Introduction
Malaysia REIT unit holder taxation governs how investors are taxed on income distributions from Real Estate Investment Trusts (REITs) or Property Trust Funds (PTFs). Under the Income Tax Act 1967 (ITA), unit holders are assessed based on when they receive the distribution, the source of income, and whether it has already been taxed at the REIT/PTF level.
Taxation at the Unit Holder’s Level
Unit holders are taxed in the Year of Assessment (YA) when income distributions from a REIT/PTF are received, not when earned.
If the REIT/PTF is exempt from income tax under Section 61A ITA, the exemption does not pass to the unit holders — they are still taxed in the YA they receive the income.
💡 Example:
Smart REIT earned income from 1 Jan 2022 to 31 Dec 2022 and distributed it on 31 Jan 2023.
ABC Sdn Bhd (which closes its accounts on 31 December) must declare the REIT income in YA 2023, as that’s when the income was received.
Taxation of Accumulated Undistributed Income
When a REIT/PTF distributes accumulated undistributed income — such as earnings from previous years — unit holders are taxed in the YA they receive it.
If that income had been taxed at the REIT/PTF level, unit holders are entitled to a tax credit under Section 110(9A) ITA, which can be used to offset their own tax payable.
Nature of Distributions Received by Unit Holders
The tax treatment depends on the type of income distributed by the REIT/PTF.
| Type of Distribution | Tax Treatment |
| Tax-exempt income (REIT listed on Bursa Malaysia) | If ≥90% of income is distributed, the REIT is tax-exempt under s.61A. Unit holders are still taxed, but no tax credit is available. The tax is final. |
| Income taxed at REIT/PTF level | Taxable to unit holders. However, tax credits are provided to offset their tax, per s.110(9A). |
| Tax-exempt income received by REIT/PTF | Income such as single-tier dividends or exempt interest remains tax-exempt when distributed to unit holders. |
| Income received by tax-exempt unit holders | Under s.127(5), if a unit holder is tax-exempt under Schedule 6 or s.127(3A), and withholding tax (WHT) was deducted under s.109D, the unit holder is entitled to a tax refund (s.111 ITA). |
Withholding Tax (WHT) Rates on REIT Income
| Chargeable Person | WHT Rate |
| Non-Resident Company | 24% |
| Foreign Institutional Investor | 10% |
| Individual & Others | 10% |
Key Takeaways
- REIT/PTF income is taxed at the unit holder’s level upon receipt.
- Tax-exempt income at the REIT level may still be taxable to unit holders.
- Tax credits apply when income was taxed at the REIT/PTF level.
- Withholding tax applies to non-resident and foreign investors.
- Certain tax-exempt entities can claim refunds under Section 111 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.
