Landlords of business premises that offer reduction or relief of rental payment to SMEs tenants from April 2020 to September 2020 are allowed to claim a special deduction equivalent to the rental reduction amount subject to the condition that the reduction should be at least 30% of the existing rental rate of the determined period
Q1: Who is eligible to claim this special deduction?
- Any taxpayers (corporate, individual, cooperative or other business and non-business entities) renting out their business premises to any qualified SMEs tenants
- The rented premises must be used by the tenant for purpose of carrying out his business
- The landlord must be a taxpayer with rental income under subsection 4(a) and subsection 4(d) Income Tax Act 1967
Q2: What is the definition of SME for this special deduction purpose?
Registered SMEs and have obtained SME Status Certificate from SME Corp Malaysia
Please check https://smecorp.gov.my/images/pdf/2020/Guideline-SMEDefinition_updated.pdf on the definition of SME
Q3: Can a company claim the deduction if the tenant is a company excluded from National SME definition under SME Guideline?
The landlord is NOT eligible for this special deduction.
Below are the example not considered as SMEs:
- Entities that are public-listed on the main board; and
- Subsidiaries of:
- Publicly-listed companies on the main board;
- Multinational corporations (MNCs);
- Government-linked companies (GLCs);
- Syarikat Menteri Kewangan Diperbadankan (MKDs); and
- State-owned enterprises
Q4: If my company rents out premise to a related company, would my company qualify for this special deduction?
If the tenant qualifies as SME as defined in question 2 above, the company (landlord) would be eligible to claim the Special Deduction
However, if the SME falls under the categories of exclusion from National SME definition under SME Guideline, the company (landlord) is not eligible for this special deduction
Q5: What is the meaning of business premises for this purpose?
Business premises for this purpose means all premises used for carrying out a business
Example: Office, workshop, warehouse, childcare and rented lot/bazar/booth/stall
However, rental of a residential house used for both residential and business is excluded
Q6: Is this special deduction applicable to rental of other than premises such as machines, parking spaces, telecommunication towers etc.?
This special deduction is for rental of business premises only.
The rented business premises must be used for the purpose of carrying out a business
Q7: What is the minimum required rental reduction in order for the landlord to enjoy the special deduction?
The minimum required rental reduction must be at least 30% from the existing monthly rental rate
Q8: What is the special deduction amount?
The special deduction amount is equivalent to the amount of monthly rental reduction offered by the landlord to the eligible SME tenants
Q9: Which period is eligible for this special deduction?
This special deduction is for a period of rental reduction offered from April 2020 until September 2020
Q10: How is this special deduction granted?
This special deduction will be granted under Income Tax Rules. Example of deduction calculation: A Sdn. Bhd rents a shop lot to B which is an eligible SME for RM5,000 a month (RM60,000 yearly)
A Sdn. Bhd. has agreed to offer rental reduction to B for the month April until September 2020 of RM2,500 a month
Without special deduction (RM) | With special deduction (RM) | ||
Monthly rental income | 5,000 | 5,000 | |
Annual rental income | 60,000 | 60,000 | |
Rental reduction of 50% for April until September 2020 | RM5,000 x 50% x 6 months | (15,000) | (15,000) |
Annual gross rental income | 45,000 | 45,000 | |
Special deduction1 | RM2,500 x 6 months | - | (15,000) |
Taxable income | 45,000 | 30,000 | |
Tax payable @24%2 | 10,800 | 7,200 |
1 Assuming no other allowable expenses
2 Current corporate tax rate
Total tax savings to be enjoyed by the landlord is as follows:
Tax savings = RM10,800 – RM7,200 = RM3,600.
For other taxpayers such as individuals, the tax savings is according to the income tax bracket
Q11: If my company reduces the rental amount at a different rate every month, can my company claim this special deduction?
If in any of these eligible months, the rental reduction is less than 30%, then the company is not eligible to claim the special deduction for that particular month/months
Q12: I have received rental payment for months April until September 2020 earlier this year. Can I still offer rental reduction and claim the special deduction?
Yes, for landlord that have received the rental payment for April until September 2020 in advance, the landlord can still offer rental reduction subject to the fulfilment of the conditions.
Q13: What are the supporting documents required?
The supporting documents required to be kept by the taxpayers (landlords) who claim this special deduction are:
- Stamped tenancy agreement;
- Rental income statement;
- SME Status Certificate issued by SME Corp.; *
- Tenant’s information, rental information and rental reduction methods**
* Information regarding registration of SME can be referred at https://smereg.smecorp.gov.my or on the official website of SME Corp Malaysia
** To be provided in Working Sheet (HK) of Company Return Form. Please refer to example attached
