Malaysia’s real estate investment trust (M-REIT) sector faces a key policy overhang as the longstanding 10% withholding tax (WHT) concession on REIT distributions is set to expire on 31 December 2025, with no confirmation yet on an extension.
According to Maybank Investment Bank Research, the concession—introduced in YA 2016 and repeatedly extended since—remains unaddressed in the latest Finance Bill, leaving investors uncertain ahead of 2026.
What happens if the concession lapses?
Under current rules (YA 2016–2025), REIT distributions are taxed as follows:
Investor Type WHT Rate Resident corporate 0% (taxed at 24% at investor level) Resident non-corporate (individuals, institutions) 10% Non-resident corporate 24% Non-resident non-corporate 10%
If the 10% concession is not renewed, affected investors—particularly individuals and foreign funds—would revert to their marginal income tax rates, which could significantly reduce post-tax yields.
Maybank IB estimates that post-tax yields may fall by 50–100 basis points, eroding the M-REIT market’s competitiveness and potentially dampening demand from yield-focused retail and institutional investors.
Foreign investors may reassess Malaysia exposure
For offshore investors, the loss of the flat 10% rate would be “notably detrimental,” as Malaysia’s REIT tax regime would become less favourable compared to regional markets such as Singapore and Thailand. This could result in capital outflows or reduced participation from global REIT funds.
Market awaits clarity from MOF
Despite the uncertainty, Maybank IB’s base case assumes the concession will likely be renewed for YA 2026, noting Malaysia’s consistent history of rolling forward the preferential tax rate.
However, the research house emphasises that clear guidance before year-end is crucial for tax planning, given M-REITs’ attractive average gross dividend yield of 5.7%.
The Malaysian REIT Managers Association (MRMA) is expected to raise the issue with the Ministry of Finance (MOF), seeking clarity and urging for continuation of the concession to preserve sector competitiveness.
Sector impact: manageable but meaningful
While fundamentals for M-REITs remain broadly stable, tax treatment directly affects investor returns. Analysts warn that prolonged uncertainty could weigh on sentiment and share prices in the near term.
For now, market participants are watching closely for policy confirmation as the year-end deadline approaches.
