Often overlooked, the tax advantages of REITs are quite compelling. Whether public or private, the tax efficiency of a REIT is much more attractive than that of any stock-issuing corporations. The latter is subject to tax on income before distribution, whereas a REIT is not. This translates to higher potential profits for REIT unitholders.

This favourable tax treament is available to all unitholders, regardless of investment size or marginal tax rate. The Canada Revenue Agency treats such as investment as similar to owning the property outright. This is why the government uses term “flow-through entities”. This means that unitholders reap the income benefits and tax deductions that traditional real estate investors would receive, but without the liability and management issues.

In other words, unitholders of REITs will collect significantly more income through tax efficiency.