MALAYSIA Law and Practice Contributed by: Natalie Ooi and Nicholas Ooi, Ooi & Ooi
Service Tax on Rental Service tax on rental does not apply to resi - dential properties; it only applies to commercial property rentals, and only if the landlord is a tax - able person under the Service Tax Act 2018. The service tax rate is 6% (increased to 8% for some services in March 2024, but rental remains at 6%). A landlord must be registered for service tax if: • they provide taxable services, including the leasing of commercial property; • their annual taxable turnover exceeds MYR500,000; or • they lease out office spaces, shops, ware - houses and retail outlets. Income Tax on Rental Income Rental income is taxable under the Income Tax Act 1967. Individuals and companies must report rental income as part of their annual tax filings. Tax rates are as follows: • individuals – based on progressive rates of up to 30% for residents; and • companies – a flat rate, currently 24%. Withholding Tax (for Non-Resident Landlords) Withholding tax may be applicable to a non- resident individual or entity. 6.8 Costs Payable by a Tenant at the Start of a Lease Legal fees, stamp duty on the lease agreement, utility and lease deposits are generally payable by tenant at the start of a lease. 6.9 Payment of Maintenance and Repair In Malaysia, for stratified property, the landlord shall pay the maintenance and sinking fund of
An unregistered lease is not valid as a statutory lease and does not enjoy the statutory protec - tions and cannot bind third parties or successors in title to said land. Nonetheless, an unregistered lease is still enforceable between the tenant and the landlord in accordance with the agreement between them, or may create an estoppel therein. 6.3 Regulation of Rents or Lease Terms Rents and lease terms are generally freely nego - tiable between the landlord and tenant. There is no statutory rent control or regulation governing commercial leases, and there is no mandatory code that parties must follow. 6.4 Typical Terms of a Lease The term of a private lease is more than three years and up to 20 years. Rent is typically pay - able monthly. Most if not all lease agreements would specify that the tenant (or lessee) will keep the leased premises in a tenantable condition and that, upon the expiry of the lease, the tenant shall deliver the premises free of encumbrances and in a tenantable condition, with reasonable wear and tear accepted. 6.5 Rent Variation This is a matter of contract that is agreed upon There is no set formula for rental increase, with business trends, market rates, good will and other commercial factors usually being taken into account. 6.7 Payment of VAT Malaysia does not have VAT, but it has an SST regime. Only the service tax component is rel - evant for rental. between the landlord and the tenant. 6.6 Determination of New Rent
659 CHAMBERS.COM
Powered by FlippingBook