Mapletree Logistics Trust books provision of RM28.1 million amid ongoing tax dispute in Malaysia

[SINGAPORE] The manager of Mapletree Logistics Trust (MLT) has made provisions of RM28.1 million (S$9.1 million) in its financial statements due to an ongoing tax dispute in Malaysia.

The dispute involves MLT’s subsidiary MapletreeLog Malaysia Holdings, which had subscribed for junior medium-term notes issued by two Malaysian bankruptcy-remote special-purpose vehicles, Semangkuk Berhad and Semangkuk 2 Berhad.

A bankruptcy-remote special-purpose vehicle is a legally separated, limited-purpose entity created to hold specific assets and to isolate financial risk from its parent company or originator.

MLT’s manager had obtained tax advice then that the interest payments from these fixed-income debt securities are exempted from withholding tax.

This means that the issuers are not required to deduct income tax and remit it directly to the tax authorities when making the interest payments to unitholders. So unitholders receive the full amount of interest.

However, the two special-purpose vehicles received a notice in February 2024 from Malaysia’s tax authorities that they owed RM28.1 million in unpaid taxes between 2015 and 2021.

MLT’s manager and the two special-purpose vehicles have received legal advice that there are valid grounds to challenge the tax notices from the Malaysian authorities, and the Malaysian entities have filed an appeal to contest them.

The case is currently awaiting further hearings in the High Court of Malaysia.

However, an interim stay order has been granted, pending the outcome of the hearing, and the disputed amount has not yet been paid to Malaysia’s tax authorities.

As there are valid grounds to challenge the tax notice, and the stay order has temporarily halted the enforcement of the tax demand, MLT’s manager said that the provisions booked did not have an immediate cash impact on the real estate investment trust.

The disputed amount had formed part of the distributions previously paid out to unitholders.

The manager has also assessed that MLT is not expected to be materially impacted, if the outcome of the hearing requires the Malaysian special-purpose vehicles to pay the outstanding amount to the country’s tax authorities.

Units of MLT rose 0.8 per cent, or S$0.01, to close at S$1.21 on Tuesday.