Italy's REIT 'not beneficial' for foreign companies

Italy's Senate has approved legislation to introduce tax-efficient real estate investment trusts (REITs) as part of the 2007 Finanziaria budget law. The vote in the Senate took place on Saturday and the next step is for the Finanziaria to get final approval by the Camera dei Deputati this week, Italian newspaper IlSole24Ore has reported.

In its current form, the Italian REIT, known as SIIQ, is mainly beneficial to Italian property companies such as Beni Stabili and IGD and not for foreign property companies with Italian assets, such as Eurocommercial Properties and Corio of the Netherlands and France's Klepierre, according to researchers at merchant bank Kempen & Co. This is because the majority shareholder may only hold 51% of a SIIQ, and 35% of the shares must be held by shareholders with a maximum stake of 1%.

While rules being discussed for the French SIIC 4 include exceptions to shareholder restrictions for REIT holding companies, the Italian legislation does not appear to include such features. However, amendments to the budget law can still be carried out until April 30, 2007. The Italian REIT is expected to come into force on June 30 2007, seven months after the UK and Germany are set to introduce their own real estate investment trusts.

The other main characteristics of the Italian REIT/SIIQ include an entry tax of 20%; full tax exemption for corporate income tax (IRAP and IRES) and distribution of 85% of the income is required.