An Analysis of Public Ruling

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INLAND REVENUE BOARD MALAYSIA

INCOME FROM LETTING OF REAL PROPERTY
PUBLIC RULING NO. 4/2011
Translation from the original Bahasa Malaysia text

DATE OF ISSUE: 10 MARCH 2011

INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011

INLAND REVENUE BOARD MALAYSIA

CONTENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 11. 14. Introduction Related provisions Interpretation Letting of real property as a business source Letting of real property as a non-business source Commencement date of letting of property All real properties grouped as a single source Expense relating to income of letting of real property Rental income received in advance Capital allowance Industrial building allowance Replacement cost of furnishings Letting of part of building used in the business Effective Date

Page 1 1 1 1-4 4-5 5-7 7 - 13 13 - 19 19 - 22 22 - 25 26 26 26 26

DIRECTOR GENERAL'S PUBLIC RULING A Public Ruling as provided for under section 138A of the Income Tax Act 1967 is issued for the purpose of providing guidance for the public and officers of the Inland Revenue Board Malaysia. It sets out the interpretation of the Director General of Inland Revenue in respect of the particular tax law, and the policy and procedure that are to be applied. A Public Ruling may be withdrawn, either wholly or in part, by notice of withdrawal or by publication of a new ruling which is inconsistent with it.

Director General of Inland Revenue, Inland Revenue Board Malaysia.

INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011

INLAND REVENUE BOARD MALAYSIA 1. This Ruling explains: (a) (b)

Letting of real property as a business source under paragraph 4(a) of the Income Tax Act 1967 (ITA); and Letting of real property as a non-business source under paragraph 4(d) of the ITA.

2.

The provisions of the ITA related to this Ruling are paragraphs 4(a) and 4(d), subsections 33(1) and 39(1). The words used in this Ruling have the following meaning: 3.1 "Arm's length basis" refers to the circumstances, decisions or outcomes that would have been arrived at if unrelated or unconnected persons were to deal with each other wholly independently and out of reach of personal influence . "Real property" includes any land and any interest, option or other right in or over such land and includes any building on land. "Person" includes a company, a co-operative society, a partnership, a club, an association, a Hindu joint family, a trust, an estate under administration and an individual, but excludes a unit trust. "Letting of real property” means granting the use of a real property or occupation of a real property under an agreement or a term of contract and includes the letting out of part of the real property that is owned or rented. "Management corporation" means a management corporation established under the Strata Titles Act 1985 (Act 318), the Land (Subsidiary Title) Enactment 1972 (Sabah No. 9 of 1972) or the Strata Titles Ordinance 1995 (Laws of Sarawak, Chapter 18). “Rent” or "rental income" or “income from letting” includes any amount received for the use or occupation of any real property or part thereof including premiums and other receipt in connection with the use or occupation of the real property. "Related company” means the situation where one company holds not less than 20% of the ordinary shares or preference shares of the other.

3.

3.2 3.3

3.4

3.5

3.6

3.7

4.

Letting of real property as a business source 4.1 Letting of real property is deemed as a business source and the income received from it is charged to tax under paragraph 4(a) of the ITA if

Issue: B

Page 1 of 26

INCOME FROM LETTING OF REAL PROPERTY Public Ruling No. 4/2011 Date of Issue: 10 March 2011

INLAND REVENUE BOARD MALAYSIA

maintenance services or support services are provided in relation to the real property. 4.2 Maintenance services or support services should...
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