Kenanga Research has a “neutral” call on Malaysian REITs.
PETALING JAYA: The government is likely to renew the 10% withholding tax rate on real estate investment trust (REIT) dividends despite there not being an announcement as yet on the matter, Kenanga Research says.
The brokerage, which has a “neutral” call on Malaysian REITs, said their total annual estimated net earnings of RM2.8bil implies that the increase in tax revenue from the non-renewal would be immaterial, as it represented less than 0.2% of the government’s estimated total tax revenue for 2026.
It noted that the withholding tax was in place from 2016 to 2025, expiring last month.
“Historically, the concession has also been renewed numerous times,” it said, adding that Malaysian REITs’ attraction for investors would be less should the withholding tax be withdrawn.
The withholding tax mirrors the regulatory structure of Singaporean REITs.
It pointed out that the REIT model plays a pivotal role in the commercial real estate value chain, from developments, asset operations to asset securitisations.
It warned that non-renewal of the withholding tax would have up to a 14% negative impact on Malaysian REITs’ valuation, with retirees possibly emerging as beneficiaries since a number of them would be in the lower tax bracket of below 10%.
It pointed out that investors with annual dividend income exceeding RM100,000 could potentially pay up to 12% in annual tax on dividends.
This is since they would also have to pay a 2% tax on these dividends.
It said that the upside for Malaysian REITs appeared to be adequately priced in by the market following Bank Negara Malaysia’s 25-basis point cut last July. “This is also reflective by the 10% rally in the KL REIT index since March 2025.”
Kenanga Research recently initiated coverage on AME-REIT, which focuses on industrial assets, with a “market perform” recommendation and a target price of RM1.68.
