Do Philippine REITs Pay BIR Income Tax? The 90% Dividend Deduction Explained

A Philippine Real Estate Investment Trust (REIT) is not blanket-exempt from BIR income tax — it pays the regular 30% corporate rate on its taxable net income, the same as any domestic corporation under Section 27(A) of the NIRC. What makes a REIT tax-efficient is a dividends-paid deduction: Revenue Regulations (RR) No. 13-2011, implementing the REIT Act of 2009 (Republic Act No. 9856) and later amended by RR No. 3-2020, lets a REIT deduct dividends it actually distributes from its taxable income — and if it distributes at least 90% of distributable income, that deduction can push taxable income close to zero.

Why “REITs don’t pay tax” is a myth, and what’s actually true #

A REIT is a stock corporation, and Section 27(A) of the NIRC taxes it at the regular 30% corporate income tax rate on its taxable net income — there is no REIT-specific exemption from that rate. The tax relief the REIT Act of 2009 built in works through a deduction, not an exemption. A widely cited restatement of RR No. 13-2011’s mechanism, as amended by RR No. 3-2020, puts it this way:

“In computing its taxable net income, the REIT shall be allowed to deduct dividends distributed by a REIT out of its distributable income as of the end of the taxable year… provided that in no case shall the total dividends distributed be less than ninety percent (90%) of its distributable income.”

This site relied on secondary tax-practice summaries of RR No. 13-2011 (as amended by RR No. 3-2020) for this passage, as the BIR’s own PDF of the regulation could not be reached directly to re-verify the exact wording — confirm the precise text against the BIR’s published regulation before relying on it for a formal filing position. A REIT that distributes little or nothing pays the full 30% on undistributed profit, exactly like any other domestic corporation.

The 90% distribution rule that makes the deduction work #

A REIT must distribute at least 90% of its distributable income as dividends to shareholders each year to claim the dividends-paid deduction; falling short forfeits the deduction entirely for that year. “Distributable income” is computed from the REIT’s audited net income for the year, adjusted for unrealized gains and other items specified in the implementing regulations — not simply reported net income. Because RA 9856 was written to make REIT shares an income-generating retail investment product, the regulations tie every meaningful tax benefit to this payout discipline rather than granting relief regardless of distribution behavior.

How investors are taxed on REIT dividends #

Cash or property dividends a REIT pays to its shareholders are generally subject to a 10% final withholding tax — lower than the rates that can apply to dividends from an ordinary domestic corporation depending on the recipient’s classification, which is part of what makes REIT shares attractive to retail investors seeking yield. The REIT withholds this tax before releasing the dividend, and the investor’s obligation ends there since it is a final tax, not a creditable one requiring further reporting.

Other BIR relief built into the REIT structure #

Beyond the income tax mechanism, RR No. 13-2011 grants a REIT a 50% reduction of the Documentary Stamp Tax otherwise due under Title VII of the NIRC on the transfer of real property into the REIT in exchange for shares — a meaningful cost reduction for the initial property injection (the “initial public offering” seeding step) that typically funds a REIT’s launch.

Worked example: distributing 90% vs. distributing 60% #

Assume a REIT reports ₱100 million in distributable income for the year.

Falling short of the 90% threshold by even a modest margin does not produce a proportional tax increase — it removes the deduction outright for that year, which is why REIT managers treat the payout ratio as a hard compliance line rather than a target to approximate.

How this differs from an ordinary domestic corporation #

An ordinary domestic corporation that pays dividends gets no equivalent deduction — dividends are paid out of already-taxed after-tax profit, and the corporation’s 30% (or, for qualifying smaller corporations, 20% under the CREATE Act) tax bill is unaffected by how much of that profit it distributes. See Intercorporate Dividend Tax Exemption for Domestic Corporations for how dividend flows between ordinary domestic corporations are treated, and Corporate Income Tax Rate in the Philippines Under the CREATE Act for the standard corporate rate structure a REIT reverts to whenever it misses the distribution threshold.

Frequently Asked Questions #

Is a Philippine REIT exempt from income tax? #

No. A REIT registered under the REIT Act of 2009 (RA No. 9856) remains subject to the regular 30% corporate income tax under Section 27(A) of the NIRC on its taxable net income. What makes REITs tax-efficient is not an exemption but a dividends-paid deduction under Revenue Regulations No. 13-2011, as amended by RR No. 3-2020, which lets the REIT deduct dividends it actually distributes from that taxable income.

What is the 90% distribution requirement for a REIT? #

To qualify for the dividends-paid deduction, a REIT must distribute at least 90% of its distributable income as dividends to shareholders. If it distributes less than 90%, the dividend payment is not allowed as a deduction from taxable income, and the REIT is taxed on the full amount at the 30% corporate rate instead.

How are dividends from a REIT taxed for the investor? #

Cash or property dividends paid by a REIT to its shareholders are generally subject to a 10% final withholding tax, a preferential rate compared to the standard rates that apply to dividends from an ordinary domestic corporation, reflecting the REIT Act’s intent to make REIT shares an accessible retail investment vehicle.

Does a REIT get any other BIR tax relief besides the dividend deduction? #

Yes. RR No. 13-2011 also grants a 50% reduction of the applicable Documentary Stamp Tax on the transfer of real property to a REIT in exchange for shares, and VAT relief on certain property transfers into the REIT structure, on top of the income tax dividend-deduction mechanism.

What happens if a REIT distributes less than 90% of its distributable income? #

The REIT loses the dividends-paid deduction for that year. Without the deduction, its full taxable net income is subject to the regular 30% corporate income tax under Section 27(A) of the NIRC, largely eliminating the tax efficiency the REIT structure is designed to provide.

Summary #

A Philippine REIT pays the same 30% corporate income tax rate as any domestic corporation — the REIT Act of 2009 and RR No. 13-2011 make it tax-efficient through a dividends-paid deduction, not an exemption, and that deduction depends entirely on distributing at least 90% of distributable income every year. Miss the threshold, and the REIT is taxed like any other corporation on the full amount.