216 AL-SALĀM REIT NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2023 ANNUAL REPORT 2023 7. Tax expense (cont'd.) Pursuant to Section 61A of the Malaysian Income Tax Act, 1967 (“Act”), income of the Fund will be exempted from tax provided that at least 90% of its total taxable income (as defined in the Act) is distributed to the unitholders’ in the basis period of the Fund for that year of assessment within two months after the close of the financial year. If the 90% distribution condition is not complied with or the 90% distribution is not made within two months after the close of the financial year which forms the basis period for a year of assessment, the Fund will be subject to income tax at the prevailing statutory rate on its total taxable income. Income which has been taxed at the Fund's level will have tax credits attached when subsequently distributed to unitholders. As at the date of this financial statements, the Fund has declared more than 90% of its distributable income to unitholders for the financial year ended 31 December 2023 accordingly. No provision for income tax expense has been made for the year. Deferred tax liability has been provided for the investment properties held by Al-Salām REIT at 10% which reflects the expected manner of recovery of the investment properties, i.e. recovered through sale. Reconciliation of the tax expense is as follows: Group Fund 2023 2022 2023 2022 RM RM RM RM Profit before tax 21,883,609 66,001,130 21,638,263 65,731,806 Tax at the statutory tax rate of 24% 5,252,066 15,840,271 5,194,383 15,775,633 Expenses not deductible for tax purposes 903,423 334,855 903,423 429,192 Income not subject to tax (6,155,489) (16,175,126) (6,097,806) (16,204,825) Deferred tax recognised at different tax rate 181,565 585,081 181,565 585,081 181,565 585,081 181,565 585,081 Taxation of the unitholders Pursuant to Section 109D(2) of the Malaysian Income Tax Act 1967, where 90% or more of the Real Estate Investment Trust’s (“REIT”) total taxable income is distributed by the REIT, distributions to unitholders (other than resident corporate investors) will be subject to tax based on a withholding tax mechanism at the following rates: Unitholders Tax rate Individuals and all other non-corporate investors such as institutional investors 10% Non-resident corporate investors 24% Resident corporate investors are required to report the distributions in their normal corporate tax return and subject to the normal corporate tax rate of 24%.
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