Real Estate Investment Trust (or REIT) is a tax designation for a real state company which distributes all or most of its income (90% +) in forms of dividends. REITs offer common shares to the public (and thus distribute some income to the public). REITs are exempt from corporate income taxation. They manage groups of income producing properties, as their primary business. They are of three types viz. equity, mortgage or hybrid.
The qualifications of becoming a "Real Estate Investment Trust" are:
1. REITs will have to be established as a corporation "REIT-AG".
2. 75% (or more) of its assets has to be invested in real-estate.
3. 75% (or more) of the REIT's gross revenues must be real-estate related.
4. 90% (or more) of the REIT's taxable income has to be distributed to its shareholders through dividends.
5. Shareholders will have to pay individual income tax on the dividends.
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