David,

Why not you ask the moderator to pin this thread. Everyone of us also need to submit tax return and it is an important knowledge for all of us.

Instead of pin the topics such as AKPK Debts and Interbank fund transfer.

http://www.nst.com.my/red/which-expenses-t...income-1.199281

ALLOWABLE: There is no ‘standard list’ of deductible expenses but there are common expenses that can be deducted
The biggest grouse that a property owner has come tax submission season will be the amount of taxes that he has to pay on his property rental income. He will then naturally start to rummage through all the property expenses he had incurred to determine what is tax-deductible and what is not.

In situations of doubt, I have known of property owners turning to other property owners asking, “Do you claim such-and-such expenses in your income tax return?“ Well, my sincere hope is that the person he is asking has a good understanding of the tax laws, otherwise it will be a case of the blind leading the blind and both will end up having to face unnecessary tax penalties when it comes to a tax audit.

This article hopes to shed some light on how to determine the tax-deductibility of those expenses.

I have often been asked if there is list of standard expenses that a taxpayer can deduct against the rental income from letting of his investment properties. Quite honestly, there is no ‘‘standard‘ list of allowable tax deductions as the expenses that a taxpayer incurs may be unique to his/her own situation.

Therefore, the taxpayer will have to fall back on the letter of the law to determine if an expense is tax-deductible against rental income. Essentially, the law states that an expense wholly and exclusively incurred in the production of income under subsection 33(1) of the Income Tax Act (ITA) 1967 and which is not prohibited under subsection 39(1) of the ITA, is allowed as a deduction from rental income. What this means in laymen‘s terms is, any expenses that you incur for the year to generate the rental income would generally be tax-deductible. This also means that no private or personal expenses are allowable as a deduction.

Common deductible expenses

Aside from the ‘standard‘ list of tax-deductible expenses that a lot of property owners is asking for, what I can provide you here is a list of common expenses that generally may be claimed as a deduction against rental income:

• Advertising for tenants
• Assessment
• Insurance (e.g. fire, burglary)
• Interest on loan(s) to finance the purchase of the property being rented out
• Legal expenses (renewal of tenancy agreement, recovery of rental arrears)
• Maintenance/service charges
• Pest control
• Property agent fees/commission
• Quit rent
• Rental collection fee
• Repairs and maintenance
• Replacement of rental assets

It is important to note that the expenses are deductible in the year they were incurred, even though you have not made any payment for them during the year.

Having said that, do ensure that your obligations as a landlord towards the expenses which are to be borne by you, are clearly spelt out in the tenancy agreement to avoid any disputes by the Inland Revenue Board (IRB) against your claims for the said expenses.

Non-allowable expenses

Having touched on the tax-deductible expenses, it is also important to know what expenses are not allowable. Typically, initial expenses are not allowed to be deducted from income of letting of real property assessed under paragraph 4(a) or paragraph 4(d) of the ITA since those expenses are incurred to create a source of rental income and not incurred in the production of rental income. Examples of such expenses include:

• Costs of obtaining the first tenant for the property, such as:
° Advertisement;
° Introducer’s commission;
° Legal fees incurred for the preparation of tenancy agreement;
• Other expenses incurred prior to the property being rented out; or
• Renovation and improvement costs.

In the case of expenses incurred prior to the property being rented out, particularly relating to annual property expenses such as quit rent, assessment or insurance costs, then the proportion of the expenses in respect of the period before the property is rented out is not deductible and have to be adjusted accordingly.

However, a distinction (although in many situations, a difficult one) has to be drawn between what expense is deemed to be ‘repairs and maintenance‘ (which is tax-deductible) and what is ‘renovation or improvement‘ (which is NOT tax-deductible). Typically, an expense is deemed to be ’repairs and maintenance‘ if it is incurred on ordinary repair to maintain or restore the real property in its existing state. It will not materially add to the property‘s value nor substantially prolong its useful life, but merely to keep it in good and efficient operating condition.

In the case of ‘renovation or improvement‘, the reverse would then apply, i.e. the expense incurred would:
• materially add to the property’s value;
• substantially prolong its useful life;
• adapt the property to a new or different use; or
• enhance the property’s income-generating ability.

What happens during the period when the property is not rented out?

As explained above, expenses incurred prior to the property being first rented out, are not allowable in calculating the adjusted income from the letting of that property. However, if the property which was previously rented out is left temporarily unoccupied while you are looking for the next tenant, the expenses incurred during the period of non-occupancy will still qualify for deduction. This is on the condition that the property is being consistently kept in a tenantable state and is ready to be let out at any time.

How long then, can a property be ‘temporarily‘ left vacant and yet the property expenses qualify for a tax deduction?

The IRB’s Public Ruling 4/2011 further explains under what circumstances where the expenses incurred for the period the property is temporarily not rented out will be allowable. The circumstances are:
• repair or renovation of the building;
• absence of tenants for a period of two years after termination of tenancy;
• legal injunction or other official sanction; or
• other circumstances beyond the control of the person who lets out the real property.

Under the above circumstances, the expenses for the period the property is not let out are allowable, provided that the property is maintained in good condition and is ready to be let out.
Of course, having explained the concept of tax-deductibility of expenses against rental income, one must never forget or ignore the underlying basis for claiming for a tax deduction, i.e. the need to keep proper records and documentation relating to the claim for those expenses. When it comes to a tax audit, the IRB‘s basis of allowing you a tax deduction for the expenses claimed would all be about the availability of evidence.

Read more: Which expenses to deduct from rental income? - RED - New Straits Times http://www.nst.com.my/red/which-expenses-t...1#ixzz2qrDugMR1

Refer to this thread post 15, 16, 35 and 45 https://forum.lowyat.net/topic/2171286/all

Few ppls commented that must declare but no need to pay.

This post has been edited by KOHTT: Jan 29 2014, 12:36 AM

The question of whether gains from the realisation of shares are revenue (taxable) or capital gains (non taxable)will depend on the facts of each case. Generally, the following factors will be considered:

a) the intention or motive of the seller
b) the period of ownership
c) the frequency of transactions
d) the method of financing

I don't think so. Unless you main stream of your regular daily income are from share trading or you are the full time share traders.

This post has been edited by KOHTT: Feb 6 2014, 05:02 PM

I think nobody here can answer this question for you.

You need to bring your letter to the LDHN office and request their explanation.

Previously I kena that also. They explained that they have checked back my tax submission and found some mistakes which they want to rectify.

30%??

Anyway, I saw this in the LHDN website....Yearly Forex Average.

http://www.hasil.gov.my/pdf/pdfam/KadarPer...anWangAsing.pdf

Could be the rate for convertion. Feel free to correct me if wrong.

This post has been edited by KOHTT: Mar 6 2014, 03:04 PM

15 Tax Deduction You Should Know.

http://www.financetwitter.com/2014/03/fift...g-guidance.html

Still got people using the manual filing and posted to LHDN?

If wrongly calculate manually due to human error, we can get saman from LHDN.

That's not a joke.

I recalled you are the one who claimed for refund of more than 5K++.

So fast already get back money and they didn't even call for tax audit before refund such a big amount to you?

This post has been edited by KOHTT: Apr 9 2014, 03:50 PM

Make sense.

Same to me.

I also claim for my donation to one of the charity organization.

At the bottom left of receipts itself stated that "Dikecualikan Cukai Pendapatan Menarat Sek 44(6)". If your receipt does not stated that, then I am not sure.

I agree with you that there is no harm to claim from LHDN since Govt actually encouraged it by allowing us to claim against our tax. Most important thing is the org that received the money actually utilized money for welfare purpose.

Mine one have.

I did not said simply claim. I just said there is no harm to claim from LHDN if we donated to the approved charity channel.

That's why my donation receipt there is a clause "Dikecualikan Cukai Pendapatan Menarat Sek 44(6)" clause.

What I stated there is clear enough. I was replying to someone suggestion not to claim for tax rebate for donation since we did it on good faith to the god.

I am not too sure about this....

But I saw this link on the first page of this thread.

http://www.hasil.gov.my/goindex.php?kump=5...1&cariw=penalti

It is stated somewhere that the tax penalty is 1,000 to 10,000 and 200% of tax undercharged.

Perhaps expert here can verify.

Depends on who is the LHDN officer, her mood when you visit them and reason that you given to them.

I have deal with one old chinese lady LHDN staff who was not so nice.

Do you have any official announcement from the LHDN? Otherwise best to assume is today.

The website still indicate today is the last day...

http://www.hasil.gov.my/index.php?lgv=2

Could be your HR under-deducted your tax in the salary slip.

Happen to me before.