Introduction
Malaysia REIT taxation determines how rental and investment income from Real Estate Investment Trusts (REITs) or Property Trust Funds (PTFs) are assessed under the Income Tax Act 1967 (ITA). Approved REITs/PTFs — whether listed or unlisted — enjoy specific tax treatments when authorized by the Securities Commission Malaysia (SC).
Basis of Assessment
The basis period for a REIT/PTF is aligned with Section 21A ITA, based on the financial accounting period. All subsections apply except Section 21A(5).
Rental Income – Special Tax Treatment
Under Section 63C(2) ITA, rental income is treated as business income, subject to restrictions:
| Category | Treatment |
| Deductible Expenses | Only expenses related to property letting are deductible. Excess cannot be offset against other income or carried forward. |
| Commencement of Source | No deduction allowed until property produces rental income. Pre-commencement expenses are disallowed. |
Restriction on Capital Allowance (CA)
CA is allowed under Schedule 3 ITA, but:
- Restricted to adjusted income from letting property.
- Unabsorbed CA cannot be carried forward.
Rental Income – Normal Tax Treatment
| Expense Type | Tax Treatment |
| Management Fees | Deductible under s.33(1) if paid to management company. |
| Trustee Fees | Not deductible under s.33(1). |
| Establishment Expenditure | Deductible in the YA business commenced (legal, valuation, consultancy fees before SC approval). |
Capital Allowance & Balancing Charge
- CA and Balancing Allowance (BA) limited to adjusted income of the year.
- Unabsorbed CA/BA cannot be carried forward.
- If disposal value > residual expenditure → Balancing Charge arises, but limited to total CA allowed.
Industrial Building Allowance (IBA)
| Item | Treatment |
| Eligibility | Only if tenant uses the building as an industrial building. |
| Restriction | IBA limited to adjusted income; unabsorbed IBA cannot carry forward. |
| Ownership Condition | REIT/PTF must own and operate the business to qualify. |
| Controlled Transfer | Under Para 38A Sch. 3, transfer from related company treated at residual value — no balancing charge. |
Other Income Tax Treatment
| Type | Tax Treatment |
| Dividend Income | Exempt income excluded from total income. Related expenses not deductible. |
| Interest Income | Exempt under Schedule 6 ITA if from:
– Government bonds or securities – Approved sukuk – Bank deposits (FSA/IFSA 2013) – Bon Simpanan Malaysia – Danaharta securities – Foreign-sourced interest remitted to Malaysia. |
Key Takeaways
- Rental income = Business source under Malaysia REIT taxation.
- Deductible expenses limited to rental income.
- Capital Allowance & IBA restricted to adjusted income — no carry forward.
- Exempt income (dividend/interest) not taxable under Schedule 6 ITA.
ANC Group – Your Personal Tax Advisor
Tax consulting is the core service of ANC Group. Our tax professionals provide clients with comprehensive tax support and guidance. We offer tax consulting and compliance services for expatriates, entrepreneurs, and listed and non-listed companies.
Our tax consulting services include business tax, transaction tax, personal tax, and corporate income tax. We don’t just guide you in interpreting and applying complicated taxation rules, but to explore new opportunities and business trends.
ANC Group keep you abreast with Malaysia tax updates and any changes in the local regulations.
We work closely with industry specialists, authorities, and associated professionals within ANC Group to provide the best-in-class integrated tax planning solutions. ANC specialists coordinate the accounting and taxation services to bring your business to success.
If you need professional tax advisory services regarding the Malaysia Income Tax Act 1967, our team is ready to assist you. Contact us here to discuss how we can support your business.
