Foreigner how to buy Malaysia's properties? What are the requirement?

refer from VPC (http://www.rap-japan.net/english/research_pdf/Malaysia/Malaysia_Guideline.pdf)

Types of Properties Foreign Interest can buy : -

The foreign interest can buy all types of properties in Malaysia, except for:-
- Properties valued less than RM500,000 per unit.
- Properties purchase more than RM1,000,000 per unit
- Residential units under low and low-medium cost categories.
- Properties built on Malay reserved land.
- Properties allocated to Bumiputra interest in any property development as determined by the State
Authority.

Any Limit to the Value and Number of Properties that Foreigner
- No limit on the value and number of property units.

- Approvals Required for Foreigners to Buy Properties  Economic Planning Unit approval is required for all property acquisitions, except residential units, valued at RM20 million, if it involves in dilution of the ownership and/or shares of property held by Bumiputra interest.

- For such acquisition, they are subject to the following equity and paid up conditions.

- Companies to have at least 30% Bumiputra shareholding.

 Paid Up Capital Conditions

- Local company owned by local interest to have at

least RM100,000 paid up capital.

- Local company owned by foreign interest to have at

least RM250,000 paid up capital.

- It is implied that if the acquisition does not involve any bumiputra interest, the above equity condition and paid up conditions will not apply.

- In addition, no approval from the Economic Planning Unit is required but approval is required from the relevant Ministries or Government Departments for the acquisition of the following categories of properties:-

(a)Acquisition of commercial unit valued at RM500,000 and above.

(b)Acquisition of agricultural land valued at RM500,000 and above or at least 5 acres.

(c)Acquisition of industrial land valued at RM500,000 and above.

- In addition, acquisition of a residential unit valued at RM500,000 and above do not require the approval of the Economic Planning Unit but falls under the preview of the State Authorities.

Exemptions:-

There are certain transactions that are exempted from requiring the approval of the Economic Planning Department (EPU). This include an acquisition of a residential unit under

the “Malaysia My Second Home” Programme. A list of transactions that are exempted from EPU

approval are listed in Appendix 1.

(C) Special Incentives to Attract Foreigners to purchase Real Estate in Malaysia. 

A foreign Interest purchasing a residential unit of RM500,000 and above are exempted from approval from the Economic Planning Unit under the Malaysia My 2nd Home Programme (MM2H). 

The applicant is expected to be financially independent and have minimum liquid assets

(age below 50 : RM500,000 and age 50 and above RM350,000) 

and also show proof of regular income. 

Part of the liquid asset (ie. RM150,000) can be utilize for the house purchase.

Other Benefits:-

10 year Visit Pass and Multiple-Entry Visa (also renewable every 10 years).

You can import your car or purchase a new car, tax free.

You can invest or own a business in Malaysia. 

You can work part-time on selected skill employment.

(D) Financing For Foreigner to Purchase Properties

 Any financing for foreigners to borrow from local banks to purchase properties?

Yes, financing is available.

 What are the requirements and conditions for approval?

- Property value must be RM500,000 and above.

- The usual requirements and conditions for locals will apply such as proof of funds and eligibility and ability to repay the loan, etc.

 Any limit on foreigners borrowing?

- For purely overseas client, maximum loan of 70% of the property value.

- For expatriates who are resident and working in Malaysia for minimum 1 year and subject to

eligibility criteria, can qualify for loan up to 90%.

 Lending rate for bank loan:-

- Same as for locals, which is +/-2% of BLR currently at 6.6%. (Subject to change)

- Loan Tenure : Maximum 25 years.

(E) Foreign Exchange Regulations

Whether foreigners can bring in their own money to purchase properties?

Yes, they can. No restrictions.

What are the foreign exchange regulations for them to bring money into the country?

No restrictions.

Non residents may maintain any number of external accounts with any financial institution in Malaysia and there is no restriction on the amount of Ringgit funds to be retained in the external accounts.

What are the regulations for repatriation of profits by foreigners after sale?

No restriction, provided the money is converted to any foreign currency (not Malaysian ringgit) and repatriate to the home country.

(F) Return on Property Investments by Foreigners

What are the preferred types of properties purchased by foreigners in Malaysia?

- Condominium apartments are the most preferred type of investments purchased by foreigners in

Malaysia.

- Office Suites

- Foreign manufacturers also purchased vacant industrial lands to build factories and warehouses.

(G) Ownership Structure of Properties  Malaysia practice the Torrens system of land registration.

Freehold property belongs to the owner in perpetuity.Transfer of interest in the property can proceed without any restrictions or approvals from the government.

Leasehold title are land leased from the State Government for a specific term, normally 33 years, 60

years or 99 years. The land will automatically revert to the State Authority upon expiry of the leasehold term.

However, the leasehold term may be renewed, subject to payment of an additional premium. Transfer of leasehold interest to another party may require the State Authority approval.

Strata title are another form of ownership common for multi storey residential and commercial buildings, as well as landed properties in a gated community.

Strata title are given to individual units and the owners share common property such as common

stairwell, driveways, roof, recreation facilities.

Foreigners are not allowed to purchase any property falling within a Malay Reserve area.

Land Use Rights are not applicable in Malaysia.

(H) Properties Purchase : Fees and Taxes

 Fees and taxes involved when a foreigner purchase

a property:-

(1) Legal fees for the Sale & Purchase Agreement.

(2) Loan Application processing fee.

(3) Registration of charge, at beginning of loan period.

(4) Valuer’s fees, if applicable.

(5) Estate Agent fee, if applicable.

(6) Stamp Duty - Stamp Duty payable on Conveyance, Assignment or Transfer of Properties.

 Upon occupation of the Property, the Foreigner are required to pay the following outgoings:-

1.Annual Rent : To the Land Office, where property is located.

2.Assessment/Property Tax : To the local authority,that provides local services in the area.

3.Fire Insurance Premium : To insure the property against fire and other risks.

4.Service Charge : For condominium apartments, strata units and houses within a gated residential

community, for the maintenance of the common services. 

 Fees and taxes payable when a foreigner sell the property:-

1.Legal Fees.

2.Discharge of Charge.

3.Real Property Gains Tax (RPGT), payable only if there is a Chargeable Gain.

 Effective 1.1.2014, the RPGT rate is as follows:- Holding Period Real Property Gains Tax Rates

Companies or Individuals (Citizens & Permanent Residents) ,Individuals (Non-Citizens)

For Companies or Individual - Up to 3 years 30%, 30%, 30%, 20%, 15% . 

For Non- Citizens                  - Up to 5 years 30%, 30%, 30%, 30%, 30% .

Exceeding 5 years                 -  0%

Procedures for purchase of property in Malaysia:- 

- Foreigner can either buy the property “Off the Plan” from the Developer or a completed property in the secondary market. Generally, foreigners prefer to buy “Off the Plan” as the developer normally have pre-arranged loan.

- The procedure will include checking on the title, check on the specifications and finishes of the

property, appoint Lawyer to peruse the Sale and Purchase Agreement, appoint Valuer to determine

the Market Value, arrange for bank loan and sign the Sale & Purchase Agreement

 Procedures for the sale of the property is the same as the procedures for purchase of the property.

 Management fees upon renting the property.Equivalent to 1 month’s rental.

(I) Taxation

 How are foreigner’s income taxed?

Income tax is imposed on foreigners on income accruing in or derived from Malaysia. Rent is taxable

income. Other sources of income of the Foreigner or non-resident that are taxable are:-

1.Gains or profits from any trade, business, profession or vocation. 

2.Gains or profits from employment, including allowances and benefits in kind.

Accommodation provided by an employee is a benefits in kind.

(I) Taxation (con’t)

3. Dividends, interest and discounts.

4. Royalties and premiums.

5. Pensions, annuities and other periodic payments.

6. Amounts received by the non-resident for provision of technical advice within Malaysia.

Tax Rate for Foreigners

Individuals  Tax Rate for Non-Resident Person (Individuals) : 26%.

 Tax Rate for Resident : Sliding Scale from 0% - 26%.

 A foreigner is regarded as a tax resident if he is in Malaysia for at least 182 days of a calendar year.

Tax Rate for Companies

 Resident company with a paid up capital of RM2.5million and below:-

 On the 1st RM50,000 Chargeable Income : 20% 

 On the subsequent Chargeable Income : 25%

 Resident company with paid-up capital above RM2.5 million : 25%

 Non-resident company/branch : 25%

Income Exempt from Tax

 Interest derived from Malaysia by non-residents on any approved loan.

 Income from offshore companies or trusts.

 Interest received by non-resident depositors from certain Malaysian Islamic banks.

 Interest received by a non-resident expert for providing technical training.

 Interest income from bonds received by nonresident companies.

Withholding Tax Payable by Foreigners

With respect to income such as royalties, interest or service fees, that is not attributable to a business

carried on in Malaysia, the tax liability of the nonresident will be settled by way of withholding tax,

deducted by the paying entity and payable to the Inland Revenue Board.

The withholding tax is normally 10%