NAIROBI: The Capital Markets Authority is hopeful its proposal to have issuers of Real Estate Investment Trusts and Asset Backed Securities exempted from taxation will be approved in the forthcoming budget.
The authority has asked the National Treasury to cushion fund managers, pension funds, insurance funds – among other trustees – from value added tax, capital gains and stamp duty when issuing REITS and ABS as it seeks to encourage their rollout.
Regulations for ABS which allows investors to borrow money using the projected revenue generation capacity of projects to be funded, were enforced in 2007 while those for REIT schemes which enable investors to pool funds for property development were approved in 2012.
“There are significant assets that need to be transferred from the trustees for the purpose of issuing those instruments which has no commercial value,” CMA chief executive Paul Muthaura said of the proposals to be considered in the Finance Bill for the year 2015/16.
“The proposals will ensure that funds will only be taxed in the hands of the ultimate beneficiaries.”Senior advisor for financial sector at the Treasury Nzomo Mutuku, said the proposals “were still undergoing the budget process” and that a decision will be taken by the due course.
Muthaura said 34 per cent of the recommendations in the 10-year Capital Markets Master Plan to 2023 that seeks to position Nairobi as a financial gateway into Africa have either been implemented or have substantially progressed.
The authority expects to roll out Exchange Traded Funds in September while two credit-linked notes, that make it possible to convert debt into equity, have been issued including Centum’s Sh6 billion on May 18.
The authority is further closing in on introduction of over the counter corporate bond market and licensing of primary bond dealers to act as gents for government to deepen fixed securities market.
A provisional licence for futures and derivatives was issued to Nairobi Securities Exchange in December subject to tightening its corporate governance rules and drafting trading rules.
