Hence, it is important for property investors to understand the actual taxation on rental income before they start to rent their property out.
Income from the letting of real property in Malaysia is named as rental income and is chargeable to tax under section 4(d) of the Income Tax Act 1967. Any person, whether resident or non-resident, citizen or non-citizen, individual or not , who derives rental income from Malaysia is thus subject to income tax.The type of person, or the residence status of the person, determines the tax rate.
In adjusting the income from the rental, all expenses " incurred wholly and exclusively in the basis period in the production of the gross income" are deductible. The deductible expenses can used to adjust the rental income are as following.
•mortgage interest ( Please take note that mortgage interest is not equaled to the mortgage payment. Monthly mortgage payment consist of mortgage interest and capital repayment. Mortgage interest is deductible expense but capital repayment is not deductible expense)
•Repairs
•Maintenance
•Quit Rent
•Assessment
•Service Charges
•Legal fees to renew the rental agreement ( Legal fees for the getting first rental agreement is not deductible expenses, only subsequent renew can be considered as deductible expense)
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