Govt may rethink preferential withholding tax as REIT sector deemed ‘mature’

KUALA LUMPUR (Feb 5): The government is reviewing whether to renew the preferential withholding tax on dividends from real estate investment trusts (REITs), as the sector is now considered mature and commercially viable, said Finance Minister II Datuk Seri Amir Hamzah Azizan.

“If you look at the REIT business, Malaysia has capitalised the REIT sector quite well. It started about 21 years ago. If I’m not mistaken, last year the REIT market capitalisation was about RM57 billion. When we first started, it was less than RM1 billion. So I think the market is well addressed and accepted, and REITs are a viable enhancement to the capital market.

“The key question is whether the government should continue to provide this support. If the business is already mature and viable, then perhaps the government 'may need to reconsider' whether such support is still necessary,” the minister told reporters on the sidelines of the 2026 Malaysia Economic Forum on Thursday.

As it is, the government has yet to announce the renewal of the concessionary 10% withholding tax rate on REIT dividends, which has been in place from 2016 to 2025. The concession has also been renewed annually since then.

Individual investors are also subject to a separate 2% dividend tax on annual dividend income exceeding RM100,000, effectively bringing the total tax rate to 12% for those with sizable portfolios.

In a Jan 22 research note, Kenanga Investment Bank cautioned that if the concession is not renewed, dividends received by investors would be taxed according to their respective income tax brackets—generally higher than the current 10%, and potentially up to 24%. The research house estimates the potential negative impact on REIT valuations could be as much as 14%.

Potential upward revision to 2026 GDP forecast

On another development, Amir Hamzah said there is a possibility that Malaysia’s gross domestic product (GDP) forecast could be revised upwards, pending the release of the official fourth-quarter data by Bank Negara Malaysia (BNM) next week.

Advance estimates from the Department of Statistics Malaysia showed that the Malaysian economy expanded 5.7% year-on-year (y-o-y) in the fourth quarter of 2025. This compares with 5.2% y-o-y growth in the third quarter.

For 2026, the government is projecting GDP growth of between 4% and 5%. 

“So there is a likelihood that by the time Bank Negara reviews the GDP forecast again in April, inshallah (God willing), there will be a positive adjustment to the forecast.

“My focus, and Kerajaan Madani’s focus, is to execute what has already been outlined in the 13th Malaysia Plan and Budget 2026 to make sure that the underpinnings of the economy remain strong,” he added.

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