Legal & Tax

Can a foreigner purchase a property in Malaysia?

Yes. A foreigner who wishes to purchase a property in Malaysia, whether for long-term stay or investment purposes is allowed to purchase a property in Malaysia. 

Who is a foreigner?

A ‘foreigner’ is defined in the National Land Code 1965 (“the NLC”) and the Guidelines on the Acquisition of Properties (“the EPU Guidelines”) issued by Economic Planning Unit of the Prime Minister’s Department (“the EPU”) as:-

• an individual who is not a Malaysian citizen;
•  a foreign company or institution; and/or
• a local company or local institution with 50% of the voting rights held by non-citizen/foreign company.

What are the approvals required to be obtained by a foreigner before purchasing a property in Malaysia?

Generally, the acquisition of a residential unit or a commercial unit valued at RM1,000,000.00 and above does not require the approval from the EPU. (As at June 2020, the exchange rate is RM4.30 to USD 1.00)

However even if a foreigner does not require to apply for the EPU’s approval, a prior approval from the relevant State Authority is still required to be obtained for any acquisition of property by a foreigner in Malaysia under Section 433B of the NLC and each State Authority in Malaysia has its own requirements and restrictions for this.

In obtaining the approval from that State Authority, a foreigner has to meet the property price threshold imposed by that State Authority and generally, the property price threshold is based on the following: -

• whether the property is held under individual title or strata title; and
• the location of the property.

What are the property price thresholds and levies imposed by the State Authorities?

Below are the property price thresholds set by the relevant State Authorities in Johor, Kuala Lumpur, Penang and Selangor as at June 2020:-

In addition to the property price threshold, the relevant State Authorities also impose a levy on the purchase of a property by a foreigner:-

What are the differences between properties with individual title and strata title?

A title serves as evidence of ownership and there are mainly 2 types of titles for properties in Malaysia, namely:-

• individual title – generally issued for a landed property such as terrace house, semi-detached house and bungalow house; and
• strata title – generally issued for a property in a multi-storey/stratified building (such as condominiums and apartments) and a landed strata property which is basically a landed property in a gated community development. 

What is the Malaysia My Second Home programme?

A foreigner who wishes to stay in Malaysia for a long period of up to 10 years may apply for a Malaysia My Second Home (“MM2H”) visa permit to enjoy various benefits and incentives such as:-

• longer visa for a period of 10 years (which is renewable);
• lower property price thresholds and levies in the purchase of residential property (these vary from state to state);
• applying for services of a domestic helper (subject to the guidelines of the Immigration Departments of Malaysia); and
• exemption of excise duty for purchase of a new locally assembled vehicle.
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In applying for a MM2H visa permit, a foreigner aged below 50 years is required to show proof of liquid assets worth a minimum of RM500,000.00 and offshore income of RM10,000.00 per month and, upon approval, to open a fixed deposit account of RM300,000.00 in Malaysia. Foreigners aged 50 and above are required to show proof of liquid assets worth a minimum of RM350,000.00 and offshore income of RM10,000.00 per month and, upon approval, to open a fixed deposit account of RM150,000.00 in Malaysia.

Below are the property price thresholds set by the relevant State Authorities for MM2H visa permit holders as at June 2020:-            

Can a foreigner buy a property “off-the plan” and how is a purchaser buying “off-the plan” in Malaysia protected?

Yes. A foreigner is allowed to purchase property “off-the plan” subject to relevant State Authority’s approval and property price threshold as discussed earlier. 

In Malaysia it is common to buy a property “off-the plan” which means that the buyer signs a contract with a licensed developer to buy a property that is yet to be built and that will be constructed in accordance with the approved building plans set out in the contract. The buyer will be billed progressive in accordance with the completion of each stage of construction of the property. 

These buyers (including foreigners) are protected by the Housing Development (Control and Licensing) Act 1966 (Act 118) & Regulations (“the HDA”) and pursuant to the HDA, a standardised sale and purchase agreement signed between the developer and purchaser. 

Some salient provisions in the standard sale and purchase agreement are as follows:-

• the developer must be a licensed housing developer under the HDA;
• detailed terms such as building specifications, approved layout plans and date of completion of construction (24 months for landed property and 36 months for strata property);
• list of common facilities and services (for strata titled properties);
• penalty for late delivery of vacant possession;
• 24 months’ defect liability period;
• scheduled payments depending on the stage of the development’s progress; and
• developer’s undertaking to apply for subdivision of title.

Can a foreigner buy a completed property in Malaysia?

Yes. A foreigner can purchase a completed property on an as is where is basis subject to the relevant State Authority’s approval and property price threshold as discussed earlier.

These buyers will be signing a “10/90” sale and purchase agreement whereby 10% of the purchase price will be paid by the purchaser upon signing of the agreement and the balance 90% of the purchase price is paid within 90 days from the date of the relevant State Authority’s approval is obtained with an automatic extension of 30 days subject to payment of interest. 

Can a foreigner obtain a loan from a financial institution in Malaysia to assist in the purchase of the property?

Yes, subject to the requirements and margin of financing imposed by various financial institution. Generally, the margin of financing for a foreigner is capped at 70% of the purchase price of the property although this amount may vary between different financial institution.

What incidental costs does a foreigner need to pay in connection with the property purchase?

Stamp duty - any purchase of property in Malaysia will attract ad valorem stamp duty calculated as follows:-

Legal fees – below are the scale fees for the calculation of the legal fees (excluding disbursements) for the preparation of the sale and purchase agreement and loan agreement (if the purchase of the property is financed by a financial institution):-

Are there any other costs payable? 

After completing the purchase transaction, the following expenses are required to be paid by the purchaser to the relevant authorities and the management office (for stratified property only):-

• quit rent payable once a year to the land authorities;
• assessment payable twice a year to the local authorities;
• sewerage charges payable monthly to the Indah Water Konsortium; and
• maintenance fees and sinking fund contribution payable monthly to the management office (for stratified property only).

What are the tax payable in disposing a property in Malaysia?

If a foreigner intends to dispose a property in Malaysia, there will be real property gain tax (“the RPGT”) payable to the Inland Revenue Board (“the IRB”). The RPGT is basically a tax charged on every person (whether a Malaysian citizen or a foreigner) on gains made arising from the disposal of a property in Malaysia.

In any disposal of the property in Malaysia by a foreigner, a foreigner is also required to remit the sum equivalent to 7% of the total disposal price to the IRB within 60 days from the date of disposal. The amount remitted to IRB is to be applied for the RPGT payable and any balance of RPGT payable to IRB must be settled within 30 days from the date of the notice of assessment issued by IRB.

A summary of the RPGT rates as at June 2020 chargeable on the gains made is as follows:-

In calculating the RPGT payable, IRB allows the following incidental costs incurred during the acquisition and disposal of the property to be deducted from the chargeable gains made:-

• legal fees and disbursements incurred during the acquisition and disposal of property;
• stamp duty paid during acquisition of the property; and
• commission paid to the agent during the disposal of property.