The purpose of the REIT tax legislation was to provide investors with tax certainty in order to incentivise the use of property investment companies, in line with international principles.
Are in specie distributions from a REIT or controlled company taxable?
Consequently, any in specie distribution received from a REIT or controlled company is subject to tax. Section 47 of the Income Tax Act effectively allows a 70% held subsidiary to be liquidated on a tax neutral basis. A liquidation distribution is exempt from income tax as a consequence of the normal section 10 (1) (k) dividend exemption.
How do I qualify for the REIT dispensation?
To qualify for the REIT dispensation, a company must be tax resident in South Africa and its shares must be listed as shares in a REIT in terms of the JSE listing requirements. Below, the specific REIT dispensation, available to South African property investment vehicles is summarised:
