If you own properties and rent them out in Malaysia, your rental income is taxed either as business income under Paragraph 4(a) or non-business income under Paragraph 4(d) of the Income Tax Act 1967. The category you fall into determines how much you can claim as deductions and whether you qualify for capital allowances. Most property owners want to be under Paragraph 4(a). But not everyone qualifies.

Public Ruling No. 12/2018 issued by LHDN draws the line clearly. If you provide maintenance or support services on your properties comprehensively and actively, your rental income is treated as business income under Paragraph 4(a). Comprehensive means doing generally all things necessary for the maintenance of structural elements, stairways, lobbies, lifts, car parks, drains, landscaping and external fixtures. Active means you either provide those services yourself or hire another party to do so. Providing security services alone does not qualify.

If you let out a property without meeting this standard, the income falls under Paragraph 4(d) as non-business income. This includes situations where facilities are maintained by a management corporation that you simply pay fees to. Those services are passively derived from ownership rights and do not qualify.

This distinction was tested in court. On 22 April 2026, the High Court dismissed the appeal of Glenmarie Estates Sdn Bhd against LHDN. Glenmarie owned 14 properties but could not prove comprehensive and active service provision. The court found they only responded to tenant complaints and their tenancy agreements did not require comprehensive maintenance. Their income remained under Paragraph 4(d).

The tax treatment of your rental income depends on what you do and what you can prove. Service provision must be real, documented and consistent.

If you are unsure which category your rental income falls into, our team at August Advisory can help. WhatsApp 010-246 2151.

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