8th October 2026 - 4 min read
The tax on REIT distributions changed in YA 2026. The old flat 10% tax is gone. You now declare your payout yourself and pay tax on it at your own rate, so some investors pay less than before and others pay more.
A REIT (real estate investment trust) is a trust listed on Bursa Malaysia that owns and rents out property like shopping malls, offices, warehouses and hospitals. It passes most of the rent back to unit holders as payouts called distributions, and you get a share of that rent without ever having to find a tenant or fix a leaking pipe.
A REIT that pays out at least 90% of its income pays no tax on that income itself, so the tax passes to you instead.
Up to and including the 2025 year of assessment, distributions to individual unit holders had a flat 10% withholding tax, deducted before the money reached you. That was the final tax on it, so you had nothing to declare.
That ended on 31 December 2025, when the 10% expired. Under LHDN’s Practice Note 2/2026, if you’re a Malaysian tax resident, your payout is now added to the rest of your income for the year. You’re taxed on the total at the normal rates, from 0% to 30%. Nothing is taken off up front, so you get the full amount and settle the tax when you file.
There’s also a separate 2% tax on dividend income above RM100,000, in place since YA 2025. Because REIT distributions are trust payouts rather than company dividends, this 2% doesn’t apply to them.
Say your REIT distributions add up to RM2,000 for the year. Under the old rule, a flat 10% took RM200.
Under the new rule, what you pay depends on your tax band. In the 6% band the RM2,000 costs you RM120, in the 11% band RM220, and in the 25% band RM500. The turning point is RM50,000 of chargeable income, where your rate rises from 6% to 11%. Below that you pay less than the old 10%, above it you pay more. You can check your band in our personal income tax guide.
Keep the distribution notice the REIT sends through Bursa Depository, along with your broker’s statement showing the payout arriving in your account. On your return, the payout goes under statutory income from other gains or profits on Form BE or B, not the dividend line. A payout received in 2026 goes in your YA 2026 return, due by 30 April 2027 on Form BE, or 30 June 2027 on Form B.
LHDN’s own worked example shows what this looks like for a higher earner.
Employment Income: RM130,000
REIT Distributions: + RM120,000
Total Income: RM250,000
Less Reliefs: − RM19,000
Chargeable Income: RM231,000
Tax Payable: RM42,150
The example assumes RM130,000 of salary and RM19,000 of reliefs. On that RM120,000 payout, the old 10% would have taken RM12,000. Under the new rule, the payout sits on top of the salary, so it’s all taxed in the 25% band and adds RM30,000 to the bill.
If you hold your listed REIT units as an investment and sell them for more than you paid, that gain isn’t subject to capital gains tax. Buy units for RM5,000, sell them for RM6,000, and the RM1,000 profit is yours to keep.
The capital gains tax introduced in 2024 covers the disposal of shares in unlisted companies, and it applies to companies, limited liability partnerships, trust bodies and co-operatives, not to individuals selling listed units.
Real property gains tax (RPGT), the tax you’d pay when selling a house or land, doesn’t apply to your units either. A REIT owns buildings, but you’re selling units in the trust, not the property underneath.
If you’re not a Malaysian tax resident, nothing is taken off up front here either. You report the payout in your own return and are taxed at 30% of your chargeable income, with none of the reliefs a resident gets. In LHDN’s Practice Note 2/2026 example, a non-resident’s RM150,000 payout is their entire chargeable income, so the 30% works out to RM45,000.
If you buy and sell REIT units often enough that LHDN treats it as a business, your gains are taxed as business income instead, the same as anyone who trades shares for a living. If you’re holding for the income and the long-term gain, this won’t affect you.
If your situation is more involved, or the payouts are large enough that a few percentage points matter, a licensed tax adviser can work through the specifics with you.
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Pugaleshwaran Raja Kumaran is a Tax Executive Director at ThinkTX Consultants, with over a decade of experience delivering strategic and practical tax solutions. He advises high-net-worth individuals, multinational corporations, and growing businesses, helping them manage complex tax matters with clarity and confidence.
He has extensive experience across a broad range of tax engagements, including corporate tax compliance, Capital Gains Tax (CGT), withholding tax, stamp duty, Real Property Gains Tax (RPGT), Sales and Service Tax (SST), and advisory on inbound and outbound investments. He also leads practice areas covering tax incentives, tax audits and investigations, private client advisory, tax due diligence, and e-Invoicing advisory, providing comprehensive support across the business life cycle.
Beyond client advisory, Pugaleshwaran actively contributes to the tax profession through writing and speaking on Malaysian tax policy, regulatory developments, and industry best practices. His work has been published by the International Bureau of Fiscal Documentation (IBFD) and Wolters Kluwer (CCH), including contributions to Malaysia’s Sales and Service Tax (SST) content updates.
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As a trusted tax partner of RinggitPlus, Pugaleshwaran reviews and verifies Malaysian taxation content to ensure it is accurate, compliant, and relevant for everyday Malaysians.
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