as far as i know, starting from 1st Jan 09, our tax will be only 10%, correct boh?

By Jennifer Chang, Senior Executive Director
Enhancement of tax transparency system

The tax transparency system for REITs was introduced with effect from year of assessment 2006. Under the system, where a REIT distributes income to investors, the REIT need not pay income tax on its taxable income; instead investors will pay the tax on their portion of taxable income received from the REIT, depending on their own marginal rates of tax. This system ensures that investors bear the tax on investment income from REITs. Any undistributed income will continue to be taxed at REIT level.The tax transparency system has been further enhanced in Budget 2007. Where the REITs distribute at least 90% of income to investors, the REITs will be fully exempted. This has two main benefits. Firstly, it encourages REITs to distribute income to investors thereby ensuring higher yields to investors; and secondly, the REITs that distribute 90% or more income need not monitor whether income has been taxed or not, thereby reducing administrative burden.

What is interesting to note is that if a REIT does not distribute at least 90% of its income to investors, the tax transparency system will not apply to the REIT. This will obviously encourage REIT managers to distribute at least 90% of income to investors, thus providing investors more certainty of the yields from their investments in REITs.

Such enhancement to tax transparency is indeed welcome as it is globally in line with the tax system of REITs in most foreign jurisdictions.

Reduction of investors’ tax

The next tax initiative in this area is the reduction of tax on REIT investors. Due to the tax transparency system, investors are taxed based on their own marginal tax brackets. This would mean that distributions received by a high net worth individual would be taxed at a higher tax rate compared with those of a retired individual, while a foreign investor is taxed through a 28% withholding tax mechanism.

Budget 2007 provides tax incentives to entice specific investors to the Malaysian REIT market through the reduction of tax on the investors. It has proposed that distribution received by individuals be subject to a withholding tax of 15% and that received by foreign institutional investors be reduced to 20% from 28% before.
The proposed reduction of withholding tax will be effective from Jan 1, 2007 and will be for five years.

The main beneficiaries of the tax reduction will be foreign institutional investors, foreign individuals as well as other non-corporate local entities. Only higher tax paying Malaysian individuals will benefit from the reduction. This could be in tune with the current investor profile for REITs. Such tax reduction will certainly make REITs an attractive investment choice and enhance the competitiveness of Malaysian REITs globally.

Without doubt, the tax incentives proposed in Budget 2007 would enhance our Malaysian REIT market. Such tax incentives are part and parcel of the aspirations to secure Malaysia as an International Islamic financial centre and will provide viable products for investments in the Malaysian market.

The writer is a senior executive director at PricewaterhouseCoopers Taxation Services Sdn Bhd

Any of you guys attending AXREIT's shareholders' meeting on 24th September at Equatorial Hotel? Maybe we can have a LYN-AXREIT gathering

Haha, on second though, my new target has been lowered to 1.58.
Only then it is worth it to average it
Can do that though. At least we get to attend the meeting and then have our small discussion nearby among ourselves
I will attend it as it is FREE, and I get to meet the Board (although not up close la )
Cherroy, I am waiting for you to join so that we can discuss more about our favourites

i was out at site today whole day... didnt get any .. gonna queue again tmr at 1.63.
a bit wory about the extra 20% share placement diluting the EPS ..

Aiseh, potong la like that Thought cherroy is so free as to not working one
Sigh, since no one joining, me also don't go lo. Might be going Singapore then.

Actually, if we compare the yield of AXREIT now with last year, the yield is actually lower.
Last year they had 9 properties up to H1, this year they have 17 up to H1.
If we take the yield on their asset for this year and compare with last year, it is lower

Well, I don't know how Anwar is going to handle this. A lot of projects under the 9MP might be stopped causing prices of building materials to dip, thus causing fear on property play. This is my assumption though, and I might be wrong

just wondering, anyone here holding amfirst? any thought s about it?

pasting at here, too.
no wonder you guys keep accumulating ATRIUM & AXREIT   

Was thinking of having diversified REITs, hence thinking of...
a) Axreit (offices)
b) Al Aqar (hospitals)
c) Hektar (shopping malls)

What do you guys think of (b) and ©?

making a remark

today's lowest

ATRIUM - 0.745
UOAREIT - 1.00
AXREIT - 1.56

p/s: DY 8-9%

cherroy, i tot you wanna get some UOAREITS if it's below $1

i have a question,

REITS dividend usually is TE?

It has 10% witholding tax, start from next year. Not totally TE.

Yup, still 1.02 today, but suddenly with market plunge, other like Axreit, Amfirst, Atrium, Towerreit become more attractive than UOA. Even Genting at 4.xx.
Gosh, it is somehow like suddenly a dozen of lenglui approaching you, don't know whom to choose from.  

LOL! why worry, uncle cherroy has money 

TAKE ALL LA ~!!

Hi all the guru here,
May I know whether AXIS REIT buy the properties using shareholder's money or take loan from bank? does it have any debt? in net cash or debt position?

Also, the NAV is higher than share price may be because ppl apply a discount expecting economic downturn (lower tenant occupancy & lower rental), oversupply of office space in KL (many due to complete soon).

Much appreciate ur comments. thanks!

Then which counter has property involved with Tesco ?

Hi Cherroy,
Thanks for response. I checked their Q2 08 result & noticed interest expenses double from 1.1million (Q2 '07) to 1.9million.
In terms of % to total trust income (1.1m/8.7m vs 1.9/13.2m), its an increase of approx 11% to 14%. 
While current interest rate is low (gov to maintain liquidity of credit), can't rule out an interest hike during -ve growth of economic (when current global financial crisis effect actually been felt in Malaysia).
However, based on above numbers, seems AXREIT is in good shape to withstand interest hike or drop in rentals.

2007 DPS is at 13.6sen, even if I slash it drastically by half at 6.8sen,  the yield is still 4.5%. ~ at RM1.49 price this morning.

I am being very conservative in valuation here & this stock seems worth a buy.
Can't understand why the stock is on free fall recently... perhaps I missed out something? Feel free to add or comment. thanks

It is better to accumulate Axis Reit compare to other REITS as it is more aggressive in their expansion even though you can see it's price drops the most % compare to other REITS but i beliv during economy recover it will gain most % compare to other REITS. Besides it dividend yield is not bad either. My fair value will be around RM 1.00 - RM 1.20. You can get dividend during recession and sell off during recover to have capital gain. Kill two birds with one stone. 

Thanks  So that means if dividend is 10 sen. After the withholding tax my take back dividend is 9 sen nett. Any others tax ?

So the tax is lower compare to we buying other stock which are being taxed 26%