PETALING JAYA: KIP Real Estate Investment Trust (KIP REIT) is calling for the reinstatement of the 10% withholding tax mechanism for REIT distributions in Budget 2027, saying a predictable tax framework would support the attractiveness of the asset class.
KIP REIT CEO Valerie Ong Pui Shan said the restoration of the 10% withholding tax mechanism was the trust’s main Budget 2027 request, alongside measures that would avoid putting additional pressure on consumer spending.
“From the REIT standpoint, it’s quite straightforward. The withholding tax is really what we want,” she told reporters at the unveiling of KIPMall Setapak today.
The 10% preferential withholding tax for certain REIT unitholders expired at the end of the 2025 year of assessment (YA). Under the tax treatment applicable from YA2026, most categories of investors other than resident companies are required to include REIT distributions in their tax returns and are subject to tax at prevailing rates, while non-resident companies remain subject to a 24% withholding tax.
The Malaysian REIT Managers Association (MRMA) has also called for the 10% withholding tax mechanism to be restored ahead of Budget 2027, saying a higher tax burden could affect the attractiveness of Malaysian REITs. MRMA has additionally proposed that the statutory gearing limit for REITs be raised from 50% to 60%.
Ong said KIP REIT believed the 10% rate would remain competitive for investors given the yields available from the sector.
“From the yield standpoint, the margin is there at 7% to 8%-plus. Even net the 10% withholding tax, it is still very favourable compared to the other options available in the market,” she said.
Ong added the retail industry would also be watching developments involving the Sales and Service Tax (SST) and e-invoicing.
However, she said there was only so much the industry could ask from the government and that the retail ecosystem ultimately depended on landlords and retailers responding to changing shopper behaviour.
“The retail ecosystem has to be created by us. How do you bring the footfall in, how do you do the tenant mix?” she said.
