Owning a property in Malaysia is like owning an investment. The income derived from it can be classified as business or rental income, which you should declare on your tax return accordingly. 

It's important to know the difference between these two so that you don't pay more taxes than necessary and accidentally get into trouble with the law!

Renting out property in Malaysia can be a lucrative business, and if you are looking to make the leap into being your own landlord then it's important that you understand what income derived from this is taxable. You will need to find out whether or not any maintenance services for example such as cleaning or repairs have been provided before deciding where on tax bracket (4(a) - Business Income; 4(d) - Rental Income). 

The decision could mean higher taxes but also more potential profits!

Renting out your property in Malaysia can be a fruitful business. Most Malaysian homeowners who rent their properties do not provide upkeep and maintenance to make the rental process more profitable, which makes them regards 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 carry forward to the next or offset with other taxable statutory income.

All capital assets (e.g., furniture and fittings) do not qualify for any deduction either- which means that your air conditioner can't contribute anything to reducing taxes when you file them.

The expenses that allow deducting for the rental of the property include:

§ 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:

v Advertising cost to get the first tenant

v Property agent fees/commission to obtain the first tenant

v Legal cost and stamp duty for initial tenancy agreement

v Expenses on renovation and improvement to get a higher rental or to be more attractive to a potential tenant

If you are thinking of becoming a landlord, do visit our website www.shijieproperty.com.my for our latest and updated property listings. You can find a hidden GEM on our website.