The tax structure for farmland REIT investments can vary depending on the country and the specific transaction structure. Allow me to give examples on a developing country like Kenya:
REITs are exempt from income tax on property rental income if they distribute at least 80% of their income to shareholders. REITs are also exempt from VAT on real estate services. However, REITs are subject to withholding tax on profits distributed to unitholders.
General REITs
REITs have many built-in tax efficiencies for investors. For example, REITs don’t pay corporate income taxes, and investors can deduct 20% of their dividends earned for the qualified business income deduction. However, the income tax liability for REIT shareholders can be complicated.
REITs can be a simple and passive investment option for individuals looking to invest in farmland. They offer regular dividend income and high liquidity. However, some say that farmland REITs may be too risky at the current time.
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