Special Tax Deduction on Rental Reduction

  1. Who is eligible? 

All taxpayers (individual/ cooperative/ other business/ non business entities) who rent out business premises to qualified SMEs tenants;

The rented premises must be used by the SME tenant for business purpose;

Landlord must be taxpayer who is receiving rental income under Subsection 4 (a) and 4 (d) of Income Tax Act 1967.

  1. When is the eligible period? 

From April 2020 until 30 September 2020.

  1. What is the minimum rental reduction for landlord to enjoy this special deduction?

The rental reduction must be at least 30% from the current monthly rental rate.

  1. Is the landlord eligible if he reduces the rent at different rate each month but all rate exceeds 30%?

Yes, as long as the reduction rates are not less than 30% in each of the eligible months.
If in any of these eligible months, the rental reduction is less than 30%, then the company is not eligible to claim the special deduction for that particular month/months.

  1. What is the special deduction amount? 

The amount of special deduction is equivalent to the amount of monthly rental reduction offered by landlord to eligible SMEs tenants.

  1. Definition of SMEs

The definition of SME for this purpose follows the National SME definition.
For more information, please click here to refer to the SME Definition Guideline

SMEs that are eligible for this special tax deduction are registered SMEs and have obtained SME Status Certificate from SME Corp. Malaysia

Any queries regarding eligibility or registration as an SME can be directed to SME Corp at SME Corp Malaysia at 1300-30-6000 or email to info@smecorp.gov.my

  1. Who is not considered as SMEs?

Public listed entities on the main board

Subsidiaries of:
✔ Publicly listed companies on the main board
✔ Multinational corporations (MNCs)
✔ Government linked companies (GLCs)
✔ Syarikat Menteri Kewangan Diperbadankan (MKDs)
✔ State owned enterprises

  1. Is a company qualified for this deduction if rents out premise to related company? 

The company (landlord) is eligible for this special deduction if the related company (tenant) qualifies as SME.

  1. What is meant by business premises for this special deduction?

All premises used for business purpose (i.e office/workshop/ childcare/ warehouse/ rented lot/ bazaar/ booth /stall).

Residential house used for both residential and business is NOT qualified for this special deduction.

  1. Is this special deduction applicable for rental of machines/ parking spaces/ telecommunication towers? 

No. This special deduction is only applicable to rental of business premises used for business purpose only.

  1. The landlord has received rental payment for April until June 2020 earlier this year.
    Can the landlord offers rental reduction and claim special deduction?

Yes. Landlord who has received rental payment in advance is still allow to offer rental reduction as long as all conditions are fulfilled.

  1. What are the required supporting documents?

Taxpayer (landlord) who claims this special deduction is required to keep the following documents:

i. Stamped tenancy agreement;

ii. Rental income statement;

iii. SME Status Certificate issued by SME Corp.*;
*Information regarding registration of SME can be referred at https://smereg.smecorp.gov.my

iv. Tenant’s information, rental information and rental reduction methods**
**To be provided in working sheet (HK) of Company Return Form, please refer to the example attached as below:


  1. Illustration:

A Sdn Bhd rents a shop lot to B which is an eligible SME for RM5,000 a month (RM60,000 yearly).
A Sdn Bhd has agreed to offer rental reduction to B for the month of April 2020 to September 2020, of RM2,500 a month.

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