Last Updated May 23, 2019

Law and Practice

Contributed By MMC Africa Law

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MMC Africa Law was established in 1995 and is headquartered in Spring Valley, Nairobi, with a full-service office in the coastal city of Mombasa. The firm is made up of 12 Partners and over 30 lawyers with expertise in a wide variety of legal matters. As well as being a member of ALFA International, a global network of independent law firms, it has a close association with the leading global law firm of Orrick, Herrington & Sutcliff LLP. MMC Africa Law’s dedicated real estate team comprises three partners and 12 lawyers who pride themselves on their extensive experience handling sophisticated and complex transactions such as those relating to mixed-use developments, an emerging market in real estate. The team also offers specialised services in urban regeneration projects, construction law, REITs, hospitality and hotels, residential developments, commercial and farmland leases, land use and planning, environmental compliance, contractual agreements, conveyancing and conducting due diligence on property.

Depreciation deductions do not apply to buildings. Such deductions do, however, apply to furniture and fittings in a building.

Under Section 20(1) of the Income Tax Act, REITs are exempt for corporation tax purposes but are subject to payment of withholding tax on interest income and dividends.

Exemption is not automatic; the REIT must apply for an exemption under the Income Tax Act Registered Unit Trust/Collective Investment Scheme (Rules 2003) and must show that:

  • the REIT will undertake portfolio investments in accordance with CMA policies and guidelines;
  • the sole purpose of the REIT is to carry on investments on behalf of the REIT's securities holders;
  • six months after registration/exemption, no REIT securities holder shall hold more than 12.5% of REIT securities in the REIT; and
  • the REIT shall, within six months of its commencement, maintain at least 25 REIT securities holders at any particular time.

If the above cannot be proven, REITs will be subject to corporation tax and required to pay tax on all income they receive before distributing dividends.

Stamp duty is not applicable to transfers of real estate into a REIT. This is pursuant to Legal Notice No 73 of 2008, which provides that any instrument that is executed in respect of the transfer of property on setting up a listed property investment vehicle shall be exempt from the provisions of the Stamp Duty Act.

The Finance Act, 2017, amending the First Schedule of the VAT Act, 2013, provides for exemption from VAT for transfers of assets into REITs.

MMC Afica Law

MMC Arches,
Spring Valley Crescent,
Off Peponi Rd.
Westlands

+254 020 2329898

+254 720 585 785

eomulele@wakili.com www.wakili.com
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MMC Africa Law was established in 1995 and is headquartered in Spring Valley, Nairobi, with a full-service office in the coastal city of Mombasa. The firm is made up of 12 Partners and over 30 lawyers with expertise in a wide variety of legal matters. As well as being a member of ALFA International, a global network of independent law firms, it has a close association with the leading global law firm of Orrick, Herrington & Sutcliff LLP. MMC Africa Law’s dedicated real estate team comprises three partners and 12 lawyers who pride themselves on their extensive experience handling sophisticated and complex transactions such as those relating to mixed-use developments, an emerging market in real estate. The team also offers specialised services in urban regeneration projects, construction law, REITs, hospitality and hotels, residential developments, commercial and farmland leases, land use and planning, environmental compliance, contractual agreements, conveyancing and conducting due diligence on property.

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