Real Estate Investment Trust (REIT) in Malaysia
- Taxation on REIT and Investors
REIT may consider as good as EPF on its tax exemption status, as
all the rental, interest and other investment income earned by
REIT are exempted from tax, provided that the REIT distributes at
least 90% of its total taxable income to its unitholders in a
particular year (note that property revaluation gain is not
considered as realised income even though it is reported in the
income statement, thus it is not taxable and not distributable).
Tax treatment of Unitholders:-
Where 90% or more of the REIT’s total taxable income is
distributed, dividends paid by REIT to its Unitholders will be
subject to a withholding tax as follows:-
- 10% withholding tax – all individuals and non-corporate investors such as institutional investors (regardless of whether they are tax resident or not)
- 25% withholding tax – non-resident company (incorporated body)
The withholding tax will be withheld by REIT before paying out
the dividends to unitholders. In other words, unitholders will be
receiving dividends, net of withholding tax.
The withholding tax is a final tax. Individuals and non-corporate
investors are not required to declare REIT dividend income in
their tax filing/returns. As such, you are not allowed to claim
tax refund or tax offset in your tax returns, as opposed to other
dividend income (provided you are receiving taxable dividend or
non single tier dividend from your share investments). However,
REIT dividends which attracts only 10% in the hand of
unitholders, which is more tax beneficiary to those higher income
earners whose tax brackets could be higher than 10%, up to a
maximum of 27%.
3. No withholding tax – tax-resident company investors. REIT dividend will be taxed in their tax computation. General company tax of 25% is applicable.
The reduced withholding tax of 10% on individual and non-corporate investors is only available up to 31 Dec 2011. REIT dividends received after 31 Dec 2011 will be taxed at original 20% for foreign institutional investors and 15% for non-corporate investors (including resident and non-resident inviduals). It is hope that the reduced withholding tax of 10% will be extended, if not further reduced (as in NIL withholding tax in Singapore) in coming Budget 2011.
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