Real estate investment trusts will benefit from changes the federal government wants to make to its controversial legislation to tax income trusts.

After markets closed Thursday, Finance Minister Jim Flaherty announced proposed technical amendments that will remove limits on how much foreign property REITs can hold.

The government says the changes will allow REITs to better compete internationally.

“Among the proposed amendments is the removal of the distinction between Canadian and foreign real and immovable properties in determining whether a trust is a real estate investment trust (REIT),” the government said in a release.

Flaherty unveiled plans in October 2006 to impose taxes on income trusts starting in 2011, known as the Tax Fairness Plan, to bring them in line with corporations. The rules included special provisions to allow real-estate income trusts to maintain their tax-free status if they meet certain criteria.

The REIT had to receive 75% of its income from properties in Canada. As well, 75% of its properties had to be in the country.

“The definition ‘real estate investment trust’ will be amended to remove the distinction between Canadian and foreign properties,” the statement said. “The 75 per cent value and 75 per cent revenue tests . . . will continue to apply, but the geographic location of the real or immovable property will not be relevant.”

The government said it will present legislation early next year to make the change.

“Today’s announcement will further clarify specific aspects of our Tax Fairness Plan and ensure the rules are applied properly,” Flaherty said in a news release. “These technical changes take into account constructive comments received from the public, helping to ensure that only the structures targeted by the Plan will be subject to the SIFT (specified flow-through entities) regime.”