Malaysia is a popular destination for foreigners looking to invest in property, thanks to its stable political climate, strong economy, and attractive real estate market. However, as a foreigner, buying land in Malaysia can be a complex process, with strict rules and regulations to navigate.
If you’re a foreigner looking to buy land in Malaysia, this guide will walk you through everything you need to know.
In Malaysia, foreign individuals or companies are only allowed to buy or acquire title/interest in land in certain states.
In states where such purchases are permitted, the transaction will be subject to various requirements and restrictions prescribed by the National Land Code (Revised 2020) (Act 828), commonly referred to as the ‘NLC’.
1. State Authority Approval
Under Section 433B of the NLC, a foreigner must seek prior approval from the State Authority before acquiring title/interest in land in Malaysia.
This approval is required in various scenarios, including the acquisition of land through disposal by alienation, dealing with land, transferring land to a trustee/beneficiary who are foreigners, and creating any dealings or transmission on the register document of title of any land under the endorsement of any memorial by the Registrar.
A fee is payable for the application, and upon obtaining state consent, a levy may also be payable before the transfer of interest/title to the foreigner is registered. The amount of the levy is determined by the State government and is typically based on a fixed percentage of the purchase price, subject to a minimum specified amount.
2. Minimum purchase price
In certain states in Malaysia where foreigners are allowed to purchase agricultural land, there may be a minimum purchase price threshold set by the State Authority. As of July 31, 2020, the minimum purchase price for agricultural land in certain states were as follows:
- Federal Territory: RM1,000,000
- Melaka: RM1,000,000 (lease only)
- Johor: RM1,000,000 (lease only)
- Pahang: RM1,000,000 (leasehold only)
It’s important to note that these purchase price thresholds may be subject to change by the respective State government from time to time.
3. Are foreigners taxable?
Foreign investors who own land should take note that taxes become payable upon realization of the investment. For example, real property gain tax (RPGT) is applicable to foreign owners who dispose of property and generate a profit (i.e. the difference between the purchase price and the sale price, also known as the chargeable gain) from the sale or disposal.
The amount of RPGT payable is calculated based on the chargeable gain amount, with the applicable tax rate determined by the holding period. If the sale or disposal is made within 3 years of acquisition, the foreigner is liable to pay RPGT at a rate of 30% on the chargeable gain. After 5 years, the tax rate reduces to 10%.
4. Guidelines on Property Acquisition
The Economic Planning Unit (EPU) has issued guidelines on the acquisition of properties, which require EPU approval in two situations for a legal purchase and transfer of property to take effect.
These two situations are as follows:
- Direct acquisition of property valued at RM20 million and above, resulting in dilution of ownership of property held by Bumiputera interest and/or government agency.
- Indirect acquisition of property through the acquisition of shares by other than Bumiputera interest, resulting in a change of control of the company owned by Bumiputera interest and/or government agency. Such property must be more than 50% of its total assets and valued at more than RM20 million.
Foreigners are not required to obtain EPU approval for the acquisition of agricultural land valued at RM1,000,000 and above, or at least 5 acres in areas for the following purposes: agro-tourism projects, commercial scale agricultural activities using modern/high technology, or agricultural/agro-based industrial activities for the production of goods for export.
It’s important to note that a transfer of property to a foreigner based on family ties is only permitted among immediate family members.
The latest EPU guideline can be found on the Official Portal of the EPU.
>> Want to invest in land in Malaysia? Be sure to see 5 steps to get you started, plus the requirements you should know when purchasing land in Malaysia! <<
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