Taxation on REIT Investment

REITReal Estate Investment Trust (REIT) is one of the most popular ways to invest in property as the dividend is rather stable and attractive. The most important reason why REIT investment is, the investor can access the fund invested in REIT rather quickly than conventional property investment as the units are traded in Bursa Malaysia.

However, bear in mind that, dividend received from REIT Investment is taxable.

For a REIT fund that distributed at least 90 percent of their total yearly income to unit holders, the REIT itself is exempted from tax for that year of assessment.

However, unit holders require to pay tax on the dividend income received from the REIT investment. As the income distributed by REITs tax exempt, no tax credit would be available to the unit holders.

If the tax exempt income received by REITs and subsequently distributed to unit holders, this dividend continues to be tax exempt to the unit holders.

REITs unit holders have to pay tax in the year of assessment the distribution is received not the financial year of the REITs.

Starting for the year 2009, tax rate for the dividend from REIT is as follows.

Entity Status Tax Type Tax Rate (%)
Company Resident Corporate Tax 25
Non-Resident Withholding Tax 25
Foreign Institutional Investor Withholding Tax 10
Individual Resident Withholding Tax 10
Non-Resident Withholding Tax 10

If a unit holder receives other incomes, and Income Tax Return Form (ITRF) has to be filed (e.g. Form BE, B or M), unit holder is not required to include REIT income in the ITRF form as the Withholding Tax is a final tax.

For more information kindly refer to Public Ruling on Taxation for REIT Investment.

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