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Real Property Gains Tax
Capital gains are generally not a subject to tax in Malaysia. Real Property Gains Tax is charged on gains arising from the disposal of real property in Malaysia or of interest, options or other rights in or over such land as well as the disposal of shares in real property companies. For individuals who are citizens or permanent residents, gains from disposal of real properties after five years are not subject to this tax. For non-citizens and non-permanent resident individuals, gains from the disposal of real property within 5 years are subject to tax at a flat rate of 30%.
Buying a House in Malaysia
1. Eligibility
All Malaysian citizens are free to purchase houses within Malaysia save for low-cost houses which can be applied for through the relevant land offices or registries based on the relevant rules for eligibility. Houses built on Malay reserved land can only be purchased by Malays. Foreign purchasers are subject to the approval of the Foreign Investment Committee (FIC) of the Economic Planning Unit of the Prime Minister's Department based on the FIC "Guidelines on the Acquisition of Properties in Malaysia by Foreign Interests".
2. Title
There are two categories of titles:
•Freehold - which gives the owner perpetual ownership and
•Leasehold - This allows the owner to stay in possession only for a specified period.
Generally, a house is issued a title for the piece of land on which the house is erected; and an apartment is issued a strata title for the specific area on the specific floor of the building in which the apartment or condominium is located. A search can be done at the relevant land offices or registries to determine whether the title is encumbered. If the title has not been issued, a search can be done on the master title on which the whole or part of the housing project is erected.
3. Financing
Banks and other financial institutions have different packages of housing loan to assist house buyers in their purchase. Pursuant to a recent Bank Negara guideline, house buyers can now only obtain housing loan of up to a maximum of 60% of the purchase price for the purchase of a second or subsequent house.
4. Documentation and procedures
All purchases direct from housing developers must use the Schedule G (for purchases of houses) or the Schedule H (for purchases of apartment respectively of the Housing Developers (Control and Licensing) Act 1996 as the sale and purchase agreements. Payment of the purchase price that is Schedules G and H is by progressive payment based on completion of work as certified by the architects.
There are no fixed rules on the form of agreement for purchases from existing house owners. However, it is common practice that upon signing of the sale and purchase agreement 10% of the purchase price be paid to the seller, and the purchaser be given 3 months to pay the balance of purchase price with an extension of 1 month if he fails to do so within the first 3 months' period.
Other than the sale and purchase agreement, a memorandum of transfer, which is Form 14A of the National Land Code 1965, must be completed to transfer the title from the seller to the purchase. In instances where the title has not been issued, then if the purchase is from a developer, the developer will undertake in the sale and purchase agreement to transfer the title when the same is issued; and if the purchase is through a sub-sale, the transfer will be through an assignment of the sale and purchase agreement between the developer and the seller (Principal SPA) to enable the buyer to take benefit of the developer's undertaking to transfer the title contained in Principal SPA.
5. Stamp duty
Stamp duty is levied on the document of transfer (i.e. the memorandum of transfer if the title has been issued, or the deed of assignment of Principal SPA if the title has not been issued) based on the purchase price.
6. Legal fees
The first Schedule of the Solicitors Remuneration Order 1991 sets out the fees to be collected by lawyers for work done in handling the sale or purchase of house based on the purchase price. For each sale and purchase of a house, the solicitors concerned can only collect fees based on the above scale from either the seller or the purchaser and not from both of them.
Selling a house in Malaysia
1. Redemption
If, at the time of sale, the house is still charged or assigned to a bank of financial institution for the loan granted to assist the purchase of the same, a redemption statement stating the amount due needs to be obtained from the financier concerned. Usually, the redemption of the house is incorporated into the sale and purchase agreement so that part of the proceeds from the sale will be utilized for that purpose.
2. Real property gains tax
All house sellers are required to complete the Form CKHT 1 for Inland Revenue within 30 days from the date of sale and purchase agreement (Section 13 of the Real Property Gains Tax Act 1976). Payment of real property gains tax is also normally incorporated in the sale and purchase agreement. Usually the solicitors acting for the seller will act as stakeholders retaining 5% of the purchase price unit payment of the same.
Source: http://www.lawyerment.com
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