QUOTE(Minolta @ Apr 27 2009, 11:10 AM)
The only way to pay zero tax on rental income is either: -
1. Show no net profit on tax return form
2. Do not declare your rental
The above 2 can be either authentic or illegal. Either way, I think most investors are more interested in the "illegal" ways. I mean, admit it, we all do it, small or big amount doesn't matter. The only thing is not to get caught. And since there are so many tax submissions every year, we all think that the chances of being scrutinized by Income Tax Dept is very low, so we do it with some confidence.
I have ventured on this idea of forming a Sdn Bhd to manage my rental income before, but gave up as it was too problematic and expensive. I have noted that the primary business of such a company is Investment Holding Company, and falls under the tax scheme of such. While capital allowances are fully deductable, deductions for others are very minimal....ie you cannot buy a car to drive or get a maid and say its part of the company and get a deduction. You cannot go for expensive meal with your family and put it under company entertainment fees and get a deduction. IRD is too smart for that. Then there the tax portion. Yes, maximum tax is 20%, but the money will be in the company. You can only use the money for more investment or buy another property(of which the lawyer fees, stamp duty is all deductable). But should you want to transfer the money from company account to your personal account, then you will have to declare a dividend on yourself......which means you will have to put is as dividend income under your personal tax return and that is taxable....so kinda like double taxation! The company secretary is expensive.
Best thing is to get > 4 properties and declare those all under business income in your personal tax return. Then all the properties can share profit/loss and expenses etc. Much more simpler, cheaper and lesser tax and headache. But unlikely zero tax. If really zero taxable, then it would mean we've actually made bad investments.
sharing,
minolta
Not true. You can always pass a resolution to get the money for your own use. Sdn Bhd can shield you from a lot of liabilities. Think in terms of having TWO sdn. bhd. an you'll get the point. And think also when you have children and you want to divide 3 properties to 4 kids. Wealth creation, preservation and distribution are the main reason one wants to use a Sdn. Bhd.
I will say this though, if the cashflow is not that great, you may not want to do this. There are just so many freaking steps to do this, and also consider the costs of maintaining one. But then again, if you're in this for the long haul, this is definitely the way to go (apart from going exclusively for flexi mortgage).
With RPGT abolished, this should be one's consideration.
Purely my 2%*RM1.
Added on April 27, 2009, 8:47 pmQUOTE(jasonhanjk @ Apr 27 2009, 08:58 AM)
You may also face difficulty to take up mortgages from banks when your company is still young (less than 2 years). And normally banks will offer higher interest rate (0.5%-1% higher than personal’s mortgage) and shorter tenure (< 20 years) for corporate’s mortgages.
Also not true. In Malaysia, everything is up for negotiations with the banks. I can get same, or better terms even, with purchase under company.
You are buying VIA a commercial entity, NOT buying a commercial entity. When you stress that distinction, it will become easier.
This post has been edited by meejawa: Apr 27 2009, 08:47 PM