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Rental Income

Introduction

Many investors own real properties in Malaysia as part of their investment portfolio and receive rental from them. These could include houses, apartment, condominium, shophouses, industrial factory, commercial office and so on.  
 
In Malaysia, income derived from letting of real properties is taxable under paragraph 4(a) (business income) or 4(d) (Rental income) of the Income Tax Act 1967. The income is deemed as a business sources if maintenance services or support services are comprehensively and actively provided in relation to the real property.
 
Most of the property owners in Malaysia who rented out their properties are not providing maintenance and support services; hence, the rental collected from their tenant is regarded as a non-business source of income (Rental income). These rentals will be taxed on a received basis, and losses in a particular tax year cannot be carried forward to the next year nor offset with other taxable statutory income. All capital assets (e.g. furniture and fitting, air-conditioner and etc) do not qualify for any tax deduction (Capital allowance) too.
 
 
 
 

Rental Income Deductible Expenses

The expenses that are income tax deductible including:
  • Assessment
  • Quit rent
  • Property loan interest
  • Fire insurance premium
  • Expenses on rental collection
  • Expenses on rental renewal, including the stamp duty
  • Expenses on repairs and maintenance
  • Expenses on replacement costs of furnishings
  • Property service charges, maintenance fees, sinking fund, and Indah Water bills
  • Legal expenses on renewal of tenancy agreement, recovery of rental arrears, etc. 
  • Expenses on pest control
  • Renewal property agent fees/commission 
 
The expenses that are not income tax deductible are initial expenses before the property is rented out, including:
  • Advertising cost to get the first tenant
  • Property agent fees/commission to obtain the first tenant
  • Legal cost and stamp duty for initial tenancy agreement
  • Expenses on renovation and improvement to get higher rental or to be more attractive to potential tenant
 
 



Tax Exemption On Rental Income From Residential Houses 

To encourage Malaysian resident individuals to rent out residential homes at reasonable charges, Malaysia budget 2018 announced that 50% income tax exemption be given on rental income received by Malaysian resident individuals from year of assessment 2018 until year of assessment 2020 subject to the following conditions:
 
i.       rental income received not exceeding RM2,000 per month for each residential home;
 
ii.      the residential home must be rented under a legal tenancy agreement between the owner and the tenant; and
 
iii.     tax exemption is given for a maximum period of 3 consecutive years of assessment.

 
 
 

Frequently Asked Question

1) Do I need to pay income tax if I only receive rental income?
  Yes, you shall declare and pay your income tax before 30 April every year.
   
2) Are the expenses tax deductible if the real property is not let out temporarily?
  If the letting ceases temporarily due to the following circumstances:
 
  1. repair or renovation of the building;
  2. absence of tenants for a period of 2 years after termination of tenancy;
  3. legal injunction or other official sanction; or
  4. other circumstances beyond the control of the person who lets out the real property;
  expenses for the period the real property is not let out are allowable provided that the real property is maintained in good condition and is ready to be let out.
   
3) My properties are in joint name with my wife. Do we need to submit rental income equally or she can report all the rental income?
  The rental income shall be declared based on the ratio of your joint ownership.
   
4) I am staying overseas but owe several properties in Malaysia. Do I need to declare my rental income to Inland Revenue Board (IRB)?
  Yes, the rentals are derived from the properties located in Malaysia. Therefore, you are required to submit and pay your income tax to Inland Revenue Board (IRB).
   
5) Do I entitle progressive tax rates, personal relief/deductions and rebates if I am staying at overseas?
  Only tax resident individual entitles for progressive tax rates, personal relief/deductions and rebates. Non-tax resident (e.g. stay in Malaysia less than 182 days) are taxed at flat rate of 28% without any personal reliefs/deductions and rebates.
 
 
 
 

What We Can Help You?

We are licensed Tax Agent registered with Inland Revenue Board (IRB) under Section 153(3) of Income Tax Act 1967. As a professional tax consultant, we can advise and assist you in your company or individual income tax compliance and submission according to Income Tax Act 1967, IRB's public ruling, Tax audit & investigation frameworks, Tax technical guideline and etc. We can also advice you on income tax incentives which are available and best suited for you.
 
We are also GST agent registered with Royal Malaysian Customs Department. We can help you comply with and conform to the GST standards and requirements. Start from registration to preparation and submission of GST return, we can solve all GST technical issues faced by you. We will also advice you on rules and regulation related to your business or company GST affairs.
 
We are advising our clients on:
  • which incentives are available and best suited for them;
  • transactions which will affect their chargeable incomes;
  • transfer pricing legislation which affect their inter-company transaction;
  • tax incentive application procedures.
 
 

L & Co Plt.

18A & 20, Jalan Sasa 2, Taman Gaya,
81800 Ulu Tiram, Johor, Malaysia.
Tel +607-859 0410
Fax +607-863 1003
Email liew@liew.my
 
     

What Our Client Say

     
L & Co always carry their services in professional way – well planning, in time, precise, friendly and professional. While we are stuck with problems, they can always advice us with industrial best practices and their views.
 
YM Tan
ICT Automation (M) Sdn Bhd
www.ict.com.my
 
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