Please take note that the information below is for reference purposes only. The special tax deduction on rental reduction has expired in June 2021.
Pandemic sweeps across the world, leaving little space for SMEs to respond and adapt to changes. With limited physical interactions and businesses undergoing digital transformation, physical offices, outlets, and stores raised a concern regarding costing.
As part of the Prihatin Stimulus Package announced by the Malaysian Government on 6 April 2020, private landlords are encouraged to offer at least 30% rent reduction between April 2020 to March 2021 their SME tenants. In return, the Government will offer tax deduction for the rental deduction offered.
To help SMEs through the pandemic, the Malaysian Government has extended the grant till 30 June 2021 and also covered non-SME tenants as well. Here is a summary of the Special Tax Deduction given to landlords on the rental deduction given to their SME tenants.
Related Read: What are the 3 Definitions of SMEs in Malaysia? »
Table of Contents
1. Who is eligible to claim the special tax deduction?
Any registered taxpayer (corporate / individual / cooperative / business entity) who is renting out their properties to SME tenants.
2. What is the tax deduction amount?
The landlord’s taxable income will be deducted by the same amount as the rental reduction amount offered by the landlord to SME tenants.
3. What is the minimum rental reduction required to be given in order to enjoy the special tax deduction?
It is at least 30% from the existing monthly rental rate.
4. Which period is eligible for the special deduction?
The period is from April 2020 to June 2021.
5. How is this special tax deduction calculated?
Please see the illustration below:
| Without Special Deduction | With Special Deduction | ||
|---|---|---|---|
| Monthly rental | RM5,000 | RM5,000 | |
| Yearly rental (before reduction) | RM60,000 | RM60,000 | |
| Rental Reduction of 50% April to June 2021 | RM5,000 X 50% X3 months | (RM7,500) | (RM7,500) |
| Yearly rental (after reduction) | 52,500 | 52,500 | |
| Special deduction | RM5,000 X 50% X3 months | Nil | (7,500) |
| Taxable income | 52,500 | 45,000 | |
| Tax payable (assuming 24%) | 12,600 | 10,800 |
Total tax savings*: RM12,600 – RM10,800 = RM1,800
*Please note that the tax saving will differ between corporate and individual due to different tax % rate.
6. What are the supporting documents required?
- Valid Tenancy agreement
- Rental income statement
- Certification of the tenant’s status as a SME company
- Supporting documents to prove rental reduction
With this Special Tax Deduction, you have more reasons to persuade your landlord to reduce rental rates!
Related Read: Malaysia RM35 billion Short-Term Economic Recovery Plan »
IMPORTANT NOTICE: This is a summarized version and for final reference, please refer to the statement issued by the Government (source: Cadangan Langkah Cukai Pre 3.0 (SME))
Not too sure how to get the tax reduction?
Engage our tax advisors today! We help SMEs navigate through such schemes to get their tax benefits.