As mentioned in our blog post on Real Estate Investment Trust (REIT) in Malaysia, 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 individuals).
Given the reduced withholding tax rate of 10% is going to expire by 31 December 2011, this could be timely now to announce the tax position of REIT investors beyond 2011 by the Malaysian government in Budget 2011.
Otherwise it could risk foreign investors as well as local investors to withdraw from REITs investments in view of higher tax rates, compared to 0% tax rate for REITs in Singapore and Hong Kong.
The reduction or removal of withholding tax is always included in the proposal of Malaysia REIT Managers Association (MRMA) for the government consideration in the annual Budget.
In last year’s Budget 2010, the Real Property Gain Tax (RPGT) was reinstated, mainly to curb the heat of speculative buying in real properties. But no announcement on REIT industry was made.
It is hope that the reduced withholding tax of 10% will be extended, if not further reduced (compared to 0% withholding tax in Singapore and Hong Kong) in the upcoming Budget 2011, to give a broad tax direction and tax position to REIT investors beyond 2011.