Proposed dividend distribution tax on InvITs, REITs may hit six planned trusts

The central government’s decision to implement dividend distribution tax (DDT) on infrastructure investment trusts (InvIT) and real estate investment trusts (REIT) will severely impact at least six such trusts planned over the next one year.

The proposed tax framework in the Budget 2020 could also bring the proposed REITs including K Raheja; Blackstone , Brookfield and Prestige Estates, to a grinding halt.

According to the new decision, unit holders will need to pay tax on dividend income from special purpose vehicles (SPV) received and distributed by REIT/InvIT leading to double taxation in the hands of SPV and unit holders. This is expected to adversely impact returns in the hands of unit holders and affect foreign investment.

“There have been representations by various industry bodies and global funds but the central board of direct taxes (CBDT) seems to be in no mood to reconsider it. The government has said it will look into it will look into it but nothing has been done,” said the MD of a fund planning to list its REIT.

Several global funds and industry lobby groups like Asia Pacific Real estate Associations, CPPIB, Blackstone, ASSOCHAM, and CREDAI have raised the concern with the removal of DDT.


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