Special deduction on rental reduction to SME and Non SME

你可以从 EIS 中拿多少失业救济金

你可以从 EIS 中拿多少失业救济金

Great News to Landlords!

The special deduction on rental reduction with at least 30% to Small and Medium Enterprise (SMEs) and Non-Small and Medium Enterprise (Non-SMEs) has been gazette on 02 September 2021 (Publication date on 08 September 2021).

Key takeaways:

1.      Who is entitled for the deduction?

Landlord (individual or company) who rents out a business premise to SMEs or Non-SMEs for business purpose. 

2.      How to determine SME?

Definition of SMEs according to SME Corp. Malaysia as below:

Manufacturing

Sales turnover is less than RM50million or Employee is less than 200 employees 

Services & other sectors

Sales turnover is less than RM20million or Employee is less than 75 employees 

3.      What is the period for the deduction?

For SMEs Tenant, the period is from April 2020 – December 2021

For non-SMEs Tenant, the period is from January 2021 – December 2021  

4.      Any requirement on the rental deduction?

A rental deduction of at least 30% on monthly rental under existing tenancy agreement

The business premise rented out is for business purpose 

5.      What types of documents need to be kept by Landlord?

Stamped tenancy agreement under the Stamp Act 1949

A separate statement of rental income for the qualifying months (Refer to Lampiran HK-x)

A confirmation stated the amount of rental reduction by landlord and a confirmation stated the receipt of rental reduction by tenant

SME certificate issued by SME Corp. Malaysia for SME tenant (certificate issued before 31/12/2021 is eligible) 

Sources

FAQ on SMEs and Non-SMEs on 3 September 2021

http://phl.hasil.gov.my/pdf/pdfam/FAQ_POTONGAN_PENGURANGAN_SEWA_PKS_DAN_BUKAN_PKS_1.pdf

Income Tax (Special Deduction for Reduction of Rental to a Small and Medium Enterprise) Rules 2021(P.U (A) 353)

https://lom.agc.gov.my/ilims/upload/portal/akta/outputp/1709367/PUA353_2021.pdf

Income Tax (Special Deduction for Reduction of Rental to a Tenant other than a Small and Medium Enterprise) Rules 2021 P.U (A) 354

https://lom.agc.gov.my/ilims/upload/portal/akta/outputp/1709370/PUA354_2021.pdf

Great News to Tenants ! Amendments to MFRS 16 on COVID-19-Related Rent Concessions

Background :

Rent concessions have been, or are expected to be, provided to lessees as a result of the COVID-19 pandemic. Such concessions might take a variety of forms, including payment holidays and deferral of lease payments for a period of time, sometimes followed by increased rent payments in future periods. 

An entity would consider whether such rent concessions meet the definition of a modification under MFRS 16 and if so, an entity would need to follow the modification guidance which could be complex.

The modification rule in MFRS 16 requires an entity to account for the lease modification as a separate lease if certain criteria are met; and if criteria are not met, the existing lease liability is remeasured using a revised discount rate.

Lessees could find it challenging to assess and apply these requirements to a potentially large volume of COVID-19-related rent concessions.

The key amendments

The amendments grant an optional exemption for lessees (but not lessors) from assessing whether a rent concession related to COVID-19 is a lease modification under MFRS 16.

If the exemption is elected, lessees could elect to account for COVID-19 rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as a variable lease payment in the period(s) in which the event or condition that triggers the reduced payment occurs.

 The exemption only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met:

 1. the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

2. any reduction in lease payments affects only payments due on or before 30 June 2021 (for example, a rent concession would meet this condition if it results in reduced lease payments on or before 30 June 2021 and increased lease payments that extend beyond 30 June 2021). In contrast, if reductions in lease payments extend beyond 30 June 2021, the rent concession in its entirety would not be within the scope of the practical expedient; and

3. there is no substantive change to other terms and conditions of the lease.

The transition provisions

The amendments are to be applied retrospectively, with the cumulative effect of initially applying the amendments recognised in the opening balance of retained earnings (or other components of equity, as appropriate) at the beginning of the annual reporting period in which lessees first apply the amendments.

Lessees are not required to restate comparative information or to provide the disclosure under paragraph 28(f) of MFRS 108.

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