INVESTMENT TRUST

Research Paper: Real Estate Investment Trust

Taxation,

eminent

domain,

police power

EQUITY REIT

INVESTOR

Property

Rights,

Cash Flow

TENANT

Leasehold

Use of

Property

Lease

Document

MORTGAGE

LENDER

Mortgage

Document

Debt

Service

Promissory Note

GOVERNMENT

Restrictions on

Tenants

Landlord –

Tenant Laws

Restrictions on Lenders

Mortgage

Laws

Income and

Wealth Taxation

Operating Environment for a REIT

rojects, however, the structure is not viable in traditional business environment, and is only
suited for Islamic transaction. On the contrary, existing AMC structure can be used with significant
modifications to investment restrictions. In the following section we present an overview of benefits of
using AMC Structure for a REIT.
Transparent Taxation
Investment in REIT is one of the investments that does not face a double taxation issue. In addition to
this, under the Income Tax Ordinance, the income of a mutual fund or an investment company registered
under the NBFC Rules 2003, or a unit trust scheme constituted by an assets management company
registered under Assets Management Companies Rules, 1995, is not taxable if not less than ninety
percent of its accounting income of that year, as reduced by capital gains whether realized or unrealized,
is distributed amongst the unit or certificate holders or shareholders as the case may be. In the case
dividend income is received by a public company or an insurance company, 5% of the gross amount of
the dividend; or in any other case, 10% of the gross amount of the dividend. Therefore the AMC structure
will be optimal in terms of tax transparency.
Repatriation
There are no restrictions or repatriation issues for foreign investors as long as they invest in securities
whether listed or unlisted. The money can be routed through SCRA channel.
Optimal Structure for Pakistan
The optimal structure REIT is the one that allows tax transparency, transfer of capital in and out of the
country for investment, and operational efficiencies. The AMC Structure is the only vehicle that suits the
Research Paper: Real Estate Investment Trust.