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Guidelines on the tax treatment for developers or management bodies for the maintenance and management of buildings and common property
The Inland Revenue Board (IRB) has published on its website updated Technical Guidelines in Bahasa Malaysia, titled “Garis Panduan Berhubung Layanan Cukai Ke Atas Pemaju Atau Badan Pengurusan Bagi Penyenggaraan Dan Pengurusan Bangunan Dan Harta Bersama” (Guidelines), dated 18 July 2022. These new seven-page Guidelines replace and revamp the earlier guidelines titled “Garis Panduan Berhubung Layanan Cukai Ke Atas Caj Penyenggaran Dan Pengurusan Harta Bersama Yang Diterima Oleh Pemaju, Badan Pengurusan Bersama Dan Perbadanan Pengurusan”, which was published on 21 May 2012 (see Tax Alert No. 13/2012).
Broadly, the Guidelines were issued to explain the tax treatments for developers or management bodies (i.e., joint management bodies (JMBs), management corporations (MCs) or subsidiary MCs) for the maintenance and management of buildings and common property.
Some of the key points are outlined below.
- The mutuality principle (as defined in the Guidelines) among owners of property units also applies to the developers and/or management bodies that maintain and manage the buildings and common property. As such, maintenance charges, contributions to the sinking fund and any other receipts from mutual dealings with property owners will not be subject to tax, and the attributable expenses or capital expenditure will similarly be disregarded for tax purposes.
Other income (other than that mentioned above) will be subject to tax and the relevant deductions can be claimed accordingly. The Guidelines also explain and provide an example (refer to “Lampiran 1” of the Guidelines) to illustrate the tax computation for an MC.
- A management body is taxed at the scaled rates prescribed under Paragraph 1, Part I of Schedule 1 of the Income Tax Act 1967 (ITA) and is required to submit its annual income tax return form (i.e., Form TF) pursuant to Section 77 of the ITA.
- A developer is taxed at the prevailing tax rates that apply to companies as prescribed under Paragraphs 2, 2A or 2B, Part 1 of Schedule 1 of the ITA, and is required to maintain separate accounts for its business and for the maintenance and management of buildings and common property.