Besides being tax exempted on the disposal of property to a REIT, a company disposing industrial building where initial annual allowances have been claimed to REIT will also not have any balancing charge.

S109D requires a REIT to deduct the necessary tax(26%) from the gross distribution and distributes the net amount to the non-resident company. The tax deducted has to be paid to the Inland Revenue within one month after distributing the net dividend. An account of the details of the recipient has to be accompanied with the remittance to the tax authorities.

Failure to deduct the tax and remitted to the Inland Revenu within one month  will result in:

• a penalty of 10% of the unpaid tax and
• both the tax deducted and the penalty are debts due to the Inland Revenue.
• note that prior to 2/9/2006, the penalty is imposed on gross distribution.

(a) Rental income from the letting of real property is a business source, hence any outgoings and expenses incurred in respect of the business are deductible. Note that any excess of expenses over income is not allowed to be set off in the current year or carried forward to next year of assessment which is a permanent loss[s63C(3)]

(b) Capital allowance

• can be offsetted against the adjusted income of rental but the excess of capital allowances in a year of assessment cannot be carried forward which will be permanently loss[s63c(4)]
• capital allowance is not restricted to the qualifying capital expenditure provided to derive rental income. It also includes any qualifying capital expenditure used in the business of REIT

REIT has as a distinctive feature since there is non-availability of setting off business loss or carrying forward business losses and capital allowances

With effect from Year Of Assessment 2006, legal , valuation and consultancy fees in connection with the establishing REIT prior to the approval by the securities commission shall be given tax deductin in the year of assessment where the REIT commences business.[Income Tax(Deduction for Establishment Expenditure of REIT or Property Trust Fund) Rules 2006, PU(A) 135/2006]. [Ps: the basis period for a Year of assessment for REIT will be the financial year end which may be 31 December or non 31 December

There have been much talks amongst Malaysian real estate investment trust (REIT) players pertaining to the possible relaxation by the Malaysian Government on REIT’s rules so as to boost the industry’s profile among foreign investors and accelerate its growth.

They viewed that the relaxation of certain REIT’s rules are crucial to the development of the Malaysian REITs due to:

• Malaysian properties are still relatively cheaper than our neighbours like Singapore, Hong Kong and China where there is upside potential in asset revaluation or further capital growth and
• That the Malaysian REITs also offer more attractive yields than the Singaporean counterparts, with some offering yields as high as 8% and 9%, compared with around 5% or 6% offered by Singapore REITs,

So what’s are some of their wish lists:

1.0 Firstly, they hope that the Malaysian government would review the withholding tax in the Budget 2009. Once the withholding tax is abolished or revised downwards (comparable to Singapore, the industry will improve further. (Neighbouring Singapore is frequently viewed as the more attractive destination for investment due to its lower withholding tax for foreign investors at 10% versus the 20% applicable to

2.0 Next, the hope that the government would  allow Malaysian REITs to invest in development projects. Incidentally in Malaysia, REITs are not permitted to invest in development projects but only in completed properties, which some players feel closes the door on opportunities to gain cheaper entries, thus maximising yields. It is understood that the Securities Commission may review this, however, there is still no official word.

3.0 Last but not least, the REIT players also welcome being allowed to manage their own REITs, currently not possible under the Valuers, Appraisers and Estate Agents Act 1981 that they are bound to. Under Section 21 of the Act, only registered valuers and appraisers are allowed to manage a property on behalf of the owner for a fee, a ruling which also applies to the management of REITs. The reasons being the REIT players believed firstly they themselves have the necessary expertise to run their own REITs and that they also believed that there is presently a scarcity of valuers with sector-specific experience related to REITs.

(Source: The Edgedaily.com 25/5/08)

UOA Asset Management Sdn Bhd, the manager of UOA Real Estate Investment Trust (UOA REIT), has received an offer from UOA Holdings Sdn Bhd for the sale of freehold land with a five-storey building with two mezzanine floors and three basement parking levels which is located along Jalan Pantai Jaya in front of Menara TM  to UOA REIT for RM86 million cash.

More details from UOA Reit Manager:

• The property is known as Wisma UOA Pantai, on the land measuring 3,883 sq m.
• The property would be undertaken by UOA Holdings’ subsidiary, Magna Tiara Development Sdn Bhd.
• The offer followed the rights of first refusal granted by UOA Holdings to UOA REIT to acquire suitable properties from the group.
• Wisma UOA Pantai which was completed in the second quarter of this year, has about 157,481 sq ft of lettable areas with 272 car park bays, and had been issued a certificate of fitness for occupation on July 9, 2007.
• The acquisition price of the property was based on a willing-buyer willing-seller basis after taking into consideration the market value of RM93.1 million, as appraised by an independent registered valuer in Sept 2007.
• Further details of the proposed acquisition would be announced at a later date upon the execution of the sale and purchase agreement.

SP Setia Bhd Group chief executive officer Tan Sri Liew Kee Sin was named the new Property Man of the Year in the 15th FIABCI Malaysia Property Award held at One World Hotel yesterday. 

The event was graced by the Sultan of Selangor, Sultan Sharafuddin Idris Shah.  

A total of nine awards were given out at the annual event dubbed the “Oscars” of the property industry. 

The other awards and winners were:

• MASTER Plan Category – Sentul West and Sentul East Master Plan by YTL Land and Development Bhd; 
• RESIDENTIAL Development (high rise) – Stonor Park by Beneton Properties Sdn Bhd;
• RESIDENTIAL Development (low rise) – Pinggiran Bayou by Leisure Farm Corp Sdn Bhd; 
• RESORT Development – Genting Highlands Resort by Resorts World Bhd; 
• RETAIL Development – KB Mall by YS Tang Holdings Sdn Bhd; 
• SPECIALISED Project – Sultan Abdul Aziz Royal Gallery by Laurent Lim Architect; 
• SPECIALISED Project – Persada Johor International Convention Centre by Persada Johor International Convention Centre; and 
• SPECIAL Award for National Contribution – The Kuala Lumpur Performing Arts Centre by YTL Corp Bhd. 
• Resorts World bagged the Best Resort award. 

(The Star Malaysia 28/10/07)