Malaysia: Tax treatment of income distributions from unit holders of REITs and property trust funds
The practice note also confirms continued REIT-level tax exemption when at least 90% of the total income is distributed.
The Inland Revenue Board of Malaysia in March 2026 issued Practice Note No.2/2026 explaining the tax treatment of income distributions to unit holders of real estate investment trusts (REITs) and property trust funds (PTFs), effective from the year of assessment (YA) 2026. The guidance reflects the expiry of preferential withholding tax treatment previously available under Schedule 1 of the Income Tax Act 1967.
Most REIT and PTF distributions are no longer subject to final withholding tax for resident individuals and resident entities and must instead be reported in the recipients’ income tax returns and taxed at prevailing rates, while nonresident companies remain subject to a 24% final withholding tax.
The practice note also confirms continued REIT-level tax exemption when at least 90% of the total income is distributed under section 61A of the Act.
For more information, contact a KPMG tax professional in Malaysia:
Lianseng Soh | lsoh@kpmg.com.my