Preferential withholding tax on REIT dividends likely to be renewed, says Kenanga

KUALA LUMPUR (Jan 22): A preferential withholding tax on dividends from real estate investment trusts (REITs), which expired at the end of 2025, is likely to be renewed with existing terms, said Kenanga Investment Bank.

The Malaysian REIT industry’s annual net earnings of about RM2.8 billion represent less than 0.2% of the government’s 2026 estimated total tax revenues, providing an immaterial increment, the research house said. Any changes could also hinder long-term growth of the industry, Kenanga noted.

“In our assessment, we opine that the likelihood leans towards full-renewal,” the research house said.

The government has yet to announce renewal of the concessionary 10% withholding tax rate on REIT dividends, which has been in place from 2016 to 2025. The concession has also been renewed annually since then.

Investors are still obliged to pay a separate dividend tax of 2% on annual dividend income exceeding RM100,000 for individual shareholders, making investors with sizeable portfolios pay 12% in annual tax on dividends.

“We understand that the Malaysian REIT Association is currently in the midst of engaging with the relevant regulatory authorities to negotiate a continuation of the concession,” Kenanga said.

If the concession lapses, dividends received by investors will be subject to their respective tax brackets which are generally higher than 10%, and up to 24%, the research house said, cautioning that the potential negative impact to REITs’ valuation could be up to 14%.

Further, the existing concession partially mirrors the regulatory structure of Singapore REITs.

Given REITs’ crucial role in the commercial real estate value chain, from developments, asset operations to asset securitisations, “a removal of the concession would reduce the attractiveness” of Malaysian REITs for both local and foreign investors, the research house warned.

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