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Property Investment Guidelines In Malaysia For Foreigners

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					Property Investment Guidelines In Malaysia For Foreigners
26th June 2008

General Country Information
Country                                                         Government
Malaysia comprises Peninsula Malaysia and                       Malaysia is governed by a Parliamentary
the states of Sabah and Sarawak on the                          democracy with a bicameral legislative
island of Borneo.                                               system. The Head of State is the Yang Di-
                                                                Pertuan Agong, a position that is rotated
                                                                amongst the different State Sultans (or
Geographical Location                                           Monarchs) every five years and the Head of
Located between 2º and 7º north of the                          the Federal Government is the Prime
Equator, Peninsula Malaysia is separated                        Minister.
from the states of Sabah and Sarawak by
the South China Sea. To the north of
Peninsula Malaysia is Thailand while its                        Climate
southern neighbour is Singapore. Sabah                          Tropical climate with warm weather all year
and Sarawak are north of Indonesia in                           round. Temperatures in the lowlands range
Borneo while Sarawak also shares a border                       from 21ºC (70ºF) to 32ºC (90ºF). The
with Brunei.                                                    highlands are cooler, where temperatures
                                                                range between 15°C (59° F) to 25°C (77°F).
                                                                Annual rainfall varies from 2,000mm to
Area                                                            2,500mm.
329,758 sq km (127,320 sq miles)

Population                                                      Major Holidays
27.17 million                                                   New Year's Day Hari Raya Aidiladha*
                                                                Federal Territory Day ** Chinese New Year*
Population Density                                              Awal Muharam* Birthday of Prophet
82.4 per sq km                                                  Muhammad* Labour Day* Wesak Day*
                                                                King's Birthday* National Day* Deepavali#
Capital                                                         Hari      Raya       Aidilfitri*    Christmas*
Kuala Lumpur                                                    Note: (*) - National holidays (**) - Putrajaya,
                                                                Kuala Lumpur & Labuan only (#) - Except
People                                                          Labuan & Sarawak
Malays who make up about 61% of the
population are the predominant group with
Chinese, Indians and other ethnic groups                        Economic Profile
making up the rest.                                             Manufacturing constitutes the largest single
                                                                component of Malaysia's economy. Tourism
Language                                                        and    primary   commodities     such     as
Bahasa Melayu (Malay) is the national                           petroleum, palm oil, natural rubber and
language but English is widely spoken. The                      timber are other major contributors to the
ethnic groups also speak various languages                      economy.
and dialects.

Religion                                                        Currency
Islam is the official religion but all other                    The unit of currency is Malaysian Ringgit
religions are freely practiced.                                 indicated as RM. USD1 is roughly equivalent
                                                                to RM3.40 on 9th May 2007. Foreign
                                                                currency can be converted at banks and
                                                                money changers.



Disclaimer: This information sheet has been produced by Knight Frank Malaysia and is for private circulation only.   1
Whilst every care has been taken in preparing the document, Knight Frank Malaysia cannot be held responsible for
any errors which it may contain.
Property Investment Guidelines In Malaysia For Foreigners
26th June 2008

Banking Hours                                                   Weights and Measures
Most states: Mon - Fri: 9.15am to 4.30pm.                       Malaysia follows the metric system in
Sat & Sun: Closed (Selected banks and                           weights and measures.
branches are open on Sat). Kelantan &
Terengganu: Sun - Wed :9.15am to 4.30pm.
Thurs       :9.15am        to       4.00pm.                     Telephones
Friday/Saturday*/Public Holiday: Close                          Local calls can be made from public phones
                                                                using coins or pre-paid cards. International
                                                                calls can be made from public phones with
Post Offices                                                    card phone facilities or at any Telekom
Open from 8.30am to 5.00pm daily except                         office.
the first Saturday of each month, Sundays
and public holidays. In Kelantan and
Terengganu post offices operate during the                      Accommodation
same hours but are closed on Fridays and                        Malaysia   has    a   wide     range     of
public holidays.                                                accommodation at competitive rates. Six-
                                                                star, medium range, budget hotels, youth
                                                                hostels, beach chalets and timeshare
Time                                                            apartments are some of the types of
Eight hours ahead of GMT and 16 hours                           accommodation      available.     Privately
ahead of U.S. Pacific Standard Time.                            operated motor-homes are also available for
                                                                rent.

Electricity
Voltage is 220 - 240 volts AC at 50 cycles
per                                second.
Standard 3-pin square plugs and sockets.


Distance to Malaysia
London, United Kingdom to Kuala Lumpur
         :  6,557     miles (10,552 km)
Paris, France to Kuala Lumpur
         :  6,483     miles (10,432 km)
Rome, Italy to Kuala Lumpur
         :  6,038     miles (9,716  km)
Stockholm, Sweden to Kuala Lumpur
         :  5,812     miles (9,353  km)
Berlin, Germany to Kuala Lumpur
         :  5,979     miles (9,622  km)
Madrid, Spain to Kuala Lumpur
         :  6,885     miles (11,079 km)
New York, USA to Kuala Lumpur
         :  9,400     miles (15,126 km)
Los Angeles, USA to Kuala Lumpur
         :  8,790     miles (14,144 km)
Vancouver, Canada to Kuala Lumpur
         :  7,944     miles (12,783 km)




Disclaimer: This information sheet has been produced by Knight Frank Malaysia and is for private circulation only.   2
Whilst every care has been taken in preparing the document, Knight Frank Malaysia cannot be held responsible for
any errors which it may contain.
Property Investment Guidelines In Malaysia For Foreigners
26th June 2008

The Sale & Purchase Transaction
The usual Sale & Purchase term are as follows:-
   (a) A down payment of 10% of the purchase price is usually required upon signing of the
       Sales & Purchase agreement (SPA). The purchaser may be required to pay an earnest
       deposit of up to 3% of the purchase price upon the vendor accepting an offer to
       purchase.
   (b) Purchaser is usually given 14 to 30days to agree on the terms and execute the SPA.
   (c) The balance of the purchase price will generally be required to be paid in full within three
       (3) months for completed property and for property under construction; the balance of the
       purchase price will be paid in accordance to the construction stages as indicated in the
       SPA.


Financing Matters
It is advisable to seek and secure a loan from a financial institution prior to the purchasing of a
property should finance is required for the purchase. Bank Negara (Malaysia’s central bank)
allows foreigners to finance up to 60% of the purchase price of the property but certain banks
may lend up to 80% for foreigners but this is on a case to case basis.


Cost Considerations
Real Estate Agency Fee

Sale or Purchase

Lands and Buildings
   (i) 2.75% on the first RM500,000
   (ii) 2% on the residue over RM500,000

Though it is common for the vendor to pay the real estate agency fee for transactions concluded,
it is not uncommon that the purchaser does so when he appoints an agency to source for desired
property(s).


Legal Fees – Sales & Purchase Agreement

The first Schedule of the Solicitors Remuneration Order 2006 sets out the fees to be collected by
lawyers for work done in handling the sale or purchase of immovable properties based on the
purchase price as follows:-
         1% on the first RM150,000 (subject to a minimum fee of RM300)
         0.7% on the next RM850,000
         0.6% on the next RM2,000,000
         0.5% on the next RM2,000,000
         0.4% on the next RM2,500,000
         Negotiable on the excess but shall not exceed 0.4% where the purchase price is in
         excess of RM7,500,000




Disclaimer: This information sheet has been produced by Knight Frank Malaysia and is for private circulation only.   3
Whilst every care has been taken in preparing the document, Knight Frank Malaysia cannot be held responsible for
any errors which it may contain.
Property Investment Guidelines In Malaysia For Foreigners
26th June 2008

The scale chart of professional fees for sale and transfer of properties (for any transaction
governed by the Housing Development (Control and Licensing) Act 1966) are as follows:-
       RM250, if the price is RM45,000 or below
       75% of the above scale fee, if the price is in excess of RM45,000 but not more than
       RM100,000
       70% of the above scale fee, if the price is in excess of RM100,000 but not more than
       RM500,000; or
       65% of the above scale fee, if the price is in excess of RM500,000


Legal Fees – Loan Documentation

Purchasers are usually required to pay the legal fees for the solicitors to prepare the loan
documentation for financing. The fees as follows:-
       1% on the first RM150,000 (subject to a minimum fee of RM300)
       0.7% on the next RM850,000
       0.6% on the next RM2,000,000
       0.5% on the next RM2,000,000
       0.4% on the next RM2,500,000
       Negotiable on the excess but shall not exceed 0.4% where the purchase price is in
       excess of RM7,500,000

The above rate is applicable for the principal instrument (ie. loan agreement) and 10% of the
scale fee (subject to a minimum of RM200 and maximum fee of RM1,000) for each subsidiary
instrument (ie. the security documents).

If the same solicitors that conduct and complete the sale and purchase of the property governed
by the Housing Development (Control and Licensing) Act 1966) also acts for the financier or the
borrower, the fees payable shall be as follows are as follows:-

         RM250, if the purchase price as well as the loan sum is RM45,000 or below
         75% of the above scale fee, if the purchase price as well as the loan sum is in excess of
         RM45,000 but not more than RM100,000
         70% of the above scale fee, if the purchase price as well as the loan sum is in excess of
         RM100,000 but not more than RM500,000; or
         65% of the above scale fee, if the purchase price as well as the loan sum is in excess of
         RM500,000


Stamp Duty

Stamp duty is usually payable by the purchaser and 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 or the market price as determined by
the Inland Revenue Department, whichever is the higher, as follows:-

a. 1% on the first RM100,000.00
b. 2% on the next RM400,000.00
c. 3% on the remainder




Disclaimer: This information sheet has been produced by Knight Frank Malaysia and is for private circulation only.   4
Whilst every care has been taken in preparing the document, Knight Frank Malaysia cannot be held responsible for
any errors which it may contain.
Property Investment Guidelines In Malaysia For Foreigners
26th June 2008

Real Property Gains Tax

Effective from 1st April 2007, the Real Property Gains Tax has been exempted pursuant to the
Real Property Gains Tax (Exemption) (No. 2) Order 2007 published in the Government Gazette
vide P.U. (A) 146.

Previously:
All vendors were 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).
The sale of real property gains tax levied on all vendors laid down in the Real Property Gains Tax
Act were follows:-

Local
Disposal within 2 years – 30%
Disposal in the 3rd year – 20%
Disposal in the 4th year – 15%
Disposal in the 5th year – 5%
Disposal in the 6th year and subsequent years – 0%

Foreigner
30% of the gain if it was sold within 5 years from the SPA sate.
5% of the gain if it was sold after 5 years from the SPA date.




Disclaimer: This information sheet has been produced by Knight Frank Malaysia and is for private circulation only.   5
Whilst every care has been taken in preparing the document, Knight Frank Malaysia cannot be held responsible for
any errors which it may contain.
Property Investment Guidelines In Malaysia For Foreigners
26th June 2008

Foreign Investment Committee (FIC)
    1. Any acquisition of property by foreign interest requires the approval of FIC;

    2. Any acquisition of property which will be developed as a development project other than
       residential unit requires the approval of FIC;

    3. Generally, foreign interest is only allowed to acquire property other than residential unit
       valued at more than RM150,000 per unit with no limit on the number of properties
       acquired;

    4. Foreign interests is allowed to acquire residential property(s) over RM250,000.



    The Following Transactions Do Not Require the Approval of FIC

    Acquisition of Residential Unit by Foreign Interest

    5.    With effect from 21 December 2006, foreign interests who acquire residential property(s)
         over RM250,000 are not required to apply for approval from the FIC and there is no limit
         to the number of units that can be acquired.


    Acquisition of Property through Public Auction

    6. Foreign interest is allowed to acquire residential property through public auction valued
       more than RM250,000 per unit and will be subjected to the conditions for acquisition.



    The Following Transactions Require the Approval of FIC

    Acquisition of Property for Hostel Purpose

    7. Local manufacturing company owned by foreign interest is allowed to acquire residential
       unit valued at more than RM60,000 subject to the residential unit being used only as a
       hostel for the company’s employees.


    Acquisition of Commercial Unit

    8. Acquisition of property valued at less than RM10 million by foreign interest does not have
       to incorporate a local company subject to the property being only for own use.


    Acquisition of Agricultural Land

    9. Foreign interest is only allowed to acquire agricultural land valued more than RM250,000
       or at least five (5) acres in area, whichever is higher subject to the conditions for
       acquisition;


Disclaimer: This information sheet has been produced by Knight Frank Malaysia and is for private circulation only.   6
Whilst every care has been taken in preparing the document, Knight Frank Malaysia cannot be held responsible for
any errors which it may contain.
Property Investment Guidelines In Malaysia For Foreigners
26th June 2008

    10. Acquisition of agricultural land by foreign interest is only allowed for the following
        purposes:-
            (a) to carry out agricultural activities on a commercial scale using modern or high
                technology; or
            (b) to carry out agro-tourism project; or
            (c) to carry out agricultural or agro-based industrial activities for the production of
                goods for export. However, for this purpose relaxation on equity condition may be
                considered.


    Acquisition of Industrial Property

    11. Foreign interest is allowed to acquire industrial property without any price limit and must
        be registered under a locally incorporated company subject to the conditions for
        acquisition.


    Acquisition of Property through Public Auction

    12. Foreign interest including foreign bank is allowed to acquire property through public
        auction valued more than RM150,000 per unit other than residential and will be subjected
        to the conditions for acquisition.


    Transfer of Property

    13. Transfer of property to a foreigner based on love and affection is allowed among
        immediate family members only.


    Leasing of Property

    14. Leasing of property for a term of 10 years and above by foreign interest.


    Disposal of Property

    15. Disposal of property by foreign interest to another foreign interest.

    16. Disposal of property by foreign interest to local interest valued at more than RM20 million.


    Charging of Properties to Foreign Interest

    17. Charging of property in Malaysia to foreign interest including foreign bank and financial
        institution incorporated outside Malaysia.




Disclaimer: This information sheet has been produced by Knight Frank Malaysia and is for private circulation only.   7
Whilst every care has been taken in preparing the document, Knight Frank Malaysia cannot be held responsible for
any errors which it may contain.
Property Investment Guidelines In Malaysia For Foreigners
26th June 2008

Conditions for Acquisition
Conditions may be imposed by the FIC for the acquisition of property by both local and foreign
interests which are as follows:-

    Equity Condition

    1. Companies which do not have any Bumiputera equity or having less than 30%
       Bumiputera equity, are required to increase the Bumiputra equity to at least 30%. The
       remaining equity shareholding can be held either by local interest, foreign interest or by
       both;

    2. Companies with Bumiputera equity shareholding of 30% or more, but less than 51% are
       required to maintain at least 30% Bumiputera equity at all time; and

    3. Companies which already have Bumiputera equity shareholding of 51% or more, will be
       required to maintain at least 51% Bumiputera equity at all time.


    Share Capital Condition

    4. Local company owned by foreign interests with a paid-up capital of less than RM250,000
       will be required to increase the share capital to at least RM250,000; and

    5. Local company owned by local interest with a paid-up capital of less than RM100,000 will
       be required to increase the share capital to at least RM100,000.


    Employment Condition

    6. Companies must, to the best of their ability, recruit and train Malaysians so as to reflect
       the country’s population composition at all levels of employment.



    For more information, kindly visit Foreign Investment Committee official website at
    http://www.epu.jpm.my/new%20folder/fic/GP_Properties.pdf




Disclaimer: This information sheet has been produced by Knight Frank Malaysia and is for private circulation only.   8
Whilst every care has been taken in preparing the document, Knight Frank Malaysia cannot be held responsible for
any errors which it may contain.

				
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