Lee Hishammuddin Allen & Gledhill
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
Yes. Foreigners can own and occupy real estate in Malaysia and can hold shares in property owning companies.
Foreign purchasers are not allowed to acquire: (i) properties valued less than RM1 million per unit; (ii) residential units under the category of low and low-medium cost as determined by the State Authority; (iii) properties built on Malay reserved land; and (iv) properties allocated to Bumiputera interest in any property development project as determined by the State Authority.
Bumiputera means a Malay individual or aborigine as defined in the Federal Constitution.
Further conditions relating to the obtaining of approval from the Economic Planning Unit, Prime Minister’s Department and the relevant Ministries, State Authorities or Government Departments apply on property acquisitions by foreigners depending on the category and value of the real estate. We can help you with the relevant applications.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
No restrictions. Foreign companies can obtain foreign currency borrowings from licensed onshore banks.
Foreign companies can also obtain any amount of ringgit borrowing from licensed onshore banks (excluding licensed international Islamic banks) to finance the purchase of residential and commercial properties in Malaysia except for the purchase of land only.
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
- Stamp duty is chargeable on the transfer instruments of the real estate, such as a Memorandum of Transfer or a Deed of Assignment. The amount of stamp duty payable is prescribed under the Stamp Act 1949.
- Registration fee will be imposed on the Memorandum of Transfer upon presentation of the same for registration at the Land Registry or Land Office. The amount varies from state to state.
- The sale of commercial properties (including land zoned for commercial purposes) is subject to goods and services tax at the prevailing rate.
Stamp duty, registration fee and goods and services tax are generally borne by the purchasers but it can be contracted otherwise in the sale and purchase agreement.
- Legal fees for the sale and purchase of real estate are fixed and governed under the Solicitors’ Remuneration (Amendment) Order 2017.
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner)?
No. However, if the owner derives income from the real estate, such as rental income, such income is subject to income tax. The burden of income tax is not transferable.
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so what are they?
Disposal of real estate may be subject to real property gains tax (“RPGT”) or income tax. This depends on whether the real estate is being held as investment asset or stock in trade. RPGT is charged on chargeable gains arising from the disposal of real estate as well as shares in the real property companies based on the Real Property Gains Tax Act 1976. For foreigners (individual), if the disposal of the real estate is within 5 years after the date of acquisition, the rate of tax is 30%. The rate of tax is 5% if the disposal is in the 6th year after the date of acquisition of the real estate or thereafter.
All rental income derived from Malaysia are subject to tax. Tax on rental income for foreigners depends on whether they are tax resident or non-tax resident in Malaysia.
How is the ownership of Real Estate evidenced in your jurisdiction?
In Peninsular Malaysia, each owner of a real estate will have an issue document of title which is a copy/extract of the register document of title. The register document of title is conclusive evidence of the title to the land described being vested in the person or body named in it as proprietor. The Registrar or Land Administrator is in control of the register documents at all times.
In Sabah, the Sabah Land Ordinance goes no further than providing that registration vests and divests title and does not provide for a conclusive register.
In Sarawak, the Sarawak Land Code makes provision for an issue document of title but does not make express provision for the conclusiveness of the register.
Is it possible to keep the identity of owners of real estate confidential in your jurisdiction?
No. Information submitted to the Land Office becomes a public document and is open for public searches to those that know the particulars of the real estate. Any person may make private or official searches in respect of any real estate at a prescribed fee.