Special Tax Deduction on Rental Reduction for SMEs

Owners of buildings or business premises that provide at least 30% reductions or waiver on rent to SME tenants shall be given a special deduction.

This measurement is part of the Economic Stimulus Package announced by the Prime Minister on 6 April 2020.

What is the purpose?

To encourage landlords to reduce rental for SMEs affected by Covid-19 as a support to the sector.

Who is eligible?

Any taxpayer (individual, partnership, company or cooperative landlord) who is leasing his business premise to any small and medium enterprise (SME). [link to – definition of SME]


What are the requirements?

  • To qualify for the tax benefit, the Landlord must reduce his monthly rent by at least 30%.

  • The tenant is an SME pursuant to the definition prescribed by National SME.

  • The reduction of rent is to be given for the month of April, May and June 2020.

  • Only rent reduction for business premises will be considered, example: Office, workshop, warehouse, childcare and rented lot/bazar/booth/stall.

How does it work?

The landlord shall enjoy a special deduction equivalent to the rental reduction or waiver (please see the example below) that has been given to his SME tenant.


Example

Company A (landlord) is renting out an office to Company B at a rental rate of RM5,000 a month. Company B is an SME. Company A agreed to reduce the monthly rent from RM5,000 to RM2,500 for the month of April, May and June 2020.


Company A (Landlord)'s Rental Income Statement


What if I only offer rent reduction in the month of June 2020?

If the rent is reduced by at least 30% and the tenant is an SME, you will be eligible to claim the special deduction for that particular month.


What are the supporting documents required?

a. Valid tenancy agreement;

b. Rental income statement;

c. Details of the tenant as SME such as number of business registration, tax file number etc.;

d. Details of the rental reduction


* Item c and d will have to be provided in Working Sheet (HK) of Company Return Form.


FAQ published by IRBM on Rental Reduction for Business Premises can be downloaded here.








Disclaimer: Every effort has been made to provide accurate information. However, the information and regulations contained in this article are subject to changes and amendments by the relevant authority at any time. As such, the information in this article may not be current.

And the information provided in this article is general commentary only and shall not be considered as advice or recommendation. As all tax situations are specific to their facts and will differ from the situations in this article - if you have specific tax questions you should consult a licensed tax agent.


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