Renting Out a Room & Holiday Stay: Tax Treatment

Is short-term rental income taxed?

Yes. Income from renting out property — including renting out part of a property such as a room in a house, or holiday stays / homestays — is income subject to income tax in Malaysia. The key question is not "is it taxed", but how it is classified, because the classification determines the form, the commencement date and the expenses that can be deducted.

Classification: s.4(d) (passive) vs s.4(a) (business)

Situation	Classification	Form
Passive renting — no maintenance/support services actively provided	s.4(d) — income from property	Form BE (box B3 — rent)
Renting with comprehensive, actively provided services (e.g. cleaning, breakfast, daily service)	s.4(a) — business	Form B

This difference matters because:

• For s.4(d), rental income is reported in the rent box of Form BE.
• For s.4(a), income is reported as business profit in Form B, and business expense rules apply.

Renting out part of a property (a room)

HASiL clarifies in Public Ruling No. 4/2011 that "renting out real property" includes renting out part of a property, for example a room in a house. Therefore, renting out a room still falls within the scope of property income tax ([R1] §3.4).

Commencement date of income

• For s.4(d) (property): income starts to accrue when the property is first rented out ([R1] §6.1–6.2).
• For s.4(a) (business): income starts to accrue when the property is ready for letting.

Deductible expenses

Expenses directly related to generating rental income and incurred during the rental period are deductible under s.33(1) of the ITA 1967. Examples: quit rent (cukai pintu), fire insurance, property loan interest, maintenance, and utility costs borne by the landlord.

Expenses that are not deductible include:

• Costs of obtaining the first tenant ([R1] §8.3).
• Expenses before the property starts being rented out — must be adjusted proportionately ([R1] §8.5).
• Expenses of a capital or personal nature, or those prohibited under s.39(1) of the ITA 1967.

Short-term letting / homestay — a specific ruling?

At this review, no specific ruling for platforms such as Airbnb or homestays was found in official sources; the treatment depends on the facts — especially whether the services provided are comprehensive and active (business) or passive (property) this item still awaits official confirmation from HASiL — check again with HASiL before deciding. until a specific ruling/guideline is published.

Simple example

Ahmad rents out two rooms in his house without any additional services. The rental income is reported in Form BE as property income (s.4(d)). He may deduct the quit rent, insurance and related maintenance expenses.

Summary

1. Short-term rental income (room/holiday stay) is taxable.
2. Determine the classification: passive → s.4(d) (BE B3); active services → s.4(a) (Form B).
3. Keep records of related expenses; do not deduct pre-letting costs or the cost of obtaining the first tenant.
4. If unsure whether your activity is a "business", refer to HASiL or a tax advisor.