How is rental income taxed in Malaysia?

Is renting out a house or room counted as business income?

LHDN Public Ruling 12/2018 distinguishes two kinds of source for rental income ^[1]. Rent is taxed as business income under paragraph 4(a) of the Income Tax Act if the owner provides maintenance or support services comprehensively and actively, either personally or through people they hire ^[1]. Otherwise, it is non-business income under paragraph 4(d) ^[1].

Providing security alone does not count as comprehensive services, and facilities managed by a strata management body do not make your rent a business even if you pay maintenance fees ^[1].

Letting part of a property, including a room in a house you own or rent, also counts as letting ^[1].

LHDN does not issue specific guidance for homestays or short-term rentals. The comprehensive and active services test in the same ruling applies ^[1].

What expenses can be deducted from rent?

For 4(d) income, only direct expenses can be deducted ^[1].

• Assessment tax and quit rent ^[1].
• Interest on the loan for the let property ^[1].
• Fire insurance premiums ^[1].
• Costs of collecting rent, including legal costs to recover rent ^[1].
• Costs of renewing a tenancy or changing tenants ^[1].
• Ordinary repairs to keep the property in its original condition ^[1].
• Costs of replacing furniture such as beds and air conditioners ^[1].

What expenses cannot be deducted?

Initial expenses cannot be deducted, whether under 4(a) or 4(d): advertising costs, legal fees for preparing the agreement, stamp duty and property agent commission to get the first tenant ^[1].

Expenses for the period before the property is first let cannot be deducted and must be apportioned ^[1]. While the property is empty after having been let and is still available for letting, those expenses remain deductible ^[1].

The ruling only allows ordinary repairs, so the costs of renovating or upgrading the property are not listed as deductible expenses for 4(d) income ^[1].

Can a rental loss be set off against salary?

Not for 4(d) income. A loss from non-business rental cannot be deducted from aggregate income and cannot be carried forward to the next year of assessment ^[1].

Rent received in advance is taxed in the year it is received ^[1].

Which form do you file and when is the deadline?

Resident individuals who do not carry on a business file Form e-BE, and those who carry on a business file Form e-B ^[2]. Electronic filing has been mandatory for individuals since year of assessment 2023 ^[2].

For year of assessment 2025, the e-BE deadline is 30 April 2026 with a grace period to 15 May 2026, and the e-B deadline is 30 June 2026 with a grace period to 15 July 2026 ^[2].

Records must be kept for seven years after the end of the year the form is submitted ^[3].

Is the 50% tax exemption on residential rent still available?

Order P.U.(A) 55/2019 exempted 50% of statutory income from residential rent of up to RM2,000 a month, but the order only applied for year of assessment 2018 ^[4].

The explanatory notes to Form BE for year of assessment 2025 do not mention any exemption for residential rental income ^[3]. Do not claim this exemption without an order in force for your year of assessment.

Do landlords need to issue e-invoices?

Individuals who do not carry on a business are exempt from e-invoicing, and taxpayers with annual revenue below RM3,000,000 are also exempt ^[5].

If an individual landlord does not carry on a business but the tenant is a business, the tenant must issue a self-billed e-invoice ^[6]. A company owned by the landlord does not share its owner's exemption ^[5].

Frequently asked questions

I let one room in my house. Do I need to declare it?

Yes. Letting part of a property you own or rent, including a single room, counts as letting ^[1].

Is my homestay or Airbnb counted as a business or not?

It depends on whether you provide maintenance or support services comprehensively and actively ^[1]. LHDN does not issue specific guidance for short-term rentals, so get advice from a tax agent for your situation.

Can I claim stamp duty and agent commission?

Not for the first tenant. Both are initial expenses that cannot be deducted ^[1].

The house is empty between tenants. Can I claim assessment tax?

Yes, if the property has been let before and is clearly available to let again during that period ^[1].

I made a rental loss this year. Can I deduct it from my salary?

Not for 4(d) non-business income. The loss cannot be deducted from other income or carried forward ^[1].

How long do I need to keep receipts?

Seven years after the end of the year the tax form is submitted ^[3].