If a (Real Estate Investment Trusts) fund distributed at least 90 percent of their total yearly income to unit holders, the REIT itself is exempted from tax for that year of assessment.
However, unit holders are liable to tax on the distribution of income. Since the income distributed by REITs are tax exempt, no tax credit under subsection 110(9A) of the Income Tax Act (ITA) 1967 would be available to the unit holders.
On the other hand, tax exempt income received by REITs and subsequently distributed to unit holders continue to be tax exempt in the hands of these unit holders.
REITs unit holders are taxed in the year of assessment the distribution is received not the financial year of the REITs.
Starting for the year 2009, tax for REIT dividend is as follows.
| Entity | Status | Tax Type | Tax Rate (%) |
|---|---|---|---|
| Company | Resident | Corporate Tax | 25 |
| Non-Resident | Withholding Tax | 25 | |
| Foreign Institutional Investor | Withholding Tax | 10 | |
| Individual | Resident | Withholding Tax | 10 |
| Non-Resident | Withholding Tax | 10 |
If a unit holder has income from sources other than REITs, an Income Tax Return Form (ITRF) has to be filed (e.g. Form BE, B or M for individuals or Form C for companies), income from REITs is not required to be included in the ITRF form as the Withholding Tax is a final tax.
