TAX TREATMENT OF REITS

Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
AUSTRALIA	ALPT (Australian Listed Property Trust)	Rules enacted in 1981 and 1985	Div. 6, 6B, 6C of Part III of Income Tax Assessment Act of 1936, Corporations Act of 2001. Rules apply to a range of trusts, including ALPTs (i.e. no specific ALPT rules)	• Organized as a fixed trust • ALPT may adopt one of two structures: - Stand-alone, passively holding real estate portfolio, or - Form part of a listed stapled security with a company that undertakes range of activities relating to ALPT's real estate (such as management, redevelopment, funds management etc.) - an investor acquires a stapled security that consists of one unit in ALPT and one share in the company • No minimum/maximum shareholder requirement • Managed by a corporate trustee/fund manager • If eligible, taxed as flow-through vehicle (i.e., the net income of the ALPT is taxed in the hands of the unitholders upon distribution and not in the trust) • Otherwise taxable as a domestic company	• In order to be eligible for flow-through treatment, ALPTs must not directly or indirectly carry on a "trading business" (i.e., a business that does not consist wholly of an eligible investment business)	• Must invest in land either inside or outside Australia for the primary purpose of deriving rental income	• No minimum distribution requirements • Income that is not distributed to unitholders is taxed in the ALPT at the top marginal tax rate for individuals (i.e., 48.5%)	• Trustee of ALPT must pay tax with respect to Australian source income distributed to foreign unitholders • Foreign unitholders are taxed on an assessment basis (i.e., must file an Australian tax return) and receive a credit for tax paid by trustee - to the extent that the foreign unitholder has deductible expenses that relate to the units (i.e., interest), unitholder can obtain a refund of tax withheld by trustee following filing of return • Disposal of ALPT units by foreign unitholders are only subject to Australian capital gains tax if the foreign unitholder owns 10% or more of issued units of ALPT	• Thin-capitalization rules will apply if the ALPT is foreign controlled (either five or fewer foreign entities own 50% or more of the ALPT or a single foreign entity owns at least 40% of issued units). If thin-capitalization rules apply, the permissible debt to equity ratio is 3:1	• If ALPT fails eligibility criteria, it is treated as a corporation for tax purposes	• Trust income taxed on a flow-through basis retains its character in hands of unitholders (i.e., as interest, rent, capital gains, etc.) • Differences between the net income of the ALPT for income tax and accounting purposes due to variances in depreciation rates and capitalization policies will give rise to "tax-preferred" distributions to unitholders - broadly, this is a cash distribution that generally should not be subject to tax at either the trustee or beneficiary level • The receipt of a tax-preferred amount by a unitholder will reduce the Capital Gains Tax (CGT) cost base of the ALPT units held by the unitholder. Where the tax-preferred distribution exceeds the cost base of the ALPT units, a taxable capital gain will arise • Tax losses incurred by the ALPT will be trapped in the ALPT
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
BELGIUM	SICAFI (Société d' Investissement à Capital Fixe Immobilière)	Enacted 1990 and 1995 (effective as of 1995)	Act of 4 Dec 90 and Royal Decree of 10 Apr 95	• Must be recognized by the Bank and Finance Commission • At least 30% of shares with voting rights must be offered to the public within one year following the registration • Otherwise taxable as a domestic company, but has a specific determination of taxable basis, resulting in an effective tax burden that is almost non-existent	• Income must be derived from qualifying investments (see Asset Rules)	• Permitted real estate investments include participations in real estate companies, holding of long leaseholds on real estate assets, debt-instruments that are linked to real estate, etc. • May invest in other non-real estate assets provided the investment is secondary or temporary • Value of an individual asset in which a SICAFI invests may not exceed 20% of the value of the entire investment portfolio - a two-year grace period may be granted to the SICAFI in order for the SICAFI to comply with the diversification rules	• At least 80% of income must be distributed annually • Realized capital gains may be retained provided they are reinvested within four years • Provided the distribution requirement is met, the taxable base of a SICAFI is limited to: - Disallowed expenses (i.e., specific expenses that are not tax deductible within the common corporate tax regime) - impact of these for SICAFI's is normally almost nil, except for regional taxes that often aim at taxing real estate (i.e., Brussels tax on office space) - Non-arm's length income received by the SICAFI (i.e., above market rent)	• 15% withholding on distributions (but exemptions and reductions may apply)	• Maximum debt to equity ratio is 1:1	• N/A	• SICAFI must be quoted on a regulated stock exchange that is recognized as such by the Belgian Banking Commission • "Exit tax" of 16.995% of the inherent capital gains will be payable by companies wishing to convert to SICAFI status in the year of conversion • Annual tax of 0.06% on net book value of shares
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
BRAZIL	FII (Fundos de Investimento Imobiliário)	Enacted 1993	Laws n. 8668/1993, and 9779/1999. This is the Corporate Tax Act. Instruction CVM n. 205 and n. 206/1994, 418/05 Normative Instruction SRF n. 25/2001 and Decree n. 4.494/2002	• Formation, operation of Brazilian FIIs, and the issuance of its quotas ( i.e. shares) must be authorized by the Brazilian Securities and Exchange Commission (CVM) • Quotas are traded in the capital markets upon payment of the issuance price - quotas may be negotiated on the Stock Exchange or on the over-the-counter market • FII must be formed and managed by institutions duly authorized by CVM, which must exclusively be financial institutions with investment portfolios, real estate assets, credit portfolios or other financial instruments • Construction companies may not hold a greater than 25% participation in FII, otherwise the FII will be taxed as a corporation for income tax purposes	• Income must be derived from qualifying investments (see Asset Rules)	• At least 75% of the FII's equity must be invested in real estate assets; otherwise it must get special approval from CVM. • The part of the FII's equity that is not invested in real estate (maximum 25%) must be invested only in financial fixed income funds or fixed income securities	• At least 95% of the realized cash profits must be distributed every six months • Brazilian investors are subject to a 20% withholding tax rate upon the distribution of the FII's earnings	• Qualifying non-Brazilian investors are subject to a 15% withholding taxation on the distribution of the earnings by the FII provided they are not residents of low tax jurisdictions • Non-qualifying foreign investors are subject to the same 20% rate as Brazilian investors	• N/A	• Loss of status rules would subject FII's net income to a 34% corporate tax	• The FII is not subject to PIS, COFINS, ISS, CPMF and Corporate Income Tax • Subscription, assignment and renegotiation of FII quotas are subject to Tax on Financial Transaction ("IOF") at a maximum daily rate of 1.5% per day on the value of the transaction, up to 10%
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
CANADA	REIT (Real Estate Investment Trust)	No specific REIT legislation	Income Tax Act (Canada) sections 108, 132, 132,1, and 132,11; Income Tax Regulation 4801	• Must be a unit trust resident in Canada and must not be established or maintained primarily for the benefit of non-residents of Canada • Issued units of the trust must have conditions attached that require the trust to accept, at the demand of the unitholder, and at prices determined and payable in accordance with the conditions of the trust, the surrender of the units • The only activity must be (i) the investing of its funds in real property, interests in real property, or qualifying assets other than real property, (ii) the acquiring, holding, maintaining, improving, leasing, or managing real property (or an interest in real property) that is capital property of the trust, or (iii) a combination of the activities described in (i) and (ii) • Must be qualified for distribution to the public and must have at least 150 unitholders, each of whom holds (i) at least one unit of the trust and (ii) units of the trust having an aggregate fair market value of not less than C$ 500 (approximately U.S.$ 400)¹	• At least 95% of income must be derived from "Qualified Investments" (see Asset Rules)	• At least 80% of its property must consist of: any combination of shares; property convertible into, exchangeable for, or confers a right to acquire shares; cash; bonds, debentures, mortgages, notes and other similar obligations; marketable securities; real property in Canada and interests in such property; and rights to and interests in any rental or royalty computed by reference to the amount or value of production from a natural accumulation of petroleum or natural gas in Canada, from an oil or gas well in Canada or from a mineral resource in Canada • No more than 10% of its properties may be shares, bonds, or securities of any one corporation or debtor (other than the Crown or a Canadian municipality)	• REIT is not taxable to the extent that its capital gains, interest, and operating income are paid or become payable to unitholders. - if such income is not considered paid or payable, the REIT is taxed as an individual	• 25% withholding on foreign distributions Reduced rates may apply under tax treaties	• N/A	• N/A	• Provides unitholders with flow-through of income in underlying real estate assets held by the trust • Losses cannot be allocated to unit holders • If the trust qualifies as a mutual fund trust before the 91st day after the end of its first tax year, and it makes an election in its return for that year, the trust is deemed to be a mutual fund trust from the beginning of the year when the election is made
¹All U.S. equivalents of foreign currency were converted on June 15, 2005.
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
COSTA RICA	Fondos de Inversión Inmobiliaros	Enacted 1997	Stock Markets Regulation Act (Ley Reguladora del Mercado de Valores)	• Both the company owning the real estate and the fund manager entity must be listed companies on the Costa Rican Stock Exchange • Subject to minimum share capital of approximately U.S.$ 132,863. This amount is adjusted every year • Costa Rican Fund's corporate purpose is the acquisition and/or leasing of real property • Composed of two entities: one holds the real estate and the other is the fund manager, which is fully regulated by the Costa Rican agency "Super Intendencia General de Valores," similar to the U.S. SEC • 25 or more investors • Minimum participation: approximately U.S.$ 4,725. per investor - this amount is adjusted every year • Funds seeking Costa Rican Fund status apply for a license through the Costa Rican agency "Super Intendencia General de Valores"	• Income must be derived from qualifying investments	• At least 80% of its property must consist of real estate assets. Real estate assets are defined as passive real property or infrastructure located in Costa Rica • Investments in non-Costa Rican real estate assets do not qualify for the 80% asset test • The fund cannot have more than 25% of its portfolio leased to one tenant • Minimum net assets are approximately U.S.$ 434,717 - This amount is adjusted every year	• Distribution rules are determined by each Fund Manager in the financial prospectus - In practice, Costa Rican Funds distribute substantially all of their income to their investors	• No withholding tax applies on distributions	• Loans limited to 35% of the book value of gross assets - Remainder must be equity, and only common shares may be issued - determination of book value is not specifically referred to in the law or regulations, but determined per informal communications with the Costa Rican Agency	• If the Costa Rican Fund fails to comply with regulatory requirements, the Costa Rican "Super Intendencia General de Valores" could take control of the REIT or liquidate the fund	• Costa Rican Fund's gross ordinary income and capital gains are subject to a 5% tax rate • Costa Rican Fund may not engage in property development activities or provide other types of real estate services
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
EUROPEAN UNION	Euro REIT	Proposed	N/A	• Purpose is to meet increasing demand for European investment exposure with cross-border tax and management efficiency	• N/A	• N/A	• N/A	• N/A	• N/A	• N/A	• N/A
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
FRANCE	SIIC (Sociétés d'Investissements Immobiliers Cotées)	Enacted 2003, amended 2005	2003 Budget Law, Revised Finance Bill for 2004, Finance Bill for 2005	• Must be a listed company on the French regulated Stock Exchange • Minimum share capital of € 15 million (approximately U.S.$ 18 million) • Main corporate purpose must be the acquisition or construction of buildings for rental purposes and/or the direct or indirect holding of shares in companies having the same corporate purpose	• Income must be derived from qualifying investments (see Asset Rules)	• Assets pertaining to ancillary activities (i.e., real property trading) are not eligible for SIIC regime and must not exceed 20% of the SIIC's total assets - there is no maximum percentage threshold for assets leased under finance lease arrangements • Under the Finance Bill for 2005, certain assets not previously eligible to the SIIC regime are now eligible (i.e., immovable property rented to third parties and financed under a finance lease arrangement entered into as of 01 Jan 05	• At least 85% of rental income must be distributed annually • At least 50% of capital gains must be distributed before the end of the second fiscal year following the one in which the gain was realized • 100% of dividends from SIIC subsidiaries must be redistributed by the SIIC within a year • The 100% distribution requirement with respect to dividends from SIIC subsidiaries does not apply where the subsidiary is a pass-through partnership, in which case the 85% and 50% distribution requirement applies in proportion to the SIIC subsidiary's rental income and capital gains	• 25% withholding on foreign dividend distributions. Reduced rates may apply under tax treaties. • No dividend withholding exemption is available under the EU Directive for dividends declared by an SIIC unless the dividend is appropriated from a basket of earnings which have been taxed at the standard corporate income tax rate	• There are no specific thin-capitalization or long-term debt restrictions aimed at the SIIC. Nevertheless, general French thin-capitalization rules imposing a 1.5:1 maximum debt-to-share capital ratio for loans granted by direct shareholders managing or controlling the French borrowing company may apply to SIICs. • Note that the French tax authorities have proposed a revision of French thin-capitalization rules and the introduction of earnings stripping rules -under the proposed legislation, deduction of interest expense incurred by French corporate taxpayers (including SIICs) would be capped to (i) 1.5 times their net equity or (ii) 25% of their net income before tax and interest expenses, whichever is greater • Proposed new thin-capitalization rules would only apply to related party debt and should not apply to unrelated debt borrowed by a French corporate taxpayer (including SIIC) regardless of whether or not the third-party debt is guranteed by a related party	• The loss of SIIC status by the quoted company within ten years from the election triggers taxation at the standard rate (i.e., 35.43% in most cases of the capital gains recognized by the SIIC election which have enjoyed the reduced 16.5% tax rate determined at the time of election of SIIC status). However, the exit tax paid upon election is creditable against the corporation tax - this recapture does not apply to the SIIC's qualifying subsidiaries that have elected the SIIC regime	• The SIIC regime is elective. SIIC qualifying subsidiaries may also elect the regime under certain conditions (i.e., 95% ownership requirement for companies subject to corporate income tax) • Upon election, a 16.5 % exit tax is due on latent real estate capital gains -this exit tax is paid over four years in four equal installments • The SIIC may perform non-qualifying activities within certain limits -these activities remain taxable under the standard income tax rules • Under the Finance Bill for 2005, rental income from the sub-leasing of property leased by a SIIC under finance lease arrangements ("credit bail immobilier") entered into from 01 Jan 05 and gains realized from the disposal of rights pertaining to such finance lease arrangements may now be exempt from French CIT • Also under the Finance Bill for 2005, legal restructurings involving SIICs as of 01 Jan 05, such as mergers or spin-offs, do not trigger negative tax consequences, so long as (i) the surviving company undertakes to fulfill the distribution requirement incumbent upon the merged or spun-off entity, and (ii) the surviving entity distributes at least 50% of the merger premium before the end of the second fiscal year following the one in which the restructuring occurs -additional distribution requirements are imposed on the surviving company where the reorganization is implemented between unrelated parties at fair market value • In addition, effective for fiscal years starting from 01 Jan 04, the built-in-capital gains existing in connection with those newly eligible assets are immediately taxable at a reduced tax rate of 16.5% and the corresponding tax liability is payable in four installments over a four-year period exactly in the same manner as for built-in gains which existed at the time of the original election for the SIIC regime • The Revised Finance Bill for 2004 has increased the rate of French transfer tax applicable to the sale of French immovable property and to the sale of shares in companies that primarily hold, directly or indirectly; such property from 4.8% to 5% for transactions entered into from 1/1/06 • Long-term capital gains realized upon the disposal of shares in companies that are predominantly real estate companies are excluded from the new participation exemption for capital gains instituted over the three-year period (from 2005 to 2007) Such long.
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
GERMANY	KAG Fund (Fund pursuant to the Investment Act and the Investment Tax Act). This chart describes the current state of German real estate investing, however Germany is currently considering the introduction of real REIT legislation, which contemplates introducing publicly traded REITS only	Enacted 2003, replacing the prior KAG law from 1957	Investmentgesetz (InvG), 2003, and Investmentsteuer-gesetz (InvStG), both as of 15 Dec 03	• Fund units are publicly offered, but not traded. Fund can also be structured as "special fund" for institutional investors (a maximum of 30 investors) • Fund units must be redeemable at any time at the option of the unit owner -special rules govern deferral of redemption for up to two years if there is insufficient liquidity • Fund must be independently managed by German "Kapitalanlagesellschaft" (KAG), which is a licensed banking institution, typically owned by major German banking conglomerates • Fund's assets and income are supervised by separate custodian bank • Comprehensive regulatory rules govern investment obligations of the KAG	• Income must be derived from qualifying assets (see Asset Rules)	• Must only own real estate or investments in real estate property companies • Property company can only own up to three investments, and no interests in other entities, other regulatory restrictions concerning debt funding, etc. apply • Acquisition value of each property must not exceed 15% of the fund's total value. Other risk diversification rules apply, such as the restriction of investing not more than 49% of the fund's assets in real property companies -the 49% threshold is reduced to 20% for minority interests in real property companies. Rules address permitted foreign investments, and interim rules govern the treatment of newly set up funds	• The distribution rules are generally set by the Fund's organizational documents • The Fund itself is an exempt entity - there are distributing and reinvesting KAG funds. For tax purposes, it is irrelevant whether the income is distributed or not: the Fund's income is apportioned to each unitholder at the end of the fund's fiscal year, whether distributed or not	• There is a 20% withholding tax on distributed and undistributed income derived from real estate investments, with the exception of capital gains from the disposition of properties owned for more than 10 years -reduced rates may apply under tax treaties	• The property portfolio can be financed with only 50% third party debt on an overall basis	• If the KAG deviates from its investment tax reporting obligations, the investors are subject to penalty-type taxation. All activities of the KAG are subject to regulatory scrutiny, and any deviation could result in regulatory action (i.e., penalty, withdrawal of license, etc.) - from a tax perspective, there is no loss of status if the obligations of the KAG are not carried out properly but a penalty-type tax applies	• With respect to non-German investments, the Fund is typically in a position to avail itself of the benefits of a tax treaty. For example, direct investments of the fund in the U.S. are taxed only in the U.S., and the foreign income attributed to the German unit holder is exempted from German taxation
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
GREECE	REMF (Real Estate Mutual Fund)	Enacted 1999	Law 2778/1999 (Government Gazette Issue no. 295/30.12.1999) "Real Estate Mutual Funds - Real Estate Investment Companies and other Provisions"	• REMF has no legal personality • REMF units are publicly offered (i.e. freely offered to the public) but not listed on the Greek Stock Exchange • REMF units must be redeemable at any time at the option of the unit owner • REMF must be managed by a Mutual Fund Management Company • REMF incorporation requires a prior operating license issued by the Capital Market Committee • REMF's assets are supervised by a separate custodian bank • The appointment of the custodian as well as its regulation must be approved by the Capital Market Committee	• Income must be derived from qualifying assets (see Asset Rules)	• REMF must invest at least 90% of its total assets in real estate, cash, bank deposits and securities of equal liquidity • Investment in cash, bank deposits and securities must be equal at least to 10% of total assets • Acquisition value of each property must not exceed 15% of the REMF's total value. Other risk diversification rules apply	• There is no minimum distribution requirement in the law • Distribution of profits takes place at year-end in accordance with REMF's Regulation, after the deduction of any expenses of the REMF • Profits derived from sale of securities can be distributed only if no capital loss greater than or equal to the profits has occurred in the same year	• Income generated from foreign securities is subject to withholding at a 20% rate upon repatriation • Income tax treaties do not apply to reduce the rate of withholding	• Financing (either loans or credits) must not exceed 33.33% of total REMF investment in real estate	• REMF will not lose its tax status if it deviates from its obligations according to the applicable law - in general, the operation of a REMF is supervised by the Capital Market Committee and any violation may trigger the imposition of penalties	• REMF is subject to special taxation at 0.3% on assets, payable by the Mutual Fund Management Company - unitholders have no further tax liability • The REMF is the beneficial owner of the income locally generated and is liable to income tax in its own name - unitholders may receive, in the form of dividends, the profits already taxed in the name of the REMF and will not be subject to further Greek tax • Given that the REMF does not have its own legal personality; it is not eligible for a Greek tax resident certificate in order to claim income tax treaty protection - any treaty protection should be claimed by unitholders, who should issue a Tax Residence Certificate in their names as the beneficial owners of the income
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
GREECE	REIC (Real Estate Investment Company)	Enacted 1999	Law 2778/1999 (Government Gazette Issue no. 295/30.12.1999) "Real Estate Mutual Funds - Real Estate Investment Companies and other Provisions"	• REIC has the form of a "Societe Anonyme" (a Greek joint stock company) • Minimum share capital of € 29,347,028.61 (approximately U.S.$ 35 million) and mandatory registered shares • The management of a portfolio is exclusively aimed toward marketable securities and real estate • REIC incorporation requires a prior operating license issued by the Capital Market Committee • REIC must file an application for its listing in the Greek Stock Exchange or in another EU Stock Exchange within one year from its incorporation • REICs investments in securities (not in real estate) are supervised by a custodian bank operating in Greece	• Income must be derived from qualifying assets (see Asset Rules)	• REIC must invest at least 80% in real estate, cash, bank deposits and securities of equal liquidity • The investment in cash, bank deposits and securities must be equal at least to 10% of total assets • The investment in marketable securities should not exceed 10% of total assets • REIC may also invest in other non-real estate assets serving the operational needs of REIC and which, together with real estate, do not exceed 10% of the value of the real estate at time of purchase	• REIC should generally distribute at least 35% of its annual net profits to its shareholders • The distribution of a lesser percentage or non-distribution is allowed pursuant to a Shareholders Meeting Resolution, provided a clause exists in the REIC Articles of Association for the creation of a tax-free reserve or for the distribution of free shares accompanied by a share capital increase	• Income generated from foreign securities is subject to withholding at 20% upon repatriation • Income tax treaties do not apply to reduce the rate of withholding	• Financing (either loans or credits) for the exploitation of the real estate portfolio must not exceed 25% of REIC's total investment in real estate • Loans received by REIC for the purchase of real estate must not exceed 10% of the total net equity of the REIC minus the total investments in real estate - the value of such loans is not included in the 25% threshold mentioned above	• The REIC will not lose its tax status if it deviates from its obligations according to the applicable law. In general, the operation of a REIC is supervised by the Capital Market Committee and any violation may trigger the imposition of penalties.	• REIC is subject to a special taxation rate of 0.3% on investments plus available funds. Its shareholders have no further tax liability • The REIC is the beneficial owner of the income locally generated and is liable to pay income tax in its own name -shareholders may receive, in the form of dividends, the profits already taxed in the name of the REIC and will not be subject to further tax
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
HONG KONG	REIT (Real Estate Investment Trust)	Enacted 2003	Code on Real Estate Investment Trusts; Securities and Futures Ordinance, §§ 104, 105	• Must be listed on the Stock Exchange of Hong Kong • Must be structured in the form of a trust • Must appoint a trustee that is functionally independent of the management company of the REIT and that acts in the best interest of unit holders • Must appoint a management company acceptable to the Securities and Futures Commission (SFC) • Must appoint an independent property appraiser • Valuation of REIT assets must be done on an annual basis • If the name of the REIT indicates a particular type of real estate, it must invest at least 70% of its non-cash assets in such type of real estate • Funds seeking REIT status apply for a license through the SFC	• Must invest primarily in real estate that generates recurring rental income • Must not hold non-income generating real estate in excess of 10% of the total net asset value of the REIT	• Must invest in real estate which should generally be income generating - on 17 Jun 05 restrictions for overseas real estate investments were removed • Must not invest in vacant land or engage in property development activities, except refurbishments, retro fittings, or renovations • Investment in hotels and recreation parks is allowed if held by special purpose vehicles • Must not lend or become contingently liable for any indebtedness of any person or use its assets to secure any obligations without prior written consent of the trustee • Must not acquire any asset that involves the assumption of any liability that is unlimited • Must hold its real estate for a period of no less than 2 years unless otherwise approved by its unit holders	• Must distribute at least 90% of net income as dividends to unit holders annually. No withholding tax is imposed on dividend income in Hong Kong	• N/A	• As of 17 Jun 05 the gearing ratio limit was increased to 45% of the gross asset value of the REIT following the removal of the restrictions for foreign investments	• N/A	• N/A
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
ISRAEL	REIF (Real Estate Investment Fund)	• To be enacted on 01 Jan 06 (not approved yet by parliament)	• Sections 64A2 - 64A9 to the Israeli tax ordinance (tax bill)	• Special purpose company that was established for this purpose • Shares listed for trade in the Tel Aviv Stock Exchange • At least 50% of the company's voting rights should be held by more than five shareholders	• Income must be derived from qualifying investment which is not "prohibited income" • "Prohibited income" is defined as income from business activity other than income-yielding real estate; income from the sale of inventory (real estate or otherwise) or sale of other real estate that is not income-yielding real estate; or income from traded securities, state bonds and deposits to the extent that such income exceed 5% of the revenues of the fund in that tax year	• 95% or more of the REIF assets' value consist of income- yielding real estate and liquid assets (cash, deposit etc.) • 75% or more of the REIF assets' value constitute of income-yielding real estate, • Income-yielding real estate's value exceed 200 million NIS (Approximately $40 million) • 75% of the income-yielding real estates' value located in Israel. • The company's obligations (other than equity) do not exceed 60% of the income-yielding real estate's value	• Every year the fund is obliged to distribute 90% of it profits calculated based on accounting principals, include amount equal to the depreciation and 100% of its capital gain from disposal of real estate • The distribution must take place no later then April 30th of the following year	• Upon distribution the fund has to withhold the tax that the shareholder would have paid had he made the investment directly in the real estate (i.e. capital gain of 25%, ordinary income based on the corporate tax or • 80% tax rate would apply on "prohibited income". • Treaty country's pension fund and mutual funds will be exempt from withholding to the extent those profits are exempt in their residence country.	• Thin-capitalization limitation of 60% (3:2 ratio)	• REIFs that do not meet the requirements or chose to cease REIF status will be taxed as a corporation from the end of the year, in case of election or from the day when requirements are no longer met.	• The assets can not be contributed to the fund in a tax free contribution. • The purchase of the real estate will be subject to reduced "purchase tax" (special tax for purchasing real estate). • Undistributed income will be subject to corporate tax by the fund.
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
ITALY	REIF (Real Estate Investment Fund)	Enacted 1994	Law No. 86, dated 01/25/1994. Specific beneficial tax regime applicable from 01/01/04 as modified by Law Decree 269 dated 09/30/2003	• No specific requirements are provided for the minimum number of unit-holders. However, having a sole investor holding all units of a REIF could be contrary to the definition of Fund provided for by the Law • The law allows only the incorporation of closed-end REIFs • REIFs are managed by a "Societa di Gestione del Risparmio" (SGR), an independent management company • SGRs are registered in a special list kept by the Bank of Italy and are subject to rules that limit and spread risk • The REIF's available funds are deposited with a depositary Bank • The participation in the REIF is regulated on the basis of the Fund's rules (Regolamento) to be approved by the Bank of Italy	• Income must be derived from qualifying investments (see Asset Rules)	• At least 66.67% of the REIF's investment values must be in real estate, real estate real rights and real estate companies. This amount may be reduced to 51% when at least 20% of REIF's aggregate value is invested in securitized financial instruments related to real estate, real estate rights or credits guaranteed by real-estate mortgages • Both the 66.67% and 51% limits must be met within 24 months from the beginning of the activity of the Fund	• The Fund Regolamento (rules) establishes the distribution rules • A 12.5% withholding tax generally applies on REIF's profits distributions	• Full withholding tax exemption applies on the distribution of REIF profits to persons resident in Countries that entered into a tax treaty with Italy or that grant an adequate exchange of information with the Italian tax authorities ("white list" countries) • Full withholding tax exemption also applies on the distribution of REIF profits to foreign institutional investors (i.e., pension funds) and central banks that are formed in a white-listed country	• REIFs can be financed for an amount not higher than 60% of the aggregate value of real estate, rights relating to real estate and real estate companies, and can be further financed for an amount not higher than 20% of the aggregate value of the other assets • REIF's advanced quota - shares - redemptions can be financed for an amount not higher than 10% of the REIF's value	• REIF's beneficial tax regime ends if the rules set forth by Ministerial Decree 228 dated 05/24/1999 are no longer met. Among others, note that the fund beneficial tax regime ends if the ratios for the diversification of the different assets are not met within 24 months from the beginning of the activity of the Fund	• Full exemption from 33% corporate income tax (IRE) and 4.25% Regional Income Tax (IRAP) applies • If the real estate is primarily rented at the time of the contribution to the closed-end real estate fund, the contribution is outside the scope of VAT and is subject to registration, cadastral and mortgage taxes in the fixed amount of EUR 168 for each tax • Real estate tax on ownership (ICI) is levied as for any other investment structure
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
JAPAN	J-REIT (Japanese Real Estate Investment Trust)	Enacted 2000	Investment Trust Law art. 63, 187	• J-REITs are generally formed as corporations rather than a trusts • Registration based on Investment Trust Law is required • One of the following must be met with regard to the investment certificates: - The certificates must be publicly offered and the issuing amount must be at least 100 million yen (approximately U.S.$ 900,000) at the time of the incorporation- The certificates must be owned by at least 50 investors at the end of the fiscal year- Must not be a closely-held corporation at the end of the fiscal year as described below • In the case of listed J-REITs, (i) the J-REIT's net asset value must be at least yen 1 billion (approximately U.S.$ 9 million), (ii) the J-REIT's total asset book value must be at least yen 5 billion (approximately U.S.$ 45 million), (iii) the number of units must be at least 4,000 and (iv) the number of unit holders must be at least 1,000 • At least 50 individual investors or qualified institutional investors hold units • The articles of incorporation must evidence that more than 50% of the issuing investment certificates have been offered within Japan • The three largest investors must own less than 50% of the units • The 10 largest investors must own less than 75% of the units in order to be listed on the Exchange (not required for tax purposes)	• Income must be derived from qualifying investments	• At least 75% investment in real estate required for listing on the Exchange (not required for tax purposes) • At least 50% of total assets must be income producing and not likely to be sold within a year in order to be listed on the Exchange (not required for tax purposes) • Must not hold 50% or more of the equity in other companies except for investment in Tokutei Mokuteki Kaihsa (TMKs) where J-REIT holds 100% of the preferred investment certificates issued	• At least 90% of profits must be paid as dividends to satisfy the requirements for the dividends paid deduction • Receives dividends paid deduction for qualifying dividend distributions	• 20% withholding on foreign distributions. Reduced rates may apply under tax treaties • In the case of listed J-REITs where the foreign investor owns less than 5% of total units, reduced withholding tax rates (10% or 7%) are applicable to dividends received by the foreign investor between 01 Apr 03 and 31 Mar 08	• No restrictions, but loans must be extended from qualified institutional investors	• Any violation of the Investment Trust Law can lead to the loss of tax status	• N/A
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
KOREA	REIT (Real Estate Investment Trust)	Enacted 2001	Real Estate Investment Act	• Need to obtain approval from Ministry of Construction & Transportation • Minimum capital requirement of KRW 25 billion (approximately U.S.$ 24 million) • Founders must own at least 10% and up to 30% of shares issued at the time of set-up • At least 30% of shares must be offered to the public at the time of set-up • In-kind contribution is allowed at the time of set-up, up to 50% of total paid-in capital - Only real estate can be contributed in-kind • No single shareholder (including its related parties) is permitted to own more than 30% of shares	• Income must be derived from qualifying investments (see Asset Rules)	• At least 70% of assets must be comprised of real estate at the end of each quarter • At least 80% of assets must be comprised of real estate, securities and cash related to real estate as of the end of each quarter	• There are three REIT structures in Korea - Type-A REIT (i.e. Regular REIT), Type- B REIT, and Type-C REIT (i.e. CR-REIT, Corporate Restructuring REIT). The Type-B and Type-C REIT receive a deemed dividend paid deduction when it declares a dividend payout of 90% or more from its total disposable earnings - Type-A REIT is currently taxed at 27.5% and does not have a dividend paid deduction	• For the three REIT structures, there is a 27.5% withholding tax on foreign distributions. Reduced rates may apply under tax treaties	• Long-term debt financing and issuance of corporate bonds are allowed for certain purposes (i.e., payback of existing loans, investment into real estate, etc), which cannot exceed two times net equity	• Any deviation from its obligations according to the applicable law results in regulatory action (i.e., penalty, withdrawal of license, etc.)	• All three REIT are taxed as a company and not treated as a flow-through entity. For the three REITs, the progressive corporate tax rates (inclusive of the resident surtax) are 14.3% for taxable income up to KRW 100 million (approximately U.S.$ 100,000) and 27.5% for taxable income exceeding that amount
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
LUXEMBOURG INVESTMENT FUNDS	Investment Funds (International and Domestic Real Estate): - FCP (collective investment fund); - SICAV (variable capital investment company) - SICAF (fixed capital investment company).	Enacted 1988; amended 2002	December 20, 2002, Part II, relating to Undertaking for Collective Investment (UCIs), which abrogates the 1988 law;The law of 19 Jul 91 relating to UCIs, the securities of which are not intended to be placed with the public	• FCP has no separate legal personality and requires a management company • Regulated by Luxembourg CSSF (Commission de Surveillance du Secteur Financier/Commission for the Supervision of the Financial Sector) • Requires an external auditor • Minimum equity: € 1.25 million (approximately U.S.$ 1.5 million) to be raised during a six month period following the agreement of the CSSF	• Income must be derived from qualifying investments (see Asset Rules)	• No more than 20% of net assets may be invested in any one property (not applicable during a start up period not exceeding four years)	• None, except that the net assets after distribution must exceed the minimum € 1.25 million (approximately U.S.$ 1.5 million) requirement • SICAF is required to create a legal reserve (5% of net profits until the accumulated reserve equals 10% of the subscribed capital)	• No withholding tax applies on distributions • The new EU Tax-Saving Directive (due to take effect as of July 2005) implements an exchange of information between Member States with respect to cross border interest payments to EU individuals. Luxembourg may levy a withholding tax during a transitional period instead of exchanging information, unless the beneficial owner opts for the exchange. The rate will be 15% initially, rising to 20% in 2007 and 35% in 2010	• Basic rule is that total borrowings may not exceed 50% of the market value of all properties. In practice, however, the CSSF may grant an increase of up to 70% leverage	• Any violation can lead to the withdrawal of the fund from the CSSF list and to the loss of its tax status	• No profit or capital taxes, except the initial capital duty on incorporation of € 1,250 (approximately U.S.$ 1,500) and an annual subscription tax of 0.05% of total net asset value. This subscription tax is reduced to 0.01% for institutional investors and reduced to 0% for funds of funds and for pension funds • No stamp duty on share issues or transfers
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
LUXEMBOURG SICAR	SICAR - Corporate form (SA, Sàrl, SCA, SC/SA.) - Limited Partnership (SCS)	Enacted 2004	Law of June 15, 2004 on venture capital companies	• Lightly regulated by Luxembourg CSSF (Commission de Surveillance du Secteur Financier/Commission for the Supervision of the Financial Sector) • Requires an external auditor • Minimum equity: € 1 million (approximately U.S.$ 1.2 million) to be raised during a 12 month period following the agreement of the CSSF • The SICAR is open to institutional investors, professional investors, and individual investors fulfilling certain conditions (for example, a € 125,000 minimum investment and a written acknowledgement of risk awareness)	• Income must be derived from qualifying investments (see Asset Rules)	• The SICAR was established for the private equity industry. The CSSF may approve a SICAR for real estate investments as long as it has the operational and revenue model of a private equity fund. The purpose should be the development of real estate with the aim of capital gains rather than rental income	• None, except that the net assets after distribution must exceed the minimum € 1 million (approximately U.S.$ 1.2 million) requirement	• No withholding tax applies on distributions • Refer to above comment on new EU Tax-Saving Directive	• N/A	• Any violation can lead to the withdrawal of the SICAR from the CSSF list and to the loss of its tax status	• General: - Capital duty due on incorporation is capped at € 1,250 (approximately U.S.$ 1,500) - No stamp duty on share issues or transfers- No subscription tax • Limited partnership form: - No Net Wealth Tax at the SICAR level - No Corporate Income Tax at the SICAR level - No Municipal Business Tax - Tax transparent for Luxembourg tax purposes • Corporate form: - Exempt from Net Wealth Tax - Fully taxable but exempt from Corporate Income Tax and Municipal Business Tax on income and gains from securities, including income arising from funds awaiting investment ("transit funds") effectively invested within a12 month period - No tax consolidation regime is applicable - In principle the SICAR should benefit from the application of tax treaties and the EU directives (subject to a country-by country confirmation) - No taxation on the disposal of the SICAR shares by a foreign resident investor
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
LUXEMBOURG SECURITIZATION VEHICLE	Securitization vehicle - Corporate form (SA, Sarl,SCA,SC/SA.) - Funds (co-ownership, trusts)	Enacted 2004	Law of March 22, 2004	• A Fund has no separate legal personality and requires a management company • The securitization entity is regulated (i.e. subject to regulatory framework) if it issues securities to the public on a regular and continuous basis. It is not regulated if it does not issue securities to the public or does not do so on a regular and continuous basis • Minimum equity: depends on legal form (minimum required for an SA, Sàrl, SCA or SC/SA) • Requires an external auditor	• N/A	• No limitations regarding the type of securitization transaction that can be performed under the Law. Therefore, any operation may relate to domestic or foreign immovable property risk (among others)	• None, except for commercial law restrictions (creation of a legal reserve of 5% of net profit until the accumulated reserve equals 10% of the subscribed capital) • Corporate form: - Fully taxable at a rate of 30.38%, but commitments for dividend and interest payments made to investors and to other creditors are deductible	• Corporate form: Any distribution is deemed to be an interest payment so no withholding tax should apply (except under application of the EU Savings Directive) • Fund: No withholding tax on distribution should apply (except under application of the EU Savings Directive)	• N/A	• N/A	• General: - Capital duty is due on capital increases, this is capped at € 1,250 (approximately U.S.$ 1,500) - No stamp duty on share issues or transfers- No subscription tax • Corporate form: - Exempt from Net Wealth Tax - Subject to a country-by country confirmation, the securitization vehicle should benefit from tax treaties and EU Directives • Fund: - No Corporate Income Tax, no Municipal Business Tax, and no Net Wealth Tax
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
MALAYSIA	(REIT) Real Estate Property Trust	Specific REIT guidelines issued and REIT specific tax provisions introduced in 2004	Securities Commission Act 1993; Securities Commission (SC) Guidelines on REIT of 2004; Malaysia Income Tax Act, 1967	• Malaysian registered trust: Malaysian trustees must be approved by SC • Minimum fund size of RM100 million • Maximum 49% of foreign effective equity • Minimum 30% of Bumiputra (indigenous investor) effective equity • Real estate must be managed by qualified property manager	• Income must be derived from qualifying investments (see Asset Rules)	• At least 70% of total assets must be investment in real estate, single purpose companies or real estate-related assets. • At least 20% of total assets must be invested in liquid assets at all times • Balance of 10% may be invested in real estate-related assets, non-real estate-related assets	• REIT will not be taxed on Income distributed to unit holders. The amount distributed is taxable in the hands of unit holders • Undistributed income will be taxed at 28%. - a credit for the taxes paid on said income is available for unit holders on the distribution of income that has been subject to tax	• Distributions to non-resident unit holders are subject to a withholding tax of 28%	• Basic rule is that total borrowings may not exceed 35% of the net asset value of the fund unless otherwise approved by the SC	• N/A	• Stamp duty: exemption for instruments of transfer relating to properties disposed to approved REITs • Capital gains: exemption for properties dispose to approved REITs. • Gains from disposal of properties by REIT may be subject to Real Property Gains Tax at rates ranging from 5% - 30% if held for less than five years
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
MEXICO	REIT (Real Estate Investment Trust - Fideicomiso Inmobiliario)	Enacted 2004	Mexican Income Tax Law (MITL), articles 223 and 224	• Trusts organized pursuant to Mexican law • Business activities must be related to real estate investments • Trusts must file before the tax authorities during the 30-day period after its constitution the following: - Copy of the trust agreement- Financial statements at the beginning of operation of the trust - A description of its general operation and investment program - Certification by a Mexican public accountant in which compliance of the trust with the Asset rule is expressed under oath	• Income must be derived from qualifying investments (see Asset Rules)	• At least 70% of equity must be invested in real estate activities and the remaining percentage in Mexican Government debt securities or in shares of mutual funds investing in debt instruments	• Real estate trusts are fiscally transparent entities that should calculate only annual income tax liability at the entity level and beneficiaries or trustees should include in their annual tax return the net income in their share in the trust income	• When beneficiaries of the trust are foreign tax residents (excluding exempt pension and retirement funds) who alienate certificates of participation, the gain is considered taxable income received from real estate investments, and taxed as alienation of immovable property -profit is determined as if REITs are Mexican resident companies • Presently, the Mexican Income tax law does not provide a clear regulation regarding the issue of withholding tax on distributions to foreign investors	• N/A	• Upon non-compliance with Organizational and Asset rules the trust may lose its status as real estate investment trust	• Annual obligation of the trust to inform the beneficiaries of their respective amounts of the assets' value pursuant to their participation in the trust • The contribution of real estate to the trust is not considered a sale or disposition of property to the extent the trustee grants the use of such property to the settlor and, to third parties, with certain requirements. • The property shall be considered alienated real estate, when the settlor alienates its certificates of participation or when the trust alienates said property. • Foreign pension and retirement funds that are settlors or trustees of real estate trusts shall not be deem to have permanent establishment in Mexico
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
NETHERLANDS	FBI (fiscal investment institution/ Fiscale Beleggingsinstelling)	Enacted 1969 (a modernization of the FBI is currently being discussed)	Article 28 Dutch Corporate Tax Act; Resolution on Investment Institutions	• FBI must be regulated by Dutch Financial Market Authority if FBI stock is marketed to the public or listed on the Amsterdam stock exchange • FBIs can be either listed or unlisted companies • If listed: - Must be listed on Amsterdam Stock Exchange - Shareholder that is a corporation subject to profits tax must own less than 45% unless shareholder is a listed FBI - Shareholder that is a Netherlands corporation must own less than 25% (directly or through related entities) - Shareholder that is an individual must own less than 25% • If unlisted: - Shareholders that are taxable corporations (either Dutch resident or foreign) must own together less than 25% - Shareholder that is a Netherlands corporation must own less than 25% (directly or through related entities) - Shareholder that is an individual must own less than 5%	• No restrictions as long as derived from passive investment (i.e., not from property development); discussion is ongoing between FBI community and Dutch tax authorities to allow property development activities under certain conditions	• Can invest in any type of passive investment	• 100% of annual taxable profit must be distributed within eight months after book year-end	• 25% Dutch dividend withholding tax on ordinary dividend distributions to foreign shareholders. Reduced rates may apply under tax treaties. Distribution of qualifying capital gain dividends from tax free reinvestment reserve are free from withholding	• 60% of book value of real estate property, 20% for other investments. Shares in subsidiaries owning real estate are subject to the 20% limit.	• Upon non-compliance with FBI requirements, the FBI may lose its status with retro-active effect to the year in which the FBI failed to comply	• Capital tax of 0.55% on capital contributions (proposed to be abolished per 01 Jan 06) • Capital gains can be reinvested in a tax- free reinvestment reserve • Dutch resident public company (NV), or limited company (BV), and funds for joint account can opt for the Dutch FBI status • Does not qualify for the EU parent-subsidiary directive • Qualifies for tax treaty benefits • Profit is subject to 0% Dutch corporate tax rate • Subject to conditions, FBI may receive a credit for foreign withholding taxes • Entrance tax when opting for FBI regime, i.e. taxable mark-to-market rule in year of adopting FBI regime • The payment of entrance tax is due in year of status change - result is a step up • Changes are being proposed to make the FBI regime more attractive
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
PUERTO RICO	REIT (Real Estate Investment Trust)	Enacted 1972, amended 2000	Puerto Rico Internal Revenue Code of 1994, as amended (PR IRC) § 1500 to 1502	• At least 50 shareholders or partners • At no time during the last half of its taxable year may more than 50% of total value of outstanding shares be owned by more than five individuals, based on the attribution rules of section 1024 of the PR IRC • Not a financial institution or a life insurance company subject to taxation under Subchapter G of the PR IRC • Otherwise taxable as a domestic corporation • Managed by one or more trustees or directors • All of its stocks, shares or interests must be issued exclusively in exchange for cash	• 95% or more of gross income must be derived from dividends; interest; rents from real property; gain from the sale of real property and rights to real property; and payments received or accrued for entering into agreements to execute loans guaranteed with mortgages on real property, or acquire or lease real property • 75% or more of gross income must be derived from rents derived from real property located in Puerto Rico; interest on obligations secured by mortgage on real property or rights to real property located in Puerto Rico; gain from the sale or other disposition of real property that is not of the type of property that qualifies as inventory; dividends or other distributions derived from, and gains derived from, the sale or other disposition of shares of transferable stock, certificates, or participation in another REIT; amounts received or accrued as consideration for entering into agreements to make loans secured by mortgages on real property and/or rights to real property located in Puerto Rico, and/or to buy or lease real property and/or rights to real property located in Puerto Rico	• At the end of each quarter of a each taxable year: - At least 75% of the value of total assets must be represented by real estate assets, cash or equivalents, and securities and obligations of Puerto Rico - Not more than 25% of the value of total assets must be represented by securities other than those mentioned above For purpose of these sections, real property means land located in Puerto Rico or improvements thereon (including but not limited to buildings or other structures of permanent nature including the structural components of such buildings or structures constructed after 30 Jun 99, or that have been substantially renewed, if constructed after that date) used as: hospitals, schools, universities, public or private housing, transportation facilities and/or public or private roads, office building, governmental facilities, facilities of manufacture industry, recreational center (does not include shopping centers), parking facilities, etc.	• At least 90% of its net income must be distributed annually as taxable dividends • If it does not distribute such net income, it will be taxable as a regular corporation, partnership or trust (at a maximum of 39% tax rate)	• 17% withholding on taxable dividends, as defined in section 1501 of PR IRC, for a period of 10 years	• No restrictions	• Loss of REIT status requires five-year waiting period to re-elect unless waived by Government for reasonable cause • Reasonable cause exception for income failure to avoid loss of REIT status	• Income from prohibited transaction (sales or other dispositions) of stock in trade or other property of a kind that would properly be included in inventory, and property held primarily for sale to customers in the ordinary course of a trade or business is taxed at 100%
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
RUSSIA	(CEMF) Closed-end mutual fund, also referred to as closed-end unit investment fund	Enacted 2001	Federal LawNo. 156-FZ of 29 Nov 01 "Concerning Investment Funds", Russian Tax Code	• CEMF is not a legal entity - it is a pool of assets managed by a management company on the basis of an asset management agreement on behalf of unit holders • The term of agreement with the management company on establishment of a CEMF may not exceed 15 years and may not be less than one year • Minimum share capital requirements for CEMF • Licensing requirements for management companies	• Income must be derived only from investment activity (see Asset Rules)	• CEMF can invest in real estate and other investment assets (i.e. securities). Certain limitations apply regarding composition of the portfolio	• No distribution requirements • It is possible to distribute profit to unit holders in a manner akin to dividend payment • Profit can also be distributed to unit holders upon redemption of units	• No Russian withholding tax applies to the disposal of a CEMF unit by a foreign unit holder. • There are currency control requirements in Russia that could apply	• No debt can be taken out	• Upon non-compliance with the requirements management company may lose its license	• CEMF is not a legal entity, thus is not a taxpayer for corporate income tax purposes. • Unit holders are taxed upon disposal of units or upon distribution of income from the CEMF. Unit holders are not taxable on undistributed income earned by CEMF • A unit of CEMF is treated as a security and taxed accordingly, ( i.e. no VAT upon realization) • VAT at 18% applies to rental incomes generated by CEMF and the sale of real estate • The contribution of real estate to a CEMF may potentially avoid taxation • Property tax at 2.2% on net book value of real estate is potentially payable by the unit holders in the fund
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
RUSSIA	(JSIF) Joint-stock investment fund	Enacted 2001	Federal LawNo. 156-FZ of 29 Nov 01 "Concerning Investment Funds",Russian Tax Code	• JSIF is a legal entity which should be managed by a licensed management company • Minimum share capital requirements for JSIF • Licensing requirements for JSIF Licensing requirements for management companies	• Income must be derived only from investment activity (see Asset Rules)	• JSIF can invest in real estate and other investment assets (i.e. securities). Certain limitations apply regarding composition of the portfolio.	• No distribution requirements • It is possible to distribute dividends to shareholders	• Dividends on shares to foreign shareholders are subject to 15% withholding tax. Reduced rates may be applied under tax treaties • Disposal of JSIF share by a foreign shareholder may be subject to 20% Russian withholding tax rate on gross revenue (24% on net profit) if real estate represents more than 50% of the net book assets of JSIF; unless exempt under tax treaties • There are currency control requirements in Russia that could apply	• No debt can be taken out	• Upon non-compliance with the requirements JSIF/management company may lose its license	• JSIF pays profits tax on its income at rates applicable to regular Russian companies, ie standard rate of 20% -24% depending on the place of registration. Certain types of incomes are taxed at different rates (i.e. dividends are taxed at 9%) • JSIF is subject to property tax at 2.2% from net book value of real estate and other fixed assets • VAT at 18% usually applies to rental income generated by CEMF and sale of real estate
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
SINGAPORE	REIT (Real Estate Investment Trust)	Regulatory framework was first released in 1999	Securities and Futures Act - Code on Collective Investment Schemes (regulatory framework)	• REITs must comply with the listing rules (i.e., at least 25% of the units issued held by at least 500 public shareholders) to be listed on the Singapore Exchange	• Income must be derived from qualifying investments (see Asset Rules)	• At least 70% investment in real estate and real estate related assets inside or outside Singapore	• At least 90% of income must be distributed annually • Income not distributed is taxed at 20% corporate tax rate	• 20% withholding on foreign distributions. This is reduced to 10% for distributions made during the period from 18 Feb 05 to17 Feb 2010	• Maximum leverage is 35% of the fair market value of the real estate assets of the REIT unless the borrowings or the REIT has a credit rating of at least A	• N/A	• Regulatory requirements apply to public REITs only (whether or not listed) • REIT cannot engage in property development activities • Stamp duty at approximately 3% for acquisition of properties. Remission of stamp duty is granted for transfer of properties located in Singapore by a company or an individual to a REIT listed or to be listed on the Singapore Exchange if the transfer is executed during the period 18 Feb 2005 to 17 Feb 2010 • No stamp duty on transfer of units
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
SOUTH AFRICA	Although other structures may be possible, REITs in South Africa are usually, if not always, structured in a form of a South African Trust, holding shares in property companies and managed by a further company which makes a market in the participation units	Regulated by Collective Investment Schemes Act	Part 5 of the Collective Investment Schemes Act	• A Property Unit Trust (PUT) holds a portfolio of investment grade properties and is listed on the JSE Securities Exchange (SA) in the "Real Estate" sector • PUTs are highly regulated vehicles in that they are governed by the Collective Investment Schemes Act • The affairs of the PUT are managed by a management company - these include buying and selling 'units' in the PUT to/from the public • Generally PUT's invests in, shares in property companies (fixed property company) - PUT's can, but rarely invest directly in immovable property • The fixed property company is entitled to deduct the amount of such dividends distributed (other than those distributed out of profits of a capital nature) from its income, whether they are distributed to another company or otherwise (s 11(s)) - effectively, therefore, the fixed property company is liable to normal tax on the difference between its income and the dividend (excluding the capital-profit element) it distributes	• Capital profits are to be reinvested and cannot be distributed to unitholders (except on termination of the PUT)	• May invest in shares in property companies, immovable property	• No minimum distribution requirements • Income distributed by the PUT to unitholders is not taxed in the trust • However income not distributed by the PUT will be taxed within the trust	• A PUT may invest in property in a foreign country and property shares or participatory interests in a collective investment scheme in property in a foreign country if such foreign country has a foreign currency sovereign rating by a rating agency, which rating and rating agency must be determined by the registrar -provided that if the country has been rated by more than one agency the lower of the ratings applies	• PUTs are now permitted to gear to levels of up to 30% of the value of the underlying assets	• N/A	• Owing to their structure, PUTs do not pay tax on the income they earn, which is distributed to the investor (unitholder) • Distributions are therefore taxed only in the hands of the unitholders. The South African tax situation dictates that PUT distributions are treated as ordinary income. For tax purposes unitholders will be allowed to reduce the taxable distributions using the interest exemption, section 10(1)(h) - Limited to R10 000 (approximately U.S.$ 1,450) • Non-resident unitholders, not carrying on business in the Republic of South Africa, are not liable for normal tax on PUT distributions. Note that there is also no withholding tax on the distribution • PUTs are currently exempt from capital gains tax when selling shares in property companies, but not when the underlying properties are bought or sold by the property company
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
SPAIN	REIF (Real Estate Investment Funds; Fondos de inversi?n inmobiliaria)REIC (Real Estate Investment Companies; Sociedades de inversi?n inmobiliaria)	Enacted 1984, amended 2003	General Investment Institutions Act; Law 36/2003 governing Real Estate Investment Institutions, and Real-Decreto 1393/1990	• REIC/REIF: - Main purpose is to invest in rental real property Both must primarily invest in rental "urban real estate" - as defined in Law- and both are subject to special investment rules and activity limitations - Minimum stock capital: € 9,015,181.59 (approximately U.S.$ 11 million) fully subscribed and paid in - Minimum number of investors: 100- Supervised by the Spanish authorities (Spanish SEC) - Contributions can be in the form of cash, real state or securities - "Significant Shareholding Rules" are applicable • REIC: - Organized as a corporation. Custodian owns the legal title of the REIC's investments • REIF: - Structure without legal personality similar to a "trust" but with special features- Administered by a separate managing company jointly with the entity holding investment deposits	• Income must be derived from qualifying investments (see Asset Rules)	• REIF: - At least 70% of the total assets must be invested in real estate properties, as defined in Law. The remainder may be invested in listed fixed-income securities • REIC: - At least 90% of the total assets must be invested in real estate property - Remainder may be invested in listed securities • REIC/ REIF: - Maximum value of single real estate asset: 35% of the value of the REIC/REIF's total assets - In order to benefit from the special tax regime, 50% of the total assets must be invested in urban real estate for renting / leasing purposes. - Properties must be owned at least three years unless the Spanish authorities agree to reduce this period	• No distribution requirement	• REIC/REIF: - Dividends distributed by REIC to foreign investors are subject to a 15% withholding tax. Reduced rates may apply under tax treaties • REIC/REIF: - Capital gains distributed to foreign investors are subject to 35% tax rate, unless a tax treaty allows for an exemption	• REIC: - External financing cannot exceed 10% of the assets of the company - General Spanish thin-capitalization rules should also be considered	• N/A	• REIC/REIF: Corporate Tax: - Tax rate: 1% of net income - No entitlement to any deduction - The REIC/REIF is not a flow-through entity for Spanish investors Transfer tax: - Rebate of 95% for housing purchased for subleasing Capital Tax: - Exemption in relation to incorporation, capital increase and merger transactions
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
TAIWAN	REIT (Real Estate Investment Trust)	Enacted 2003	Real Estate Securitization Act	• In accordance with the Real Estate Securitization Act, the trustee institution must meet the following criteria: - Be engaged in the trust business pursuant to the Taiwan Trust Law - Be established for at least three years - Meet the standards set by credit rating institution recognized by competent authority • For companies purely engaged in the businesses of real estate investment trust or real estate asset trust, the competent authority may set forth rules for the minimum outstanding capital, shareholders' structure, qualifications of the person responsible for the company, the expertise and experience of the company's management, and the business activities • Certificates shall be held by at least 50 persons for at least 335 days during a fiscal year - except for independent professional investors, it is not required for the 50 persons to be the original holders of certificates. Any five certificate holders shall not own more than ½ of the total value of the certificates issued	• Income must be derived from qualifying investments (see Asset Rules)	• The real estate investment trust fund must invest in the following: - Land - Real estate with a constant revenue stream - Rights derived from real estate with stable revenue - Certificates or asset backed securities issued or delivered by trustee institutions or certain special purpose companies - Certain other assets prescribed or approved by the competent authority • Restrictions are set forth for the use of excess cash • The total investment in short-term commercial paper of any company shall not be greater than 10% of the net worth of the real estate investment trust at the investment date • The total amount of bank deposit, bank guarantee, bank acceptance, short-term commercial papers in one financial institution shall not be greater than 20% of the net worth of the REIT and 10% of the net worth of the financial institute at the investment date • The total investment in certificates or asset backed securities issued or delivered by trustee institutions or special purpose companies shall not be greater than 20% of the net worth of the REIT at the investment date	• The investment income of the real estate investment trust fund must be distributed and the profit of the REIT shall be distributed within six months after the closing of the fiscal year • The distributed amount is deemed to be interest income and is subject to a 6% withholding tax	• A 6% withholding tax rate applies to distributions	• N/A	• According to Article 55 of the Taiwan Real Estate Securitization Act, if the trustee is not in compliance with the related law and regulations, it may be requested to transfer REIT to other trustee recognized by the competent authority	• The certificates, issued or delivered in accordance with the Taiwan Real Estate Securitization Law, that have been sold or redeemed by the trustee pursuant to the trust agreement are exempted from security transaction tax • The trustee institution is the taxpayer of land value tax • Income tax on gains derived from securities transactions is not imposed, but losses on securities transactions are no longer deductible • The disposal of REIT certificates is exempt from Taiwanese income tax
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
TURKEY	REIT (Real Estate Investment Trusts Gayrimenkul Yat?r?m Ortakligi)	Enacted 1998	Communique of Capital Markets Law, Commercial Law	• Must deal primarily with portfolio management • Name must include "real estate investment trust" • One of the shareholders must be "leader entrepreneur" • Start up capital should not be less than the amount determined by CMB (Capital Markets Board) • Shares must be quoted on the Stock Exchange • Administered by Board of Directors and Board of Auditors • Must not be involved in commercial, industrial, or agricultural activities • Must not be involved in any capital markets activities other than portfolio management • Must not be involved in construction activities • Capital should not be less than TRL 5.850 billion (approximately U.S.$ 4 million) • At least 49% of the capital of the REIT should be offered to the public • At least 25% of the shares that represent the initial capital must be issued for cash	• Income must be derived from qualifying investments (see Asset Rules)	• REIT must invest at least 50% of its portfolio value in real estate, rights relating to real estate and real estate projects • REIT may invest at most 10% of its portfolio in time deposits or demand deposits • REIT may invest at most 10% of its portfolio in foreign real estates and capital market instruments regarding foreign investments • The lands and lots in the portfolio of REIT on which any project has not been realized for three years as from the acquisition date, must not exceed 10% of its portfolio value	• REITs must distribute a minimum of 20% of their profit as dividends	• No withholding tax applies on distributions	• N/A	• REITs lose their status if they cannot meet the 50% requirement for their portfolio value to be composed of real estate, rights concerning real estate, and real estate projects during the previous three months - the Capital Market Board extends the status of the company once for one year - if requirements cannot be met within the extended period, the REIT loses its status within one month following the extension period	• Exempt from corporate tax pursuant to Corporate Tax Law, art. 8-4/d
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
UNITED KINGDOM	UK-REIT (Real Estate Investment Trust)	Introduction proposed in Budget 2004 -currently in consultation Expected enactment: 2006Discussion paper issued in March 2005, with a progress report expected later in the year	The UK-REIT rules are currently under discussion. The details included here are intended only as a description of potential rules.	• Closed-ended and probably listed on Stock Exchange (open ended Authorized Investment Funds are also being considered). • Minimum number of investors requirement, but number not yet specified • Management may be internal or external. • No additional landlord requirements	• At least 75% of income must come from qualifying property investment activities to be tax exempt • Potentially only properties generating a significant proportion of rental income may qualify • Non-qualifying activities may include property development • Non-qualifying activities are taxable under the normal corporation tax rules	• At least 75% of the UK-REIT's gross value of assets must be derived from qualifying property investment activities • Qualifying properties may be of any type and in any location worldwide	• Minimum distribution requirement of 95% of income from qualifying activities • Dividends from qualifying activities are treated as property income in the hands of the investors • Distributions should be subject to 22% withholding tax (i.e., the basic rate of UK income tax) • Distributions arising from non-qualifying profits are treated as ordinary dividends in the hands of the investors	Potential maximum debt to equity ratio or interest/income ratio in order to minimize tax avoidance or manipulation	• If a UK-REIT exceeds any operational parameters, it should revert to being fully taxable as if it were a company subject to corporation tax • A deemed capital gain should be crystallized on the conversion of a REIT to a normal limited company	• Aims to align after-tax returns from holding real estate indirectly more closely with those obtained from holding real estate directly • Potential conversion charge of existing vehicles/companies, although this should be limited to the tax to which they are subject on realized capital gains • Income from the UK -REIT likely to be taxable as Schedule A income (UK properties) or Schedule D Case IV income (non-UK properties) for UK taxpayers (i.e., equivalent to current taxation system for UK individuals on income from real estate)	• Aims to align after-tax returns from holding real estate indirectly more closely with those obtained from holding real estate directly. • Potential conversion charge of existing vehicles/companies, although this should be limited to the tax to which they are subject on realized capital gains. • Income from the PIF likely to be taxable as Schedule A income for UK taxpayers (i.e., equivalent to current taxation system for UK individuals on income from real estate).
Country	Structure	Legal Status	Citation	Organizational Rules	Income Rules	Asset Rules	Distribution Rules	Foreign Considerations	Restrictions on Long-Term Debt	Loss of Status Rules	Other Tax Considerations
UNITED STATES	REIT (Real Estate Investment Trust)	Enacted 1960	I.R.C. § 856-860	• 100 or more shareholders • Five or fewer individual shareholders hold no more than 50% of value • Not a bank or financial institution • Otherwise taxable as a domestic corporation • Managed by one or more trustees or directors • Ownership evidenced by transferable shares • REIT must distribute C-Corp earnings and profits by end of taxable year	• At least 75% of gross income annually (excluding prohibited income) must come from real estate related sources • At least 95% gross income annually (excluding prohibited income) must come from real estate related sources plus passive sources such as dividends and interest • Rents may be disqualified if: (i) based on net income or profits of tenant; (ii) rents from a related party (10 % or more ownership threshold); or (iii) > 1% of amounts derived from each property is from performance of impermissible tenant services by REIT	• At least 75% of assets is comprised of real estate, cash or cash items, and Government securities • Not more than 20% of assets consist of securities of all taxable REIT subsidiaries (TRSs) combined • Not more than 5% of assets consist of securities of any one issuer (other than Government and TRS securities) • Not more than 10% of outstanding vote or value of the securities of any one issuer is held (except for Government and TRS securities and excluding qualifying real estate assets) by the REIT • REIT asset tests must be met quarterly	• At least 90% of REIT taxable income must be distributed annually • Certain distributions are treated as paid in prior year to meet requirement • Receives dividends paid deduction for qualifying dividend distributions • Subject to 4% excise tax on certain undistributed amounts • Subject to corporate tax on amounts retained and not distributed • Deficiency dividend procedure and throw-back election may be available to satisfy distribution requirement	• 30% withholding on foreign distributions Reduced rates may apply under tax treaties • Under the Foreign Investment in Real Property Taxes Act (FIRPTA), 35% tax is withheld on distributions of REIT capital gain dividends to foreign shareholders attributable to the sale of real estate assets by the REIT. • Capital gain dividends may be eligible for ordinary dividend treatment if the foreign shareholder does not own more than 5% of any class of stock in a publicly traded REIT	• No restrictions	• Loss of REIT status requires a five-year waiting period to re-elect status unless waived by Government for reasonable cause • Reasonable cause exception for income failure to avoid loss of REIT status • Beginning in 2005, relief provisions available for asset and other REIT qualification violations	• Enactment of TRS rules to permit partially or wholly owned taxable subsidiary corporations to provide impermissible services to REITs other than hotel or lodging activity • REIT subject to 100% tax on non-arm's length transactions with TRS • REIT subject to 100% tax on gain from "dealer" activity • REIT may own property through partnerships; look-through rule applies to income and assets • REIT may be subject to built-in gains tax on property

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