Malaysia lifts REIT withholding tax
Malaysia has scrapped withholding tax on REIT distributions for most unit holders starting in 2026 — a policy change that should boost net yields for international investors in Malaysian trusts. (reitsweek.com) That’s a material after‑tax yield change to factor into any EM REIT allocation. (reitsweek.com)
The Inland Revenue Board issued Practice Note No. 2/2026 on 18 March 2026 to clarify tax treatment of REIT/PTF distributions for Year of Assessment 2026 and subsequent years. (hasil.gov.my)) The Practice Note confirms the concessionary 10% final withholding tax that applied from YA2020–2025 will cease for unit‑holders other than resident companies from YA2026. (hasil.gov.my)) Resident unit‑holders must now include REIT distributions in taxable income — companies and other entities pay their normal tax rates and individual unitholders are taxed at prevailing personal rates — and the deduction of withholding tax under section 109D will not apply. (hasil.gov.my)) For non‑residents, the Practice Note keeps the long‑standing 24% final withholding tax on distributions to non‑resident companies, while foreign individuals and institutional investors will be assessed at 30% of chargeable income under the revised framework. (hasil.gov.my)) Market reaction was immediate: the Bursa Malaysia REIT Index fell 3.45% to 939.18 points on 19 March 2026, its lowest close since 26 December 2025. (pickastock.info)) Research houses and industry bodies flagged the shift: Maybank IB projects post‑tax net yields for M‑REITs could still average about 4.7%–6.0% and noted the REIT Index offered an average yield near 5.17% as of the announcement, while the Malaysian REIT Managers Association recorded the index drop and has previously described the withholding‑tax framework as an essential strategic instrument. (theedgemalaysia.com))
