How To Stamp Tenancy Agreement

I first became a "landlord" and signed my first ever tenancy agreement 2 years ago. Now it's time to renew it.

Last time my property agent helped me to do everything including finding tenant, drafting the agreement and doing the stamping. I think I should learn to do it myself.

For tenancy agreement, we can download it free of charge from internet and just make some necessary amendment.

To know how and where to do the stamping, a search in internet brought me to a good local property investment blog known as "horlic".

However, this blog seems to be inactive now...

Here are steps I went through to get the tenancy agreement stamped.

1. Prepare 2 copies of tenancy agreement signed by both parties
2. Download and fill up PDS 1 & PDS 49A forms. Forms are available at LHDN website & branches
3. Bring the forms and tenancy agreement to nearest LHDN branch. Get a queue number for stamp duty and then submit to stamp duty counter
4. Wait for your name to be called at payment counter and then pay the stamp duty
5. Get the tenancy agreement back and go home

*LHDN = Lembaga Hasil Dalam Negeri (Inland Revenue Board)

As there was not many people when I went there, I get everything done in less than 10 minutes.

It's much easier than I thought.

According to the staff there, now we can only stamp the tenancy agreement within 30 days after the starting date of tenancy period.

For example, if you rent your property from 15th April 2015 to 14th April 2017, you can only stamp the agreement from 15th April 2015 to 14th May 2015.

However, I'm not sure how strict they are with this new rule. Previously we can stamp it before the date of tenancy period.

How much stamp duty we have to pay?

LHDN staff will have a list to refer to, but we can calculate the stamp duty by ourselves using a formula. 

To know how much to pay, calculate your annual rental first then refer to the table below.

Annual Rental	Tenancy period
	< or = 1 year	> 1 to 3 years	> 3 years
First RM2400	Exempted	Exempted	Exempted
Every RM250 after RM2400	RM1	RM2	RM4

The first RM2400 of annual rental is exempted from stamp duty. This means that if your monthly rental is not more than RM200, you don't need to pay stamp duty.

It's easier to understand by using example.

If your rental is RM1200 per month and tenancy period is 2 years, annual rental will be RM14400.

As first RM2400 is exempted from stamp duty, only RM12000 will be charged.

So RM12000 divided by RM250 = RM48.

As it is a 2-year agreement, RM48 x RM2 = RM96.

The stamp duty will be RM96. However, we need to pay another RM10 for second copy of agreement.

So, total payable to LHDN will be RM106.

This stamp duty is commonly paid by tenants.

What if the calculated stamp duty is not a round number? 

Lets say if you rent your property at RM1600 per month for 1 year. Stamp duty will be:

[(RM1600 x 12) - 2400] / 250 = RM67.20.

I'm not sure whether it will be rounded up to RM67 or RM68. Those who knows might want to clarify on this.

In conclusion, DIY your tenancy agreement stamping is not difficult at all.

GST Finally Arrives

Now, GST means Good Shopping Time. From tomorrow onward, it will be Goods & Services Tax era.

I think every Malaysian will more or less buy more things before GST, either fast moving groceries or things we seldom buy. I'm also one of them.

Actually I did not buy a lot of extra items, but it's enough to explode my credit card...

Some people may want to buy 100 rolls of toilet papers, some change their furniture or home appliances, some do house renovation and some buy a new property.

For me, I just stock in more infant milk powder, only to realize later that they are exempted from GST...

Anyway, GST has hastened me to purchase 2 Redmi Note 4G, one for my wife and one for myself. This is the first time in my life that I shop for a smartphone!

Extra 6% might not seem to be a huge amount in which consumers pay extra 60 cents for a RM10 item.

However, when you are charged 6% on almost everything in your life, that is a significant financial burden.

Before its official date of implementation, most people are already being charged GST.

I have two, motor insurance and life insurance, which have already been paid.

I can foresee tighter cash flow this year, especially when my take-home pay will be 30% lower than previous year. This is a real challenge for me and I really need to be more frugal after this.

To cut down expenses, it's always good to look at those fixed and recurring expenses first.

My first move is to downgrade my Astro subscription, which will save RM30 per month.

I like sports, and I like to watch EPL football matches which I started to do so some 25 years ago.

Now I have removed full Astro Sports package but I still have some sports channels in HD. So why not?

My next target will be phone bill. I consistently pay more than RM200 per month to Maxis even though I normally use only about RM30 a month.

This is because I have to pay for 4 supplementary lines which include a few heavy users. I have tried to find ways to reduce this bill since few years ago but the conclusion is always more worth it to keep current package.

With new smartphones for myself and my wife, I'm considering to subscribe for data service so I really need to work it out smartly.

For home internet, I think I have saved quite a lot for 2-3 years since moving into my new house, by not subscribing to Streamyx or Unifi.

Now I'm using 4GB of WiFi data volume a month (RM68) at home and it appears just enough for me.

I purposely limit my online time at home to spare out more time for family and house chores. In other words, I have not much time and MB to do stock market research at home.

For electricity bill, I think there's not much room to save significantly except I don't use air-conditioner all together. My average usage is approximately RM140 per month.

Previously I used to turn on the air-cond at night for 3 hours at 27-28C. However, since last year when the weather is very hot, the air-cond is turned on for 6-8 hours! Now I should cut down the time again...

Though these cost-cutting measures may not save a lot, I think it's still good to make it a habit to control our budget.

Time flies. I remember when GST was announced by the government officially during Budget 2014 in Oct 2013, I felt that it's still a long time to go. Now the time has finally arrived.

As almost all countries around the world adopt GST, I believe that it is an essential tax system which can benefit the country. I just hope that government will utilize the tax income smartly.

Tax On Rental Income

In Malaysia, rental income is taxable.

For most new and small property investors, the rental income is taxed under individual (BE-form).

If Mr.A earns a salary of RM6,000/month  + a rental income of RM1,000/month (total income RM84,000 a year), and assume a total tax relief of RM24,000, the final chargeable income will be RM60,000. So Mr.A's tax rate will be 19%.

If Mr.B earns a salary of RM6,000/month and has no rental income (total income RM72,000 a year), and also has a similar tax relief of RM24,000, his chargeable income will be RM48,000. So his tax rate is at 11%.

Mr.A has to pay a total tax of RM11,400 while Mr.B has to pay RM5,280.

Mr.A earns RM12,000 more than Mr.B in a year, but pay RM6,120 more tax.

In other words, RM510 of the RM1,000 monthly rental income is being "taxed", and Mr.A only earns RM490 more than Mr.B in a month, not RM1,000 he thinks.

Fortunately for property investors, there are deductible expenses from rental income.

These deductible expenses include:

• assessment
• quit rent
• loan interest
• fire insurance premium
• expenses on rent collection
• expenses on rent renewal
• expenses on repair
• service charges, maintenance fees, sinking fund, Indah Water bills

However, initial expenses before the property is "officially" rented out are NON-deductible. These include:

• advertising cost to obtain the tenant
• legal cost & stamp duty for rental agreement
• commission for real property agent 

Many people may think that all commission for property agent and stamp duty for tenancy agreement are tax deductible. Actually they are not deductible for the first time you rent out the property. For subsequent renewal of tenancy agreement, they are deductible.

The information above are from limited personal knowledge and experience, and might not be accurate. Please correct me if there are any mistakes.