Malaysia REIT managers push for withholding tax relief as 2027 Budget deadline looms

SINGAPORE, 22 SEPTEMBER 2026 —

AmFIRST REIT CEO Chong Hong Chuon has led a push by the Malaysian REIT Managers Association (MRMA) to reinstate a 10% withholding tax exemption on REIT dividends in Budget 2027, arguing the removal of the tax break has hurt investor confidence and put Malaysian REITs at a competitive disadvantage against Singapore and Hong Kong.

The MRMA’s proposal follows the government’s decision to scrap the preferential tax treatment this year, forcing unit holders—including individuals and foreign institutional investors—to pay progressive income tax rates of up to 30% or a flat 30% rate for non-residents, depending on their classification. Chong said the industry had submitted formal requests to the government, questioning whether the tax change would generate meaningful additional revenue.

“Some of us even challenge whether there’s additional revenue that can be collected from the removal of this (withholding tax break),” Chong told reporters after AmFIRST REIT’s annual general meeting on Monday.

The tax relief, which was in place from 2016 to 2025, had been a key incentive for foreign and retail investors. Without it, Malaysian REITs now face higher effective tax burdens compared to peers in Singapore and Hong Kong, where no withholding tax applies. Chong said the MRMA was also advocating for a higher statutory gearing limit—raising it from 50% to 60%—to give REITs more flexibility in acquisitions and expansion.

AmFIRST REIT’s deputy CEO, Zuhairy Md Isa, said the loss of the tax break had accelerated capital outflows to more competitive markets. “We lost out to Singapore, Hong Kong, and other REIT jurisdictions,” he said. “The only way to rejuvenate the industry is to make our REITs more attractive to investors.”

The push comes as Malaysia’s REIT sector grapples with rising costs, including the 8% sales and service tax (SST) introduced earlier this year, which has further squeezed margins. Chong said the MRMA was seeking a broader tax structure overhaul to support the sector’s growth.

AmFIRST REIT’s shares traded flat at 34 sen on Monday, valuing the REIT at RM233.4 million.

--- The tax relief’s removal: a shift in investor dynamics

The 10% withholding tax exemption had been a cornerstone of Malaysia’s REIT tax regime since 2016, designed to encourage retail and foreign participation. Under the old system, unit holders—whether individuals, non-resident institutions, or even resident companies—paid a flat 10% tax at source, simplifying compliance and reducing administrative burdens.

But with the exemption scrapped this year, the tax treatment now varies sharply by investor type. Resident individuals face progressive tax rates from 0% to 30%, while non-residents are hit with a flat 30% levy. The change has made Malaysian REITs less appealing to foreign investors, particularly those from jurisdictions with lower or no withholding taxes, such as Singapore and Hong Kong.

Zuhairy noted that the loss of the tax break had contributed to a slowdown in new investments. “Without the withholding tax, we’ve seen investors shift to more tax-efficient markets,” he said. “We need to restore that competitive edge.”

The MRMA’s push for reinstatement is not just about tax relief—it’s about reversing what industry players see as a structural disadvantage. Chong said the association had also proposed raising the gearing limit from 50% to 60%, arguing that higher leverage would allow REITs to pursue larger, higher-yielding assets.

--- Regional competition: why Singapore and Hong Kong REITs remain ahead

Malaysia’s REIT sector has long struggled to match the liquidity and investor appeal of its regional peers. Singapore’s REIT market, for instance, benefits from a zero withholding tax policy and a more established investor base, while Hong Kong’s REITs enjoy strong mainland Chinese capital inflows.

The removal of the withholding tax exemption has widened this gap. In Singapore, REIT dividends are taxed at the investor’s marginal rate, with no withholding at source. Hong Kong follows a similar model, with no dividend tax for foreign investors. This has made Malaysian REITs less attractive to global fund managers and high-net-worth individuals seeking tax-efficient yields.

Chong acknowledged that the tax change was part of a broader effort to align Malaysia’s REIT regime with global best practices. However, he argued that the current structure was counterproductive. “The government may have intended to simplify tax collection, but the result has been capital flight,” he said.

--- The gearing limit debate: more leverage for bigger deals?

The MRMA’s proposal to raise the gearing limit from 50% to 60% is part of a broader push to give REITs more financial flexibility. Under current rules, REITs are limited to 50% debt-to-asset ratios, restricting their ability to take on large acquisitions or development projects.

Zuhairy said the higher limit would allow REITs to pursue higher-yielding assets without diluting shareholder value. “A 60% gearing limit would give us more options for growth, especially in a market where yields are under pressure,” he said.

The proposal comes as Malaysia’s REIT sector faces stagnant growth. While the country’s REIT market has expanded to over RM100 billion in assets, it remains smaller than Singapore’s RM200 billion+ market. The gearing limit increase could help close that gap by enabling larger transactions.

However, the move is not without risks. Higher leverage increases financial vulnerability, particularly in a rising interest rate environment. Chong said the MRMA would push for stricter prudential safeguards if the limit were raised.

--- Investor reaction: mixed signals on tax relief

While the MRMA’s lobbying efforts have drawn support from industry players, retail and institutional investors remain divided on the tax relief’s impact. Some argue that the removal of the withholding tax was long overdue, as it had allowed investors to avoid higher marginal tax rates.

“Many investors were effectively paying less tax than they should have under the old system,” said one Kuala Lumpur-based fund manager, who requested anonymity. “The change brings more transparency, even if it means higher effective taxes for some.”

Others, however, warn that the tax hike could deter foreign capital. “Singapore and Hong Kong REITs are already more attractive,” said a Singapore-based asset manager overseeing Malaysian REITs. “If Malaysia doesn’t adjust, we’ll see more outflows.”

AmFIRST REIT’s performance reflects the broader market sentiment. While the REIT’s shares have held steady, its dividend yield—currently around 6.5%—has failed to attract significant new buyers compared to Singaporean peers, which offer similar yields with lower tax burdens.

--- The Budget 2027 deadline: will the government listen?

The MRMA’s push for tax relief and higher gearing limits now hinges on whether the government will act in Budget 2027. Finance Minister Tengku Zafrul Aziz has signaled a focus on fiscal consolidation, but industry players hope the REIT sector’s economic contributions will secure concessions.

Chong said the MRMA had submitted detailed proposals, including revenue impact assessments, to support its case. “We’ve shown that reinstating the withholding tax break won’t hurt government revenue—it may even boost it by attracting more investors,” he said.

If the tax relief is restored, analysts expect a rebound in foreign and retail investor interest. A reversal could also trigger a rally in Malaysian REIT stocks, particularly those with high international exposure.

However, if the government maintains the current tax structure, the sector may face further outflows to more investor-friendly markets. The coming months will be critical in determining whether Malaysia can reverse its REIT competitiveness gap—or cede ground to Singapore and Hong Kong for good.

Related: AmFIRST REIT