Individual landlords with annual turnover or revenue below RM3,000,000 are exempt from issuing e-Invoices for rental income (live LHDN timeline, updated 30 August 2026). Malaysian tax residents declare residential rent via Borang BE (due 30 April) or Borang B (due 30 June), while non-residents file Borang M and face a flat 30% tax rate on net rental income.
Is rental income taxable in Malaysia in 2026?
Yes. Malaysian rental income is taxable. Most residential landlords in KL, PJ, Penang and JB are taxed on net rental income — gross rent minus allowable direct expenses — not on the full rent collected. The practical job is building a clean paper trail: tenancy agreement, rent ledger, bank proof, invoices, and repair evidence. This guide is maintained by Malaysia's zero-deposit rental platform.
Every ringgit you collect from a tenant is income that LHDN can see. The bank transfer is in your statement; if the tenancy agreement is stamped (as it should be), the paper trail is already there. The question is not whether to declare — it is how to declare correctly and which expenses you are actually allowed to offset.
Keep the records a tax agent usually asks for later: listing history, tenancy documents, rent collection trail, repair messages and handover photos. That does not replace a tax agent, but it reduces the need to guess from memory.
How is rental income classified — Section 4(d) or Section 4(a)?
Ordinary residential letting is generally Section 4(d) passive rental income. It becomes Section 4(a) business income only when maintenance and support services are provided comprehensively and actively. The classification changes what you can deduct and whether losses can be offset.
A landlord who rents out a condominium on a long-term tenancy is usually Section 4(d). A short-stay operator who provides cleaning, concierge support and active tenant management may need a different review.
| Factor | Section 4(d): passive rental | Section 4(a): business source |
|---|---|---|
| Typical arrangement | Long-term residential tenancy | Active service-heavy or short-stay letting |
| Services provided | Basic: collect rent, maintain the unit | Comprehensive and active: cleaning, concierge, management |
| Allowable deductions | Direct expenses only (LHDN PR 12/2018) | Wider business-source treatment; seek tax advice |
| Losses from rental | Generally cannot offset other income | May be available; seek tax advice |
| Capital allowances | Not available under 4(d) | May be available under 4(a); seek tax advice |
| Common examples | Owner rents flat to one household for a year | Multiple serviced units with staff, Airbnb-style operation |
If you are not sure which classification applies, write down the facts — number of units, lease lengths, services provided, who manages repairs — and bring them to a qualified tax agent before filing.
Section 4(a) vs Section 4(d) ITA — which one is yours?
The classification lives in the facts of your letting arrangement, not the rent amount. Ordinary long-term residential letting is Section 4(d) by default; Section 4(a) business-source treatment only attaches when you provide comprehensive and active maintenance and support services. Getting the classification right is the single decision that changes which expenses you can deduct, whether losses can be carried forward, and whether Schedule 3 capital allowances are in play.
The four-column table below is the practical decision frame. The first three columns are the rules; the fourth is a "verify with a tax agent" callout for the boundary cases where the LHDN position is not always obvious from the Act alone. Treat the table as a starting position, not a final ruling.
| Criterion | Section 4(a) — business source (comprehensive + active services) | Section 4(d) — non-business source (passive letting) | VERIFY-WITH-LHDN — callout for hybrid / serviced / furnished-short-stay |
|---|---|---|---|
| What the section charges | Aggregate business income, computed under s.4(a) and the business-source rules in s.35–s.43 ITA 1967, with adjusted loss and capital allowance treatment under s.44 and Schedule 3 | "Rents" as a specific non-business source under s.4(d); the section that catches ordinary residential passive letting | Serviced apartments, short-stay operators, and student-hostel operators usually need a tax agent to confirm which section applies — LHDN looks at substance over label |
| Date of commencement (when rent starts being taxable) | The date the property is "ready and available for letting" — completed, furnished and on the market, even if no tenant has yet moved in | The date the property is "first rented out" — the day a tenant takes possession, not the day the listing goes up | If you hold a property ready for short-stay and it sits empty for a quarter, 4(a) date-of-commencement rules may already be biting; 4(d) waits for a tenant |
| Loss carry-forward | Business losses can be carried forward under s.44(2) ITA 1967 and offset against future business income, subject to the rules on controlled transfers and source continuity | Section 4(d) losses generally cannot be carried forward against other income; the rental column is read in isolation for each year of assessment | If your letting has produced a real loss and you expect a profit in future years, the 4(a) vs 4(d) choice is the difference between carrying the loss forward and losing it |
| Capital allowances (Schedule 3) | Schedule 3 capital allowances may be available for qualifying capital expenditure on plant, machinery and certain industrial buildings used in the business | Schedule 3 capital allowances are not generally available to a 4(d) residential landlord — only direct expenses under PR 12/2018 | Furniture-and-fittings treatment is one of the boundary questions. A 4(d) landlord claims the cost of ordinary repair, not capital allowance; a 4(a) operator may have Schedule 3 in play for plant and machinery |
| Indirect expenses | Apportioned in line with general business-expense principles, supported by records | Indirect expenses (management time, shared utilities, general admin) are restricted by LHDN practice to a modest proportion of total rental income | If your management costs feel high, the right move is to document the actual time and out-of-pocket spend with receipts, not to guess. Administrative restrictions are LHDN practice, not a statutory formula in the Act |
| First-letting costs (advertising, first TA legal, initial agreement stamping, first agent commission) | Not deductible — LHDN treats these as initial / pre-commencement expenses, not business running costs | Not deductible — same LHDN position under PR 12/2018 para 8.3; first-tenant costs stay out of the rental column | If you let the same unit to a second tenant two years later, the renewal costs are not "first-letting" — they are deductible renewal costs. The first-letting rule is one-tenant, one-time |
| Form, filing and rate (resident) | Reported on Borang B as part of aggregate business income; resident individuals pay progressive graduated tax rates on total income including net rent | Reported in the "Rent" section of Borang BE / B / M; resident individuals pay progressive graduated tax rates on aggregate income including net rent | Resident landlords are taxed at progressive rates. A flat tax rate on rental for residents is not a Malaysian tax position; the flat rate applies to non-residents only (see next row) |
| Form, filing and rate (non-resident) | Non-resident individuals with rental income face the non-resident rate; a non-resident company pays the corporate tax rate | Non-resident individuals: flat 30% on net Malaysian rental income (w.e.f. YA2020), no personal reliefs, no graduated rates; allowable deductions reduce the net figure first | The flat rate applies to the net figure after deductions, not to gross rent. A non-resident landlord who never tracks expenses is effectively overpaying; calculating tax on gross rent would be wrong |
This table reflects LHDN Public Ruling No. 12/2018 and the Income Tax Act 1967 as at the date on this page. The non-resident 30% rate is operative from Year of Assessment 2020. Source classification for serviced and short-stay arrangements depends on the facts; consult a tax agent before filing.
The four practical scenarios where the table should send you to a tax agent rather than to MyTax:
- A short-stay or serviced apartment operation (Airbnb-style) where the line between 4(d) and 4(a) is not obvious from the listing alone.
- A furnished unit that is being marketed for short-stay, but is currently occupied on a long-term TA — the actual arrangement, not the marketing positioning, drives the classification.
- A non-resident landlord who is unsure whether the individual 30% or the corporate rate applies.
- A landlord whose property has produced a real loss and who wants to know whether the loss is available to carry forward.
For the per-expense deduction treatment under 4(d), the Malaysian landlord tax deductions guide is the next page to read. For the repair-vs-capital distinction that drives Schedule 3A treatment under 4(a), the capital allowance vs repair guide walks through what counts and what does not. For Airbnb-style letting, use the Section 4(a) versus 4(d) comparison above and confirm your actual services with a tax agent.
Is Airbnb income taxed differently in Malaysia?
Short-stay income is taxable in Malaysia like any other rental income — the duty to declare does not change; the classification does. An Airbnb-style operation with active guest services usually falls under Section 4(a) business income rather than Section 4(d) passive rental, which changes the deduction framework you file under.
Use the classification table above to place your own arrangement, and read the economics before modelling the return. Third-party analysis puts full-service short-stay management fees at 18-40% of revenue (a commonly cited 2026 average of roughly 20-25%), and Airbnb's host service fee is commonly cited at around 15.5% of the booking subtotal — operator fees, not tax. Third-party analytics (AirROI, Airbtics) put Kuala Lumpur's average short-stay performance at roughly 35% occupancy and a USD 69 average daily rate in early 2026. Whether those fees and running costs are deductible depends on where your letting lands: direct expenses under PR 12/2018 for Section 4(d), wider business-source treatment for Section 4(a) — confirm your actual arrangement with a tax agent before filing.
What expenses can landlords deduct under Section 4(d)?
LHDN's Public Ruling No. 12/2018 allows deductions for direct expenses wholly and exclusively incurred in producing rental income: assessment and quit rent, loan interest on the property loan, fire insurance premium, rent-collection and enforcement costs, renewal or subsequent-tenant costs, and ordinary repairs to keep the property in its existing state.
"Wholly and exclusively" is the discipline. The expense must be connected to earning the rental income, not to improving the asset or setting up the rental before any tenant has arrived.
| Allowable expense category (PR 12/2018) | What to keep | Common mistake |
|---|---|---|
| Assessment tax and quit rent | Council bill and payment proof | Missing receipt; confused with other properties |
| Loan interest on the property | Bank statement or annual interest schedule | Claiming the full instalment including principal |
| Fire insurance premium | Policy, invoice, payment proof | Claiming unrelated personal or household insurance |
| Rent collection and enforcement costs | Invoice, agreement, correspondence | No documentary link to rental income |
| Renewal or subsequent-tenant costs (agent commission, new tenancy prep) | Invoice, renewal agreement, new tenancy trail | Treating first-tenant costs as if they were renewal costs |
| Ordinary repairs (keeping the property in its existing state) | Contractor invoice, before-and-after photos, approval messages | Claiming renovation or betterment as an ordinary repair |
For the repair-versus-improvement distinction in detail, read the Malaysian landlord tax deductions guide. For the expense-by-expense deductible table, read the rental expense deductions guide.
What costs can landlords NOT deduct?
Do not deduct first-letting costs, capital improvements, mortgage principal, personal expenses, or renovation spend. LHDN names first-tenant costs specifically as initial expenses: first-letting advertising, legal cost for the first tenancy agreement, stamp duty, and first-tenant agent commission — all non-deductible.
This is where landlords most often make mistakes that trigger LHDN queries. A cost can feel rental-related but still be the cost of creating the income source, not the cost of producing income once the source exists.
| Do not deduct | Safer position |
|---|---|
| First-tenant advertising (online listing, classifieds) | Initial expense — not deductible |
| Legal cost and stamp duty for the first tenancy agreement | Initial expense — not deductible |
| First-tenant agent commission | Initial expense; different from renewal/subsequent-tenant commission |
| Mortgage principal repayment | Capital; only loan interest is deductible |
| Renovation, upgrade, or betterment | Capital improvement — not an ordinary repair |
| Sinking fund / capital replacement items | Review with tax agent; not standard direct expenses |
| Personal expenses bundled with rental costs | Must be wholly and exclusively for rental income |
Renewal or subsequent-tenant costs are treated differently. When you renew a tenancy or bring in a replacement tenant, the qualifying costs for that transaction can be deductible — but keep the documents that show it is a renewal or change of tenant, not the first letting.
What does a net rental income calculation look like?
Start with gross rent received, subtract the supported direct expenses, and keep the working paper with its evidence. The calculation is only as strong as the documents behind it. Here is the standard deduction schedule structure — always verify against your own facts and current LHDN guidance.
| Step / Item | How to compute | Record required |
|---|---|---|
| Gross annual rent | Total monthly rent received across the 12-month assessment year | Stamped TA and monthly rent ledger |
| Less: Assessment tax & quit rent | Actual local council and land office payments made during the year | Official assessment and quit rent receipts |
| Less: Mortgage loan interest | Loan interest portion incurred for the year (excluding principal repayment) | Annual loan interest statement from bank |
| Less: Fire insurance premium | Fire / houseowner insurance premium paid for the property | Insurance policy schedule and payment receipt |
| Less: Renewal / subsequent agent fee | Commission for tenancy renewal or replacement tenant (not first-letting) | Agency invoice and renewal tenancy agreement |
| Less: Ordinary repair expenses | Maintenance costs incurred to keep property in its existing state | Contractor invoices and before/after photos |
| Equals: Net taxable rental income | Gross annual rent minus total allowable direct deductions | Consolidated annual rental schedule |
The net rental income is added to your other income and taxed at the progressive resident rate. Your actual figures will depend on your loan, insurance, property charges, repair history, and how the unit was let.
Keep a separate schedule for each property, updated monthly. Do not wait until April to reconstruct twelve months of receipts from WhatsApp.
How is rental income split when a property is jointly owned?
Co-owners do not pool their rental income on one return. Each co-owner declares their own share of the rent on their own e-Filing and claims their own share of the deductions, in the same proportion as the ownership recorded against the title. A joint filing in one spouse's name for a property in both names is a recurring LHDN adjustment trigger.
The title and the loan name both matter, but not always in the same way. Where the property is owned in unequal shares (for example 70/30 between spouses, or 60/40 between business partners), declare in those proportions and document the split with the title document. Where the title is silent on share, the default is equal — but the better practice is to ask a tax agent to confirm the position for the year being filed.
| Joint-ownership scenario | What each owner declares | What each owner claims |
|---|---|---|
| Spouses, equal title share, single loan | Half the gross rent on each BE | Half the deductions, split by actual cost share |
| Spouses, unequal title share (e.g. 70/30) | Declared according to title ownership proportion | Deductions apportioned by ownership share, with proof of unequal title |
| Business partners, equal title, joint loan | Half the rent on each return | Half the loan interest, half the other deductions |
| Inherited property, multiple heirs | Share of rent in proportion to inheritance | Share of deductions, supported by probate / grant documents |
| Property in sole owner's name | Sole owner declares all rental income on their return | Sole owner claims all qualifying deductions |
One practical trap: a landlord who lets their spouse declare the full rent "for convenience" and splits the refund privately will be asked to amend the return if LHDN reconciles the bank statements against the title. The platform's per-tenancy rent ledger makes the gross-to-share conversion a copy-paste job; the title document is the proof the share is correct.
How is rental income taxed for resident versus non-resident landlords?
Resident individuals pay progressive income tax on net rental income combined with their other income. A non-resident individual landlord is taxed at a flat 30% on net Malaysian rental income from Year of Assessment 2020 — no personal reliefs, no rebates, no graduated rates, but allowable rental expenses are still deductible before that flat rate applies.
The 30% applies to the net figure after deductions, not to gross rent. That distinction matters: a non-resident landlord who never tracks expenses is effectively overpaying.
| Taxpayer status | Tax treatment | Personal reliefs |
|---|---|---|
| Resident individual | Progressive rates on total income (rental + other income combined) | Standard personal reliefs apply |
| Non-resident individual | Flat 30% on net rental income (w.e.f. YA2020) | None — no personal reliefs or rebates |
| Non-resident company | Separate corporate rate applies (not the individual 30%) | Not applicable |
Non-resident status depends on how many days you are present in Malaysia in the year of assessment. If you are overseas and own a Malaysian rental property, get a tax agent involved before you file. Wrong classification can mean filing under the wrong rate in both directions. For the non-resident comparison, use the table in this section and confirm your filing position with a tax agent.
What is CP500 and when does it apply to rental income?
CP500 is LHDN's advance instalment scheme for individuals with non-employment income such as rental income. If LHDN issues a CP500 notice, you pay the estimated tax in six instalments starting in March. You can revise the estimate using Form CP502 — first revision by 30 June and second by 31 October of the assessment year.
This is the gap most competitor guides miss. Landlords focus on the April annual return and forget that rental income can trigger instalments during the year itself.
CP500 is an estimate. It is not the final tax bill. If your rental income changes materially — a unit goes vacant, you sell a property, rent drops — ask your tax agent whether to file a CP502 revision rather than paying an estimate that no longer reflects reality.
For Year of Assessment 2026, LHDN announced a transition period: no penalty is imposed for non-payment or under-estimation of CP500 instalments by individuals with non-employment income including rental income. The tax itself still has to be paid; only the penalty is waived for YA2026 specifically. Do not treat this as a permanent exemption.
Does a residential landlord have to charge SST on rent?
No. Letting residential housing — terrace houses, apartments, condominiums, bungalows, serviced suites — is outside the scope of service tax. A normal residential landlord does not charge SST on rent. Service tax applies to commercial and certain non-residential rental services, not to ordinary residential letting.
The SST position is time-sensitive and the scope is expanding. If the property is commercial, mixed-use, held through a company, or part of a larger leasing or serviced-accommodation operation, verify the current RMCD position with a tax agent before issuing invoices.
For ordinary residential landlords renting out a single flat or house, the practical risk is not SST. It is weak records that cannot support the deductions already allowed.
Does a landlord need to issue e-Invoices?
Individual landlords with annual turnover or revenue below RM3,000,000 are exempt from issuing e-Invoices for personal rental income (live LHDN timeline, updated 30 August 2026). If your tenant is a business, the business tenant may need to issue a self-billed e-Invoice for the rent it pays. e-Invoicing uses LHDN's MyInvois system.
Phase dates and thresholds are moving. Verify the current LHDN e-Invoice guideline before assuming you are exempt or before issuing any invoice format change. The conservative position: if you receive a query from a business tenant asking for an invoice, check the current MyInvois guidance and raise it with your tax agent.
How to file rental income on Borang BE or B
For most landlords the form choice is a one-line decision: Borang BE if rental is your only non-employment income, Borang B if you also have business, freelance or sole-proprietor income, and Borang M if you are a non-resident individual. The rental entry sits in the same HK section on both BE and B, so swapping between them does not change the rental number.
For Year of Assessment 2026, e-Filing typically opens 1 March 2027, with BE/M due 30 April 2027 and B due 30 June 2027. Confirm the current dates on mytax.hasil.gov.my, since LHDN updates the calendar annually.
The full e-Filing walkthrough — log-in, EA import, the rent section, the relief and bracket math, the PCB reconciliation, amendment flow, audit-letter response — is in the Borang B / BE filing guide. The eight documents to gather before you open the form (EA, rent received, quit rent, assessment, insurance, mortgage interest, repair receipts, stamp duty) are listed there.
What record-keeping substantiates a rental deduction claim?
Keep records that prove three things: rent was received, the expense was real, and the expense was tied to producing that rental income. Bank proof alone is weaker than bank proof plus an invoice, a tenancy document, repair photos, and contractor messages.
The strongest file is boring. One folder per property, one sub-folder per year. Inside: tenancy agreement (stamped), rent ledger, bank statements, assessment and quit-rent bills, loan interest schedule, fire insurance policy, repair invoices, contractor notes, before-and-after photos, agent invoices, and key tenant messages.
| What to keep | Why it matters |
|---|---|
| Stamped tenancy agreement | Establishes the rental source, parties, and rent amount |
| Monthly rent ledger | Matches rent months to bank entries |
| Bank statements | Proves money received |
| Loan interest schedule from bank | Separates interest from principal repayment |
| Assessment and quit-rent bills and receipts | Supports the deduction |
| Fire insurance policy and payment proof | Supports the deduction |
| Repair invoices with before-and-after photos | Shows repair versus improvement |
| Agent invoices (renewal or subsequent tenant) | Shows it is a qualifying renewal/change cost, not first-letting |
| Handover and move-out photos | Supports repair deductions and deposit discussions |
Build this trail from listing history, tenancy documents, rent collection records, repair approval messages and handover photos. The same documents that support your tax records also support a deposit discussion if it comes to that.
When does a landlord need a tax agent?
Get a tax agent when any of these apply: non-resident owner, company ownership, multiple units, short-stay or service-heavy letting, mixed personal use of the property, large renovation, a forfeited deposit, a CP500 notice, or an LHDN query.
The cost of a tax agent review is smaller than the cost of filing incorrectly with confidence. Bring a clean pack:
| Bring to the tax agent | Why |
|---|---|
| Tenancy agreement and ownership details | Establishes the source and ownership share |
| Rent ledger and bank statements | Gross income |
| Expense schedule and receipts | Deduction support |
| Repair invoices and photos | Repair versus improvement classification |
| Loan interest schedule | Interest only, not principal |
| CP500 notice if issued | Instalment review |
If you are still preparing the unit, start with the rent-out checklist for Malaysian landlords.
FAQ
Is rental income taxable in Malaysia even if I only own one property?
Yes. There is no property-count threshold or rental-income exemption for individual landlords. Rental income is taxable from the first property and the first ringgit, though the practical tax burden depends on your net income after allowable expenses and your total income for the year.
What is the difference between Section 4(d) and Section 4(a) for rental income?
Section 4(d) covers passive residential letting where you collect rent without providing active services. Section 4(a) treats rental as business income when maintenance and support services are provided comprehensively and actively. The classification determines which deductions are available and whether losses can offset other income. If you run short-stay units with active management, ask a tax agent which applies.
Can I deduct my mortgage repayment against rental income?
Only the loan interest portion is deductible — not the principal repayment. Ask your bank for an annual interest schedule that separates the two. Claiming the full monthly instalment is one of the most common deduction errors LHDN sees.
Is first-tenant agent commission deductible?
No. LHDN's Public Ruling 12/2018 treats the cost of getting the first tenant — including advertising, legal fees for the first tenancy agreement, stamp duty, and first-tenant agent commission — as initial expenses that are not deductible against rental income. Agent commission for a renewal or a subsequent replacement tenant is treated differently and can qualify when documented.
What does the 30% non-resident tax rate mean in practice?
A non-resident individual landlord is taxed at a flat 30% on net Malaysian rental income (with effect from Year of Assessment 2020) — that is, on income after allowable deductions, not on gross rent. Non-residents get no personal reliefs, rebates, or the graduated resident rates, but allowable rental expenses are still deductible before the flat 30% rate applies. Non-resident status is based on days present in Malaysia in the year of assessment; confirm your status with a tax agent before filing.
Do I have to pay tax during the year or only when I file?
If LHDN issues a CP500 notice, you pay estimated tax in instalments during the year, commencing March. These instalments are credited against your final assessment when you file the annual return. For Year of Assessment 2026, penalties for CP500 under-estimation are waived as a transition measure, but the tax itself remains payable.
Which Borang should I file — BE, B or M?
Borang BE if rental is your only non-employment income; Borang B if you also have business, freelance or sole-proprietor income; Borang M if you are a non-resident individual. The rental entry itself sits in the same HK section on both BE and B, so the rental number does not change between BE and B — only the form that surrounds it does. See the Borang B / BE filing guide for the full walkthrough.
Related guides
- Property Is Under Joint Name: Who Declares the Rental Income to LHDN?
- How Much Rental Income Is Taxable in Malaysia? Threshold, Deductions & Filing (2026)
How this page stays accurate. The legal statements rest on Income Tax Act 1967; figures are checked against a dated fact registry at every update. Report an error: [email protected].