Below are summary that i get from RED - News Straits Times @ Friday , 2/11/2012 ; which i think worth sharing here :)
Sunday, November 4, 2012
RPGT rate for 2013
The recent 2013 Budget proposal has made some increment on the effective tax rate.
Below are summary that i get from RED - News Straits Times @ Friday , 2/11/2012 ; which i think worth sharing here :)
Below are summary that i get from RED - News Straits Times @ Friday , 2/11/2012 ; which i think worth sharing here :)
RM46mil allocated to four restoration projects in Penang
By DAVID TAN davidtan@thestar.com.my
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| The restored Macalister Mansion has 8 hotel rooms, two restaurants and two bars |
The most well-known of these heritage properties restored are the Choong Lye Hock mansion and the Loke Thye Kee building.
The other two restoration projects are by Asian Global Business (AGB) and Public Packages Holdings Bhd involving commercial offices and warehouses built in the early 20th century at Weld Quay and Church Street Ghaut.
The AGB Group is restoring two early 20th century commercial and warehouse properties to be an integrated RM220mil Rice Miller Hotel and Residences, which is an in-fill development project.
An in-fill development involves constructing a project from scratch.
The cost of restoring a heritage project depends on the quality of finishing used and normally ranges between RM300 and RM400 per sq ft.
Sometimes a company spends more for restoration because of the condition and age of the property.
A prime heritage property in George Town can fetch rental of between RM5 and RM10 per sq ft, which means that a 2,000 sq ft heritage property strategically located can generate a rental of RM10,000 to RM20,000 a month, according to Henry Butcher Malaysia (Penang) vice-president Shawn Ong.
The Choong Lye Hock mansion restoration project, located on 48,943 sq ft at Macalister Road, was undertaken by local businessman Datuk Sean H'ng and his wife Datin Karen H'ng.
The Choong Lye Hock mansion belonged to a tycoon and philanthropist, who bought the property in the late-1890s.
Lye Hock is the father of local millionaire Ch'ng Eng Hye and the grandfather of badminton legend Datuk Eddy Choong.
The restored building, now known as Macalister Mansion (MM), has eight hotel rooms, two restaurants called The Dining Room and The Living Room, and two bars called the Bagan Bar and The Den.
Macalister Mansion opened its doors to the public in April 2012.
According to MM public relations director Josephine Leong, the planning and the restoration work for the 17,286 sq ft mansion took about 20 months.
“This is corporate responsibility initiative project to demonstrate that old colonial buildings can be regenerated into useful and practical spaces with a contemporary feel.
“Some eight months were spent on planning the design with a Singapore-based interior design company, Ministry of Design (MOD) to produce stunning interior designs.
“It took us 12 months to restore and reinforce the original columns, staircases and archways, original brick walls and wall cornices.
Leong says the Macalister Mansion project was more about a labour of love.
“The owners want to raise the bar in the boutique hotel scene in Penang. As global travellers, they would like to bring back that differentiated hotel experience where guests get to enjoy a more personalised and intimate level of service within luxurious surroundings,” Leong adds.
Raine & Horne Malaysia director Michael Geh says about RM2mil or about RM630 per sq ft was spent on restoring Loke Thye Kee, known as the oldest restaurant in Penang, at Burmah Road.
According to Geh, a local investment company, Loke Thye Kee.com, set up by Singaporean investors, bought the double-storey property from a local businessman some about six years ago.
“About two years, which included also the time to obtain the green light from the local authorities for renovation, was spent on restoring the building with approximately 3,200sq ft of built-up area.
“It has been leased to a local company called Food People Sdn Bhd, which plans to set up soon a Hainanese restaurant, and food and beverage outlets,” he says.
Known as the House of Happiness in Hainanese, the Loke Thye Kee restaurant was established by brothers Loy Kok Boon and Loy Kok Dai, who leased the building from local businessman and philanthropist Khoo Sian Ewe.
Loke Thye Kee serves traditional Hainanese and Western cuisine such as curry kapitan, choon piah, and chicken chop.
AGB Group spent RM21.5mil or RM860 per sq ft to restore two heritage commercial and warehouse properties built in the early 20th century at Weld Quay.
AGB chief executive officer Dr Noraini Abdullah says the restoration turned out to be costly because a lot of work had to be done for strengthening the physical buildings, as their conditions were bad.
“About RM16mil was spent for restoring and reinforcing the physical infrastructure of the warehouse building, which serves as the event hall of the Rice Miller Hotel.
“Another RM5.5mil was spent in restoring a 5,000 sq ft colonial commercial building that will serve as the restaurant for the Rice Miller Hotel,” she adds.
The Rice Miller Hotel and Residences project is scheduled for completion next August and scheduled for opening in Dec 2013.
It will comprise 48 hotel suites, 99 city residences, which range between 800 and 2,500 sq ft in built-up, 23 retail lots of 600 sq ft, and two blocks of five-storey office buildings.
“In the past 12 months, we have sold 50% of the retail lots and city residences. Most of the buyers comprise Penangites and investors from Ipoh and Kuala Lumpur,” she adds.
Next to the Rice Miller Hotel and Residences project, Public Packages Holdings Bhd (PPHB) is restoring two heritage double-storey commercial properties with over 39,632 sq ft to be integrated into a RM50mil in-fill heritage hotel cum commercial project located at Church Street Ghaut, off Beach Street, which is popularly known as the central banking district.
PPHB hotel project manager Tony Koay says the group would spend RM15.8mil or RM400 per sq ft to restore the two heritage properties with fittings.
“One of the heritage commercial building with 11,000sq ft will be restored as part of the in-fill heritage hotel.
“The other heritage property with 28,632sq ft will be restored for commercial and office usage,” he says.
Koay says the advantage of carrying out infill development work for the heritage hotel project was that one could maximise the interior of the buildings to suit the needs of modern business usage.
The cost per sq ft to develop a heritage hotel from scratch with furnishings is about RM1,000 per sq ft, says Koay.
“A problem with restoring a heritage building for hotel usage is that the interior of such heritage buildings restricts the utilisation of space,” he says.
Koay adds that the in-fill heritage hotel would have over 150,000 sq ft of built-up area, 150 rooms, a business centre, meeting rooms, two-level of basement car-park, and retail shops on the ground floor.
“The architectural style for the hotel follows the design of late 19th and early 20th century port offices and warehouse buildings in George Town.
“We are targeting the upmarket tourists,” Koay says.
Higher prices with heritage status
By DAVID TAN davidtan@thestar.com.my
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| The Coffee Atelier, comprising 5 prewar buildings at Stewart Lane. |
Henry Butcher Malaysia (Penang) vice-president Shawn Ong says that prior to George Town's listing as a Unesco World Heritage Site (WHS) in 2008, the properties were selling from between RM300 and RM600 per sq ft.
“In view of the limited units of pre-war properties available in Penang, pre-war buildings with unique characteristics are generally attracting a lot of buying interest.
“Therefore, it is quite common for pre-war buildings available for sale being snapped up by investors, pushing up the selling price.
“The majority of buyers are Malaysians contrary to perception that more foreigners than Malaysians buy pre-war properties.
“A notable recent transaction is the sale of 30 units of pre-war shophouses in Nagore Road, George Town to investors,” he says.
According to Ong, the rentals of pre-war buildings of larger size in George Town's prime zones generally fetch RM10,000 to RM20,000 per month, compared to between RM5,000 and RM8,000 before George Town's Unesco WHS status.
“Locations such as Armenian Street, Stewart Lane, Chulia Street, Love Lane, and Muntri Street, due to their proximity to Little India and Khoo Kongsi, are among the most sought-after areas for heritage properties in George Town,” Ong adds.
The selling price of heritage properties in Penang has risen by about 10% this year compared with 2011, according to Ong.
According to Henry Butcher's Penang Real Estate Market Report, the total number of pre-war buildings within the conservation area of George Town Unesco WHS is 4,665, with 2,344 units at the core zone and 2,321 units at the buffer zone.
The core zone covers 109.4 ha bounded by the Straits of Malacca on the north-eastern tip of the island, Love Lane to the north-west, and Malay Street Ghaut and Dr Lim Chwee Leong Road to the south-west corner.
The core zone is protected by a 150-ha buffer zone bounded by Dr Lim Chwee Leong Road to the south-west and Transfer Road to the north-west.
According to PPC International Sdn Bhd director Mark Saw, the number of heritage property transactions for Penang in 2011 was 228, compared with 211 in 2010.
“Most of these properties were for double-storey pre-war houses in the north-east district of the island.
“Those with the foresight to invest in heritage properties before George Town received the WHS status would see the value of their properties increased substantially today.
“In the market presently, there are large-size heritage properties in inner George Town selling for more than RM10mil,” he says.
One such heritage building in inner George Town with a built-up and land area of 10,000 sq ft and 5,762 sq ft respectively is the No. 25 China Street, a double-storey property built in 1846 by Kapitan Chung Keng Kwee.
Malaysian-born David Wilkinson, who owns the property, says he bought the property in 2005 and spent over RM2mil to restore the building, which took about two years.
“It is the largest property on China Street as the building is equivalent to three shophouses. The property is being used as a private residence, but has the potential for commercial usage as a special heritage museum,” he says.
Another sizable heritage property in inner George Town that has seen its value rise substantially since 2008 is the row of five pre-war houses on Stewart Lane now collectively known as Coffee Atelier, comprising a coffee house cum restaurant, museum, art gallery and four hotel rooms owned by Stefan Gehrig and his wife Lorina.
Stefan says he purchased the five properties, which had a total built-up area of 8,160 sq ft and land area of 4,800 sq ft, for RM3.5mil in 2010.
He adds that he had recently received an offer of RM6mil for the properties.
“The five unique heritage properties were built in 1927 and were called shophouses because the original inhabitants carried out their trades on the ground floor, and lived with their families on the upper floors.
“One of these shophouses was once a coffee merchant's workshop in 1988.
“The name Coffee Atelier' derives from this element of the building's history and celebrates the memory of this artisanal trade from a bygone era,” he says.
Reducing tax on your rental income
Dr Tan Thai Soon @ 19 October 2012 for RED – News Straits Times
TAX MATTERS: It pays to know what are deductible so as to reduce your taxes on rental income
Classification: This article covers the latest developments on tax treatment for rental income from real property under the Public Ruling No. 4/2011, effective for the year of assessment 2011. In particular, we will focus on the classification of rental income as business source or non-business source, the grouping of business source and non-business source when computing the statutory income, the commencement date of letting of real property, and allowable and non-allowable expenses.
A. Advantages of rent as a business source
The advantages of treating the rent as a business source are as follows:
• It can claim capital allowance.
• Business source losses can be carried forward to the next period.
• Current year business source losses can be utilised to set off all sources of income.
To treat rent as a business source, section 4(a) of Income Tax Act 1967 (ITA) requires the tax person to provide “maintenance services or support services” in relation to the real property.
Maintenance or support services: Where, in conjunction with the letting of a property, a person also provides “maintenance services or support services”, the letting of the property can be considered a business source of income under section 4(a) of ITA. The maintenance or support services should be “comprehensively” and “actively” provided.
‘Comprehensively provided’: Maintenance services or support services comprehensively provided means services which include:
(a) doing generally all things necessary (e.g. cleaning services or repairs) for the maintenance and management of the real property such as the structural elements of the building, stairways, fire escapes, entrances and exists, lobbies, corridors, lifts/escalators, compounds, drains, water tanks, sewers, pipes, wires, cables or other fixtures and fittings; and
(b) doing generally all things necessary for the maintenance and management of the exterior parts of the real property such as playing fields, recreational areas, driveways, car parks, open spaces, landscape areas, walls and fences, exterior lighting or other external fixtures and fittings.
However, if a person only provides security services or other facilities, it should not be considered as providing maintenance services or support services comprehensively.
Services ‘actively provided’: Services actively provided means the person who owns or lets out the real property:
(a) provides them himself; or
(b) hires another person or another firm to provide the maintenance services or support services.
Maintenance services or support services: The following examples in Table 1 show where the letting of property is treated as a business source: See Table 1
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| Table 1 |
Rent as a non-business source: If a person lets out the real property without providing maintenance or support services comprehensively and actively, the rental income is regarded as a non-business source of income and is charged to income tax under section 4(d) of ITA.
Passive maintenance or support services: If a person lets out the real property and the maintenance or support services are passively derived from the ownership of the real property, the rental income is treated as non-business income under s4(d) of ITA.
Table 2 shows examples where the letting of property is treated as non-business source: See Table 2
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| Table 2 |
B. Letting of property to related parties
Letting of property between related parties can be considered as a business source as long as maintenance services or support services are comprehensively and actively provided. The rental charged must be at arm’s length. However, if the rental charged to the related parties is not at arm’s length basis, the Inland Revenue Board would adjust the rental payment accordingly.
Meaning of related parties and related company: The related parties include individuals or companies; meaning one of the parties is in a position to influence or control the other party. Related company means where one company holds not less than 20 per cent of the ordinary shares or preference shares of the other.
C. Commencement date of letting of real property for the first time
The commencement date the real property is rented out for the first time, where the source is treated under s 4(d) of the ITA is “the date of letting”. However, the commencement date of letting of real property where the source is treated under s 4(a) of the ITA is on the date “the real property is made available for letting”, that is, when the real property is ready to be occupied by tenants. Expenses incurred before the commencement date are not allowable, therefore considered as pre-commencement expenses.
D. All real properties grouped as a single source
If a person lets out several real properties in a YA (Year of Assessment) and the letting of real properties can be grouped as one source:
(a) all real properties is a business source, all the real properties can be grouped as one business source under s 4(a) of the ITA (see Example 1);
(b) all real properties is a non-business source, all the real properties can be grouped as one non-business source under s 4(d) of the ITA (see Example 2); and
(c) some of the real properties is a business source and some is a non-business source, income from both sources shall be assessed separately under s 4(a) and (d) respectively (see Example 3).
E. Expense relating to income of letting real property
Expense ‘wholly and exclusively incurred’: An expense wholly and exclusively incurred in the production of income under section 33(1) of ITA and which does not fall under section 39(1) of the ITA is allowed as a deduction from income of business of letting of real property charged under s 4(a) of the ITA.
Deduction of direct expenses from income under s 4(d): Expense which is allowed a deduction from income under s 4(d) is direct expense that is wholly and exclusively incurred in the production of income under s 33(1) of the ITA.
Examples of direct expenses:
a) Assessment and quit rent paid to the local authority and land office respectively;
b) Interest on loan taken to finance the purchase of real property which is rented out;
c) Fire insurance premium paid in relation to the real property which is rented out;
d) Expense on rent collection fee and legal expense incurred to enforce rent collection
e) Expenses on rent renewal incurred on tenancy agreement or to change tenant; and
f) Expense on ordinary repair to maintain the real property in its existing state.
Initial or pre-commencement expenses to obtain first tenant: Initial expense is not allowed as a deduction from rental income assessed under s 4(a) or (d) of the ITA, as the expense is incurred to create a source of rental income and not incurred in the production of rental income. An example of such expenses is the cost to obtain the first tenant such as advertising cost.
Expenses during a period the real property is not rented out: Generally, expenses incurred in relation to a real property during a period it is not rented out are not allowable as a deduction. However, if the period the real property is not rented out occurs after it has been let out and it is clear that it is ready to be let out, then expenses during that period are allowable.
Letting ceases temporarily: If the letting ceases temporarily due to the following circumstances:
a) repair or renovation of the building;
b) absence of tenants for a period of 2 years ( 24-month period) after termination of tenancy;
c) legal injunction or other official sanction; or
d) other circumstances beyond the control of the person who lets out the real property,
then expenses for the period the real property is not let out are allowable provided that the real property is maintained in good condition and is ready to be let out.
Replacement cost of furnishings for non-business source: If the letting of real property is a non-business source, the replacement cost of furnishings, such as furniture and air conditioner can be claimed as deduction from gross income from letting.
Rental income received in advance: Rental received in advance is treated as gross income for the basis period in which it is received, any expense incurred in relation to that rental income after that basis period is allowable in the basis period in which the income is assessed. Therefore amendment has to be made to the assessment for the YA concerned.
Where there is more than one real property and rental from one or more properties is received in advance, expenses related to that source is deductible from other rental income in the basis period in which the expenses are incurred.
Capital allowances for rental under business source: If the letting of property is treated as a business source, capital allowances can be claimed on expenditure incurred on plant and machinery. The provisions in Schedule 3 of the ITA shall apply.
If the letting of property ceases temporarily, capital allowances can still be claimed provided the real property is maintained in good condition and is made available for letting
Dr Tan Thai Soon is the managing director of TST Consulting Group and can be contacted at tanthaisoon@tst.com.my and www.tst.com.my
Read more: Reducing tax on your rental income - RED - New Straits Times http://www.nst.com.my/red/reducing-tax-on-your-rental-income-1.158775#ixzz2BE1pI3Rl
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