REITs excluded from income trust tax.

The vast majority of real estate investment trusts (REITs) will be excluded from the recent announcement from the federal government that a tax will be levied on income trusts, according to a report from the Real Property Assocation of Canada (Realpac), a property investment advocacy group.

The announcement amounted to a re-definition of the Canadian REIT, effective 2011. A small number of Canadian REITs with active business components or significant foreign real estate holdings may have to make modifications to comply with the new rules. With a four-year transition until the rules come into effect, it is expected that Canadian REITs will have plenty of time to make the necessary structural and business modifications to bring themselves onside.

Finance's rationale for exempting REITs states, "This exception from the specified investment flow-through measures recognizes the unique history and role of collective real estate investment vehicles."

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REITs have existed in the United States since 1960 and Canada since 1994, and are a growing phenomena around the world. Recently the U.K. passed laws enabling U.K. REITs, and Germany is expected to follow shortly, bringing the world total to approximately 25 countries.

For more information visit www.realpac.ca.