KUALA LUMPUR (Oct 28): Sunway Real Estate Investment Trust (REIT) will be able to pay higher non-taxable income distribution from the first quarter of its financial year ending June 30, 2016, onwards, after winning a judicial review that allows it to claim for industrial building allowance (IBA) for its properties.

In a filing with Bursa Malaysia today, Sunway REIT said the entitlement came after the Inland Revenue Board (IRB) withdrew its appeal at the Court of Appeal against a High Court’s judgment, allowing the REIT to claim for the IBA.

The REIT said its manager Sunway REIT Management Sdn Bhd will compute income distribution by claiming IBA on its hotel properties from 1QFY16, which will result in a higher non-taxable income distribution to be paid.

The REIT’s manager is currently liaising with IRB on the manner of refund to unitholders, as a result of the higher withholding tax amount paid to IRB in relation to the affected distributions.

For resident and non-resident individual unitholders, institutional investors, as well as foreign corporate unitholders, the REIT said “due announcements will be made once confirmation from IRB on the manner of refund to unitholders has been obtained”.

As for resident corporate unitholders, the REIT advised that they may need to reassess their tax position and consider whether to revise their tax returns to IRB.

“Sunway Reit shall issue revised tax vouchers upon obtaining the reply from IRB to restate the higher non-taxable income distribution and lower taxable income distribution for the affected distributions,” it said.

Nonetheless, Sunway REIT said the total income distribution per unit for the affected distributions will remain the same.

IBA is granted to companies incurring capital expenditure on construction or purchase of a building which is used for specific purposes.

In this regard, companies are eligible for an initial allowance of 10% and an annual allowance of 3%; the IBA can be claimed within 30 years.

However, a ruling stated that a REIT has to operate the hotel on its own to be entitled for the IBA claims, which Sunway REIT appealed against and was rejected by the IRB.

Subsequently, Sunway REIT’s management filed for a judicial review on the provision and obtained a favourable judgment from the High Court on May 8 this year. IRB appealed the case in the Court of Appeal, but withdrew its appeal on Aug 28.

To be prudent, while pending the decision by the High Court, Sunway REIT Management had computed the taxable distribution portion to unitholders by not claiming for IBA on its properties, which resulted in a lower non-taxable portion of income distribution paid for the period of Jan 1, 2013 to June 30, 2015.

Sunway REIT’s website showed it has four hospitality asset under its portfolio, namely Sunway Resort Hotel & Spa, Pyramid Tower Hotel, Sunway Putra Hotel, and Sunway Hotel Seberang Jaya.