Proposals to make Malaysian REITs more competitive

MORE tax transparency, attracting the best talents and a push for Government-linked companies (GLCs) to set up property trusts are among steps that the Government should consider to boost the industry.

Stewart LaBrooy, executive director of Axis REIT Managers Bhd, has called for the Government to remove the 15 per cent withholding tax for individual unitholders on the dividends received from a real estate investment trust (REIT).

This will make Malaysian REITs more competitive as compared to the sector in Singapore, he said.

“The current legislation, after the changes since the tabling of Budget 2007, has been detrimental to the smaller investors and we had a tough time from the moms and pops during our shareholders meeting this year,” LaBrooy told reporters after speaking at a forum on the developments of REIT in Kuala Lumpur yesterday. The forum was organised by rating agency Malaysian Rating Corp Bhd (MRCB).

The Government last year announced that REIT dividends received by an individual investor be taxed at 15 per cent, among other changes. Last year’s move was seen to benefit the bigger investors more and put the lower income group at the losing end as prior to that, individuals paid tax based on their respective tax rates.

Tax issues aside, the industry is also losing talents to other fast growing markets like Singapore, LaBrooy said.

Malaysia should deregulate this market to attract the best in the business, he said, suggesting the removal of equity restrictions in REIT management companies.

Currently, there is a 49 per cent restriction to foreign shareholders and a minimum 30 per cent Bumiputera shareholding in the set up of such firms.

“I think we should let the foreign boys in, even if that means the competition will intensify,” he said.

He also observed that so far, GLCs that are holding huge property portfolios are not being encouraged to sell the assets into a property trust, when it could be an ideal solution for them to unlock asset value, either for other investment needs or to reduce the company’s gearing.

Participation of the GLCs are key to rapidly developing the size of Malaysian trusts, he added.

It is also high time that the Government looks into ways that allow efficient cross border REIT transactions, LaBrooy said, adding that Malaysia ought to start creating tax treaties with Asean and Asian countries to allow cross border purchase of assets to happen.

He warned that Singapore, the closest competitor, already has tax treaties in place and is planning more to make the city state a hub for listing of REITs in Asia.