This article first appeared in The Edge Malaysia Weekly on February 9, 2026 - February 15, 2026

The government has yet to make its decision on the preferential withholding tax on dividends from real estate investment trusts (REITs) more than a month after its expiry. The 10% tax concession, which had been in place since 2016, expired last year.

According to Minister of Finance II Datuk Seri Amir Hamzah Azizan, the government is still reviewing the matter, noting that the REIT sector has expanded substantially in the past two decades. As at last Friday, the total market capitalisation of the REIT sector stood at nearly RM63 billion, compared with less than RM1 billion when the sector was introduced in 2005.

While the minister hinted at the possibility of the tax concession not being renewed, a timely decision is needed. Prolonged uncertainty could weigh on investor sentiment, particularly among institutional investors that are highly sensitive to policy clarity when making investment decisions. Kenanga Research has estimated that the potential negative impact on REIT valuations could be as much as 14%.

For individual investors, dividend income exceeding RM100,000 annually is already subject to a 2% tax. If the concession is not renewed, the total effective tax rate could rise to 12% for investors with larger REIT portfolios.

Having said that, distribution income remains a key attraction of the REIT sector, which currently offers an average distribution yield of 4.57%, with some REITs delivering yields of above 6%. As one of the best performing sectors on Bursa Malaysia last year, the REIT Index is up 13.7% over the past year.

With the REIT sector growing exponentially over the years, as highlighted by the minister, the impact of the withholding tax appears manageable as REIT unit prices have held up well, supported by a slew of catalysts, including the Visit Malaysia 2026 campaign.

Ultimately, investors are looking for clarity and the removal of this overhang.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.