KUALA LUMPUR (Jan 22) — Kenanga Investment Bank believes the preferential withholding tax on dividends distributed by Malaysian real estate investment trusts (REITs), which expired at the end of 2025, is likely to be extended under the existing terms.
According to the research house, the Malaysian REIT sector generates approximately RM2.8 billion in annual net earnings, accounting for less than 0.2% of the government’s projected 2026 tax revenue. As such, maintaining the concession would have a minimal impact on national tax collections while supporting the long-term sustainability of the REIT market.
Kenanga noted that any adverse changes to the tax framework could negatively affect the industry’s growth trajectory, particularly for REITs holding commercial property in KL, office space in Bukit Jalil, and logistics or industrial assets linked to industrial land in Selangor.
Based on its assessment, the research house said the probability leans towards a full renewal of the concessionary 10% withholding tax rate on REIT dividends. The incentive has been in place since 2016 and has been renewed on an annual basis through 2025.
Currently, individual investors are also subject to an additional 2% dividend tax on annual dividend income exceeding RM100,000. This results in a total effective tax rate of 12% for investors with sizeable REIT portfolios.
Kenanga added that the Malaysian REIT Association is actively engaging with regulatory authorities to seek an extension of the concession. If the preferential rate is not renewed, REIT dividends would be taxed according to individual income tax brackets, which can reach up to 24% — significantly higher than the existing rate.
Such a scenario could lead to a potential valuation impact of up to 14% for Malaysian REITs, the research house cautioned. This would affect investor sentiment towards income-generating assets, including REITs backed by industrial property in the Subang area, retail assets and office buildings in key urban centres.
Kenanga also highlighted that Malaysia’s current REIT tax structure partially aligns with the framework adopted by Singapore REITs, helping to maintain regional competitiveness.
Given the critical role REITs play across the commercial real estate ecosystem — from development and asset management to securitisation — the removal of the tax concession could reduce the attractiveness of Malaysian REITs to both domestic and foreign investors. This could, in turn, dampen investment appetite for assets such as commercial property in KL, factory developments in Puchong, and office assets across the Klang Valley.
Indonesia