Rental income is liable to tax if the property is situated in Malaysia. This is applicable even though you are not residing in Malaysia or may be a non-resident. Rental income is taxable when it is due and payable to the property owner.
For example, your tenant rented your property from Aug 2012 - Dec 2012. He paid the rent for this period. In Jan 2013, you need to declare the rent for Aug - Dec 2012 in year of assessment 2012 as the rent was due and payable to you in 2012.
The rental is taxed on all the joint owners based on their share in the property, regardless which party receives the rent or whether the owners paid for the property.
Costs you incur to place the property in service, manage it and maintain it are usually deductible. Even if your rental property is temporary vacant, the expenses are still deductible while the property is vacant and held out for rent. Deductible expenses include but not limited to the following:
- Advertising and legal cost that you are getting subsequent tenant
- Assessment and quit rent
- Repairs and maintenance fees
- Expense on rent renewal
- Fire insurance premiums
- Interest on loan
- Expense on rent collection
- Pest control
However, the initial expenses such as legal cost to prepare rental agreement, stamp duty and commission for real estate agent are not allowed as deduction from rental income.
The cots of repairs such as minor repainting, repairing appliances, fixing leaks, replacing broken windows or doors can be deducted against rental income. But improvements such as installing a water filtration system, modernizing kitchen which add to the value of the property are not deductible.