Tax Exemption On Rental Income From Residential Houses oh Tax Exemption On Rental Income From Residential Houses

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.

The then Prime Minister further announced that this exemption would be effective for three years, from years of assessment 2018 to 2020.^[1]

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

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:
	repair or renovation of the building; absence of tenants for a period of 2 years after termination of tenancy; legal injunction or other official sanction; or 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.