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Real Estate Investment Trusts for Sale Transactions


In order to facilitate purchase and sale transactions for the Promoter of a Real Estate Project, as well as for its potential buyers, Ipal Trust has structured a Trust that gives the Promoter security and tranquility in giving the Promissory Buyer the use and early enjoyment of the real estate unit (real estate) that he has promised to buy, while the terms and conditions of the Promise of Sale Agreement are met. The above prevents the Promoter from having to resort to signing additional agreements to fulfill this purpose, which do not conform to the agreed transaction that consists of the sale of the real estate, which generates additional obligations as a consequence of the regulations that govern those other agreements (such as Leasing Contracts).


Object


To maintain the fiduciary property of the real estate unit (real estate) object of the Promise of Sale Agreement signed between the Promoter and the Promissory Buyer, in accordance with the following:

  • The Promoter transfers the real estate unit object of the Promise of Sale Agreement to the Trust Estate in order to guarantee the payment of the balance of the sale price of said unit by the Promissory Buyer;

  • The Trust, by instructions of the Promoter and the Settlor, grants the Promissory Buyer, the disposition, use and enjoyment of the real estate unit;

  • The Promoter becomes the Principal Beneficiary of the Trust Estate, that is, of the real estate unit, until it is canceled by the Promissory Buyer;

  • The Promissory Buyer becomes the Secondary Beneficiary of the Trust Estate, that is, of the real estate unit, which Ipal Trust, on behalf of the Trust, would transfer to the Promissing Buyer's name once it is canceled to the Promoter.

Parties to the Trust


Trust Company: Ipal Trust Corp.

Settlor: The Promoter


Beneficiaries:

i. Principal: The Promoter

ii.Secondary: The Promissory Buyer


The Trust guarantees:


(i) in first instance, the payment of the balance of the real estate unite sale price by the Promissory Buyer to the Promoter, and;

(ii) in second instance, the delivery of the real estate unit in favor of the Promissory Buyer, once the obligations with the Promoter have been fulfilled and as a consequence, the disaffection and transfer of the unit on its behalf.


Tax Treatment


  • The transfer of the real estate unit (real estate) to the Trust Estate does not cause tax.

  • On the other hand, since the Settlor is a real estate development company, the following exemptions are maintained with respect to the first operations for the sale of new homes:

(i) If the sale occurs within the first five (5) years after the issuance of the occupancy permit if the construction permit was issued between July 1, 2016 and July 1, 2019 or, whose occupancy permit was issued before July 1, 2022 [Law No. 94 of September 20, 2019];

(ii) When carried out within two (2) years from the issuance of the occupancy permit [Law No. 33 of June 30, 2010].


Depending on the date of issuance of the occupancy permit, one exemption or the other would correspond.

  • Regarding the gain from the sale of real estate, within the ordinary course of business of the Promoter, the rates applicable to income tax are also maintained, which is calculated by applying the following progressive rates on the total value of the sale or the cadastral value, whichever is greater, on the first sale of the home or business premises as follows:






** Applies in cases where the land has been revalued within the two (2) years prior to the sale date; it only applies to construction permits issued as of January 1, 2011.

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