Do I Need All Receipt For Rental Repair Under $2000 A Year

Must you declare your rental income to LHDN & Landlord tax incentives

Many landlords are under the mistaken impression that rental income from residential properties or not-business sources is classified as an investment and therefore can be exempted from tax. In truth, you could be penalised under Department 113 of the Income Taxation Act 1967 for nether-declaring or non declaring your rental income at all.

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Income revenue enhancement season is finally hither and it is time to intermission out the calculator and dust off all the receipts you lot have accumulated throughout the yr. Many people discover taxation filing a hassle and tend to leave it to the very last minute. And when the panic of missing the tax borderline kicks in, they tend to make careless mistakes!

One such error is rental income from non-business sources. It doesn't matter if you own simply one rental property or if the belongings is an inheritance and not purchased by yous. As mentioned above, many belongings owners are being penalised by the Inland Acquirement Lath of Malaysia (LHDN) for not reporting income earned from renting out their property.

If yous are wondering how to make up one's mind whether yous qualify equally a taxpayer and whether is it necessary for you to pay income tax for any rental income you receive, fret non as nosotros have compiled a step-by-pace guide to assistance you figure this out and file your taxes properly.

1. First of all – is your income taxable?

Earlier even thinking about filing your income tax, let's determine if you are an eligible taxpayer in the first place. In Malaysia, yous are required to pay income taxes if:

a) Your income is above RM34,000 per annum (after EPF deductions) or RM2,833.33 per month (subsequently EPF deductions); or alternatively
b) Your income is above RM38,202.25 per annum (earlier EPF deductions) or RM3,183.52 per month (before EPF deductions).

Next, you demand to determine if you are a revenue enhancement resident or non-resident. Why is this important? Well, tax residents are taxed at a progressive tax rate and can bask tax reliefs and rebates that would help reduce the amount of income taxes paid to LHDN.  You lot are classified every bit a tax resident if you encounter the following criteria:

(a) You have been in Malaysia for at least 182 sequent days within the calendar yr; or
(b) You have been in Malaysia for a period of less than 182 consecutive days during the calendar year but your stay continues for a menses of at least 182 consecutive days or more in the following agenda year (e.grand. y'all've stayed for 50 days in 2022 but your stay continues for another 182 days in 2022).

If y'all accept to be away from Malaysia due to the following reasons;

i. Business trips
2. Wellness treatment
iii. Social visits not exceeding 14 days

..the absence volition even so be counted as role of the 182 consecutive days.

2. What is chargeable income and how practise yous decide your tax charge per unit?

In Malaysia, tax residents are taxed based on a progressive tax rate (i.due east. the tax rate increase as your income increases) and the tax rate is based on their chargeable income. Under South.4 of the Income Tax Act 1967, the following are classes of chargeable income:

• Gains or profits from a business
• Gains or profits from an employment
• Dividends, interests and discounts
• Royalties, premiums and rent
• Pensions, annuities or other periodical payments non falling under the above classes
• Gains or profits not falling under the above classes

Therefore, by calculation up your income from the various classes, yous can determine your tax charge per unit. Basically, the lower your income, the lower your revenue enhancement rate is and the less tax y'all will have to pay. The current tax charge per unit equally appear under Budget 2022 starts from 0% and goes all the way upwards to xxx%.

Do take annotation that tax residents bask certain tax reliefs and rebates. By and large, taxation reliefs are portions of your income that practise non need to be included in the calculation of your taxes. You can learn how to file your income tax in Malaysia using LHDN east-filing with our consummate guide, and get the latest list of official tax reliefs for YA2021

iii. What are the income tax rates for expatriates and non-residents?

And so, we have covered tax residents and the perks they are entitled to, but what about expatriates working in Malaysia? Do they receive the same tax reliefs and rebates equally tax residents?

© ti-ja | Getty Images

The reply is fairly uncomplicated. Accept they been working in Malaysia for at least 182 consecutive days within the calendar year? If yes, they would be considered as tax residents. They are to pay taxation based on the progressive revenue enhancement rates and are eligible for the tax reliefs and rebates. If not, they are considered non-residents and are ineligible for the tax reliefs.

Not-residents are those who, regardless of citizenship and nationality, have been working in Malaysia for a flow of more than than 60 calendar days but less than 182 agenda days. As non-residents, they will be taxed at a stock-still rate of xxx% instead of a progressive tax rate.

However, non-residents who autumn under these categories will not exist taxed:

• Employed in Malaysia for less than 60 days
• Employed on board a Malaysian ship
• Age 55 years one-time and receiving a pension from Malaysian employment
• Receiving interest from banks
• Receiving tax-exempt dividends

4. What is rental income tax?

Now back to the main agenda – You might be surprised to know that if you own a property in Malaysia (that isn't used for business purposes) and you receive rental income, you lot are required to pay income tax for it. While explained in item under Section 4d of the Income Tax Human action 1967, the summary of it as co-ordinate to LHDN is, "The letting of real property is treated as a not-business source and income received from information technology is charged to taxation under paragraph 4(d) of the Income Revenue enhancement Human activity 1967 if a person lets out the real belongings without providing maintenance services or support services (such as cleaning services and repairs services) comprehensively and actively".

The letting of existent holding is too treated as a not-business organisation source if an individual rents out a belongings, where the tenant enjoys maintenance services or back up services that are passively derived (not actively provided by the holding owner).  This would include tenants of strata properties who enjoy the usage of the edifice's facilities such as swimming pools, gym, etc.

Beginning i January 2022, rental income received in Malaysia is evaluated on a progressive tax rate which ranges from 0% to thirty%. Rental income is calculated on a net basis, which means the final rental earnings amount is derived after deducting the permitted incurred expenses.

5. What are the available 2022 tax incentives for landlords with rental properties?

As stated in LHDN, landlords are entitled to several tax incentives in the form of allowed deductible expenses.

© PitiyaO | Getty Images

The post-obit expenses are allowed to be deducted from rental income and must be directly expenses wholly and exclusively incurred in the production of income:

• cost of ordinary repairs to maintain the property in its existing country
• insurance premium on fire/burglary
• assessment tax and quit rent
• mortgage involvement on loans obtained
• rent collection fee and legal expense incurred to enforce hire collection.
• the expense incurred to renew tenancy or to change tenant.
• the maintenance fee for strata properties

Notation: In society to merits these exemptions, yous must have a legal tenancy agreement for said rental belongings every bit well equally the original receipts of the claimable expenses.

Initial expenses such equally costs to obtain your get-go tenant including ad costs, legal fees, stamp duties and existent estate amanuensis commission fees are not allowed for deduction. These expenses are necessary to create a source of rental income and are not incurred in the production of rental income.

6. How to calculate your net rental income?

Allow's say you lot receive RM2,000 per month from renting out a double-storey bungalow you lot ain to a tenant for a catamenia of one year.

The holding'southward annual cess tax is RM1,000 while the quit rent is RM100.

Unfortunately, yous find that your tenant has damaged the property and your bungalow requires repairs costing a total of RM7,000.

Your net rental income would be:
= Rental income – Permitted expenses (Assessment Tax + Quit Rent + Repairs for Damages)
= (2,000 x 12) – (1,000 + 100 + seven,000)
= 24,000 – eight,100
= xv,900

You volition accept to file any net rental income under 'Statutory income from rents' when doing your e-filing online. For transmission tax submissions, net rental income is filed nether office B2 (in the Exist class) or part B7 (in the B form).

Having said that, if you lot suffer a rental loss, you are not required to declare the rental loss during your tax filing.

Check OUT: My tenant is not paying rent. What can I exercise as a landlord?

vii. Are in that location any tax exemptions on rental income in YA 2022 (2022)?

Many landlords believe that they are entitled to the 50% tax exemption proposed by the government a few years ago, where an exemption of 50% on the statutory income of rental received by Malaysian resident individuals was provided to encourage Malaysian homeowners to hire out their residential homes. HOWEVER, the tax exemption which was gazetted as the Income Taxation (Exemption) (No. 2) Order 2022, was only for a menstruation of i year from 1 January 2022 to 31 December 2022  and has now expired.

So does this mean there are no rental income tax exemptions in 2022 (YA2021)? Unfortunately, yep.

Special Income Revenue enhancement Deduction for landlords in 2022

Nevertheless, that does not mean in that location are no other tax exemptions belongings owners tin can have advantage of. In an effort to boost the flailing economy during the COVID-19 period, the government gazetted a Special Income Tax Deduction for Reduction of Rental to a Tenant other than an SME (Rules 2022 [P.U.(A) 354/2021]) in September 2022.  Under this Rule, a special deduction will exist given to residential property owners who provide at least 30% rental discounts to tenants (for each qualifying month).

The qualifying month here is applicable from January to December 2o21

The conditions of this income revenue enhancement deduction are:

• the rental reduction should be at least 30% of the existing rental rate
• The tenancy agreements must be stamped under the Postage Act 1949
• A split argument of income in relation to the reduced rental income for the qualifying months in YA 2022
• Confirmations from both parties on the offering and acceptance of the reduced rental amount
• The special deduction for a rent reduction granted to non-SMEs is not bachelor to a landlord that has claimed the deduction for the aforementioned hire reduction provided to SMEs under P.U.(A) 353/2021.
• The landlord must be a taxpayer with rental income under subsection 4(a) and subsection four(d) Income Tax Act 1967.

The supporting documents required to be kept by the taxpayers (landlords) who merits this special deduction are:

1. Stamped tenancy agreement;
2. Rental income argument;

Advance rental paid in 2022

Where rental for the qualifying months (Jan to December 2022) is paid in advance, the landlord is eligible for the deduction under P.U.(A) 354/2021, as applicable, provided that the landlord keeps the supporting documents stating the reduction of monthly hire given past manner of refund or past any other ways agreed betwixt the landlord and tenant. The documentation requirements set out in the above conditions employ to whatever claim for deduction in relation to the reduction of advance rental paid.

To learn more about how to file your taxes through LHDN's eastward-filing, check out our guide hither. Likewise, find out the latest Postage duty, administration & legal fees for a tenancy understanding in Malaysia.

Edited past Reena Kaur Bhatt

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