10% tax on REIT dividends extended 5 years

The Government has extended the concessionary tax rate of 10% on dividends of non-corporate institutional and individual investors in real estate investment trusts (REITS).

The incentive, which expires on Dec 31, will be extended for five years, starting from Jan 1 next year to Dec 31, 2016.

“We are very happy with the extension as there was a lack of clarity on what would happen after the expiry,'' said Malaysian REIT Managers Association (MRMA) and Axis-REIT Managers Bhd CEO Stewart LaBrooy.

“Earlier, there were concerns as no announcements were made while the date of expiry was drawing close. Now that it has been extended, we can go back to business as usual.”

Mah Sing Group Bhd managing director Tan Sri Leong Hoy Kum said this would promote domestic participation and attract foreign investors.

Labrooy added that the REIT industry had developed very well over the last few years. The upcoming REIT to watch out is that of Pavilion Kuala Lumpur which should add further liquidity to the market.

Pavilion Kuala Lumpur is slated to be Malaysia's largest initial public offering for a REIT. It is likely to be valued at a yield of 7%. Details are still sketchy at this point, but sources said its assets could be worth between RM4bil and RM5bil.

Meanwhile, individual and institutional investors in Singapore and Hong Kong do not pay withholding tax on their REIT investments.

Both local and foreign retail as well as institutional investors in Malaysia now have to pay a 10% withholding tax, which had already been reduced from the 25% tax rate previously.

The withholding tax rate in Malaysia has not been adjusted since 2008.

By The Star