After getting your property paperwork sorted out and the daunting task of completing your renovation, investment buyers will quickly seek to collect rental from the property. Attracting and screening for a good tenant is not easy and it also boils down to luck. But i believe creating a home rather than just treating it as a rental house will increase your chances of finding a tenant that actually wants to live in it.
One of the things to note when renting out your units is to never rent your house without a tenancy agreement (TA), especially for direct (not through agents) rental to friends/family/friend of friends etc. The extra step in drafting a TA and getting it officially stamped at LHDN office forms a legalised document will save you much agony in the case of any dispute.
There is another added advantage by having a tenancy agreement. It will be a supporting document to prove that you are having additional rental income. This additional income can help you to acquire loan approval for your next property purchase.
Calculating Stamp Duty payable
So how much stamp duty will my rental unit incur? This is the official statement from LHDN (Inland Revenue Board of Malaysia):
Tenant And Landlord
The lease or tenancy instrument which secures annual rent not exceeding RM2,400 is EXEMPTED from duty and presentation of these instruments at a stamping office or centre is not necessary.
The prescribed rate of duty on the instrument which secures annual rent exceeding RM2,400 is as follows:
(For every RM 250 or part thereof in excess of RM2, 400)
When the lease is for a period Duty Rate
Not exceeding one year RM1.00
Exceeding one but not exceeding three years RM2.00
Exceeding three years or for any indefinite period RM4.00
(For every RM250 or part thereof in excess of RM2,400
-If the consideration for tenancy constitutes or includes a PREMIUM, additional duty is chargeable and it is calculated on the amount of the premium at the rate chargeable on immovable property.
Too much jargons? Here is step-by-step calculation:
Step 1: Calculate the total of annual rental (e.g.: RM2,700 per month x 12 months = RM32,4000)
Step 2: Calculate the taxable rental. The first RM2,400 of your annual rental is entitled for stamp duty exemption (e.g.: RM32,400 – RM2,400 = RM30,000)
Step 3: For every RM250 or part thereof in excess of RM2,400, different rates will be applied to calculate the payable Stamp Duty according to tenancy period as following:-
- RM1 will be charged for tenancy period 1 year or less;
- RM2 will be charged for tenancy period more than 1 year but equal to 3 years or less than 3 years;
- RM4 will be charged for tenancy period exceeding 3 years or more.
(= OR < 1 YEAR)
(> 1 YEAR, = OR < 3 YEARS)
(> 3 YEARS)
|First RM 2,400||Exempted||Exempted||Exempted|
|Every RM 250 or part thereof in excess of RM2,400||RM 1.00||RM 2.00||RM 4.00|
Example 1: Tenancy Period = 1 year
Payable Stamp Duty = (RM30,000 / RM250) x RM1= 120 x RM1 = RM120
Example 2: Tenancy Period = 2 years
Payable Stamp Duty = (RM30,000 / RM250) x RM2 = 120 x RM2 = RM240
Example 3: Tenancy Period = 3 years
Payable Stamp Duty = (RM30,000 / RM250) x RM4 = 120 x RM4 = RM480
* figures will be rounded up
Step 4: For second copy of tenancy agreement, the stamping cost is RM10.
Total Cost Involved (for tenancy period of 1 year, DIY tenancy agreement),
= Stamp Duty + Stamping for 2nd Copy
= RM120 + RM10
FAQ on Tenancy Agreement
Who prepares the tenancy agreement?
Either the tenant or landlord can engage a lawyer to draft the tenancy agreement. Often many cases property rental agents would be helping landlords prepares the agreement from a prepared template. If you are drafting it yourself, ask around your friends and colleagues, I’m sure some of them got it.
Where can I pay for tenancy agreement stamp duty?
You can pay for stamp duty at any Lembaga Hasil Dalam Negeri (LHDN) in Malaysia, for a list of LHDN branches near you, go here.
Who pays for the stamp duty, tenant or landlord?
There is no hard rule on this as the law doesn’t state, however conventionally it is the tenant who will bear the cost of stamping fee, but some (more desperate) owner agree to split 50/50 or absorb the cost to secure the tenancy. Nothing is set in stone.
If you get a lawyer to draft for a standard residential tenancy agreement, they might charge you from RM200 to RM400, depending on the rental rates and complexity of the agreement. To save cost, google it, there are a lot of sample in internet. Else, ask around your friends and colleagues, I’m sure some of them got it.