Reply to PQ on REIT, Trust Funds Management, and Statutes Governing Trust and Tax Regulations
Question No. 456 & 457 Notice Paper No. 203 of 2003 For Oral Answer
Date: For Parliament Sitting on 5 January 2004
Reply to PQ on REIT, trust funds management, and statutes governing trust and tax regulations.
Name and Constituency of Member of Parliament Q456 & 457, Mrs Fang Ai Lian, Nominated Member
____________________________________________________________ Question 456 To ask the Deputy Prime Minister and Minister for Finance in view of recent changes in the Hong Kong and Malaysian budgets to improve their competitiveness in Real Estate Investment Trusts (REIT), what steps are being considered to maintain Singapore's lead in this industry and will the abolishing or reducing of the stamp duty on REIT properties be considered.
Answer 1 The Monetary Authority of Singapore (MAS) recognises the importance of property funds in creating liquid, transparent investment alternative for real estate investors and broadening the choice of tradeable securities in Singapore. Through the securitisation of their assets, property developers both in Singapore and overseas have an additional avenue for fund raising via a REIT listing here.
2 This is why we have sought to improve the environment for REIT offerings. The government has selectively granted tax transparency status to the REITs, which means that income is taxed at the investors' level and not at the trust level. This measure had allowed REITs to obtain certain operational cost benefits. MAS had also raised the gearing level for property funds to 35% (from 25% previously) of the fund's deposited property in March 2003. Furthermore, a Singapore REIT's borrowings may exceed 35% of its deposited property if the credit rating of the fund or all of its borrowings is rated at least ?A? by Fitch, Moody's or Standard & Poor's. These changes give REITs more flexibility to manage their capital structures. Hence, Singapore is still well-positioned as a competitive REIT centre.
3 In addition, Singapore's capital markets track record, strong presence of global fund managers and developed financial industry infrastructure make us an attractive location for REIT listings. We believe these are important value propositions for the development of Singapore as an international REIT centre.
Question 457 To ask the Deputy Prime Minister and Minister for Finance what has been the progress in (a) implementing the Economic Review Committee's proposals to promote the business of trust funds management in Singapore and (b) updating the relevant statutes governing trust and tax regulations in Singapore.
Answer 1 As part of our effort to develop Singapore into an attractive international trust domicile, various legislative and administrative refinements are in the works.
2 The Trustees Act is currently being reviewed and the updated legislation is expected to be passed in mid-2004. The Trustees Act was enacted in 1967. It was based on the UK Trustees Act of 1925, and unlike the UK, US and Canada, which have made significant changes to their trust laws, we have not made any major changes to modernise our Act. MAS and the Ministry of Finance are currently reviewing the Trust Companies Act, and the updated legislation is scheduled to come into force in the second half of 2004. MAS will also take over the administration of the Trust Companies Act from the Registry of Companies and Businesses.
3 As part of our efforts to improve the business environment for the trust industry, we had in Budget 2003 extended the income tax exemption for foreign trusts administered by Approved Trustee Companies to include foreign trusts administered by any trust company in Singapore.