MOF, IRAS, MAS launch relief measures for SGX-listed S-REITs

These include extending deadlines for distribution of income and raising the leverage limit.

The Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS) and the Monetary Authority of Singapore (MAS) have launched relief measures for Singapore Exchange-listed S-REITs to help them manage their cash flow and raise funds amidst the ongoing pandemic, according to a press release.

These include extending deadlines for distribution of taxable income and raising the leverage limit and deferment of new regulatory requirements.

MOF and IRAS will extend the timeline for S-REITs to distribute at least 90% of their taxable income from 3 months to 12 months for FY2020 to qualify for tax transparency. This extension is only applicable for distributions made from taxable income that is derived by an S-REIT during FY2020.

For example, to avail the tax transparency treatment for FY2020 taxable income, S-REITs with FY2020 ending 31 March 2020 and 31 December 2020 will have up to 31 March 2021 and 31 December 2021 respectively, to distribute to their unitholders at least 90% of their taxable income derived in FY2020. IRAS will provide further details of the change by early May 2020.

MAS has also raised the leverage limit for S-REITS from 45% to 50%, effective immediately. This is intended to provide S-REITs with greater flexibility to manage their capital structure and to raise debt financing.

Further, MAS will defer to 1 January 2022 the implementation of a new minimum interest coverage ratio (ICR) requirement. MAS had earlier proposed to require S-REITs to have a minimum ICR of 2.5 times before they are allowed to increase their leverage to beyond the prevailing 45% limit.

“The higher leverage limit, together with the enhanced share issue limit announced by SGX RegCo last week 3, will allow S-REITs to have continued access to different funding channels, including borrowing from banks, issuing bonds, and raising equity,” the press release added.

Meanwhile, the regulator is requiring S-REITs to disclose their leverage ratios and ICRs in their annual reports and interim financial results, to provide investors with timely information about the financial position of S-REITs and the impact of higher leverage on their risk profiles.