The challenge
Investors from Asia are increasingly using Singapore as a platform for accessing real estate investment opportunities in the UK and Europe. As the only UK-focused REIT listed in Singapore, Elite Commercial REIT is in a unique position. With the trust’s initial public offering (IPO) in 2020 more than eight times oversubscribed, its huge potential for channelling Asian investment into the UK is clear.
To realise these ambitions, it needed a new and innovative approach to fulfilling tax obligations, delivering value for investors, and attracting investment capital into its business.
As a Singapore-listed REIT, Elite Commercial REIT faced the prospect of operating at a disadvantage to competitors in the UK in terms of tax treatment. UK-domiciled REITs are exempt from corporation tax, with Singapore investors being subject to UK tax at 15% on property income distributions, after applying the UK-Singapore double-tax treaty.
However, using a conventional structure, Elite Commercial REIT would have paid UK corporation tax at 19% on income and gains, with the rate rising to 25% from 2023. This would have reduced distributable income for Singapore investors compared with investing via a UK-domiciled REIT. The consequence would be a less attractive structure for investors that would potentially lower the amount of investment coming into the UK.
That’s why we wanted to work with them – to challenge the status quo and find an innovative solution that would ensure Elite Commercial REIT can compete on a level playing field with UK-domiciled REITs to attract capital.
