Sunday, January 08, 2006

Real Property Gain Tax


Basis Of Taxation

The chargeable gains arising from the disposal of any land situated in Malaysia and any interest, option or other right in or over such land or the disposal of shares in a 'real property company' is subject to Real Property Gains Tax.





Disposer's Responsibilities

The disposer of a real property has to submit the following within 30 days from the date of disposal of the asset:

1. Completed Form CKHT 1;

2. Copies of stamped Sale and Purchase Agreement or Form 14A (memorandum of transfer) to prove the acquisition and disposal of the asset;

3. Copy of grant/title deed (if any);

4. Copies of bills and receipts for expenses claimed. (in case of companies or non-citizen and non-permanent resident individuals, details not required if asset is disposed in the sixth or subsequent year from the date of acquisition).







Acquirer's Responsibilities

An acquirer has to submit the following within 30 days from the date of disposal of the asset:

1. Completed CKHT 2 forms;

2. Copy of stamped Sale and Purchase Agreement or Form 14A (memorandum of transfer) to prove the acquisition;

3. Copy of grant/title deed (if any).

Acquirer (or his solicitor) is also required to retain the whole of the consideration monies or a sum not exceeding five percent (5%) of the total value of the consideration whichever is the lower, until he receives clearance (Form CKHT 4 or CKHT 5) from the Inland Revenue Board.







Exemptions Available For Real Property Gains Tax

(i) A gain arising on disposal prior to 7 November 1975, the date of coming into force of the RPGT Act 1976.

(ii) An amount of RM5,000 or 10% of the chargeable gain, whichever is greater, for each disposal of a property by an individual.

(iii) A gain accruing to the Government, a State Government or a local authority.

(iv) A once in a lifetime exemption on a gain accruing to an individual who is a citizen or a permanent resident or to a husband and wife in respect of the disposal of one private residence.

(v) A gain equal to to the amount of estate duty payable where the disposer is compelled to dispose the property in order to pay the estate duty.





A No Loss And No Gain Situation

Applicable only to companies (as defined in the RPGT Act 1976) for the following situations:-

(i) Transfer of asset between companies in the same group to bring about greater efficiency in operation for a consideration consisting of not less than 75% syer in the transferee company and the balance of a money payment.

(ii) Transfer of asset between any companies for any consideration in any scheme of reorganisation, reconstruction or amalgamation whereby the transferee company is being restructured to implement any such scheme in compliance with Government policy on capital participation in industry.

(iii) Distribution of asset by a liquidator of a company and the liquidation of the company was made under a scheme of reorganisation, reconstruction or amalgamation whereby the transferee company is being restructured to implement any such scheme in compliance with Government policy on capital participation in industry.





Several Transactions Where Disposal Price Is Deemed Equal To Acquisition Price


(i) Transfer of assets between spouses.

(ii) Gifts made to the Government, State Government, local authority or a charity exempt from income tax.

(iii) Disposal of an asset as a result of a compulsory acquisition under any law.

(iv) Disposal of an asset by a person to an Islamic Bank under a scheme where that person is financed by such bank in accordance with the Syariah.





Example To Illustrate Calculation Of Real Property Gains Tax

Disposal Price on 10.01.2000

300,000

Less: Renovation/extension costs

20,000

Legal fees

3,000

23,000

277,000

Acquisition Price on 15.04.1996

200,000

Add: Duty stamp paid

3,000

Legal fees

2,500

5,500

205,500

71,500

Less: Exemption of RM5,000 or 10%of the chargeable gain, whichever is greater

7,150

Chargeable gain

64,350

Tax on RM64,350 @ 15% = RM9,652.50

Rate of tax 15% for disposal in the fourth year after the date of acquisition.







Rates Of Tax (Real Property Gains Tax)

CATEGORY OF DISPOSAL

COMPANY (%)

INDIVIDUALS & OTHER PERSON (%)

Disposal within 2 years

30

30

Disposal in the 3 rd year

20

20

Disposal in the 4 th year

15

15

Disposal in the 5 th year

5

5

Disposal in the 6 th year and subsequent years

5

0

The above rates apply for disposals on or after 27 October 1995.

An individual who is not a citizen and not a permanent resident is subject to the following rates:-

CATEGORY OF DISPOSAL

RATE OF TAX (%)

Disposal within 5 years after the date of acquisition of the chargeable asset

30

Disposal in the 6 th and subsequent years after the date of acquisition

5

These rates apply for disposals on or after 17 Oktober 1997.

Thursday, January 05, 2006

Foreign Exchange Controls ( F E C )

Foreign Exchange Controls

A non-resident is permitted by the Controller of Foreign Exchange to undertake direct or portfolio investment in Malaysia but subject to certain guidelines.

In February 1999, as a further easing of the exchange control rules, Bank Negara Malaysia announced that all foreign investments in properties are excluded from the levy on profits, which are realised and repatriated. The following are excluded:

For funds which came in before 15 February 1999, no levy is imposed on the repatriation of the original capital amount invested.
For funds which came in on or after 15 February 1999, the principal is allowed to be repatriated without any levy. The profits will be subject to a levy of 10% if profits are repatriated 12 months from the date the profits are made. However, no levy is imposed on profits made from the investment in properties, upon repatriation.
Consequently, the levy is only imposed on investments in shares, bonds and other financial instruments. This levy does not apply to profits from FDI. The amount of levy would depend on the duration the funds are held in Malaysia.

Determination of the levy:

These new measures are aimed to encourage portfolio investors to take a longer term view of their investments in Malaysia and to attract new funds into the country, while at the same time discouraging short-term flows. The 2001 Budget proposed that only portfolio profits repatriated within a 12 month period are subject to a 10% exit levy. The 10% levy will no longer be imposed for any profit repatriated after a year. However, the effective date of commencement is yet to be announced. This proposal intends to encourage new capital inflows into the country.

The levy would be imposed only on any gains over and above the initial sum brought in up to the point of repatriation. Any subsequent losses are not eligible for rebate but can be offset against any subsequent gains.

The levy is to be paid to the following institutions:

All commercial banks
Bank Islam Berhad
Arab Malaysian Merchant Bank Berhad
Aseambankers Malaysia Berhad
Commerce International Merchant Bankers Berhad
Malaysian International Merchant Bankers Berhad
Perwira Affin Merchant Bank Berhad
RHD Sakura Merchant Bankers Berhad

A non-resident traveller visiting Malaysia is permitted to carry with him/ her any amount of traveller's cheques denominated in foreign currencies and foreign currency notes, but is required to declare to the authorities the amounts carried by him/ her into Malaysia. However, a non-resident traveller leaving Malaysia is only permitted to carry with him/ her traveller's cheques denominated in foreign currencies and foreign currency notes up to the amount that he/ she brought into Malaysia. In addition, a non-resident traveller visiting or leaving Malaysia is permitted to carry with him/ her Ringgit currency notes up to RM 1,000 only.

Malaysia My Second Home

Introduction
Malaysia My Second Home program is to allow people from all over the world, who fulfill certain criteria, to stay in Malaysia as long as possible on a social visit pass with multiple entry visa. The Social Visit Pass is initially for a period of 5 years and renewable.

WHO ARE ELIGIBLE TO APPLY?
It is open to all citizens of countries recognized by Malaysia regardless of race, religion, gender or age.

WHY MALAYSIA?
Governmental support :
This program is initiated, organized and launched by the Malaysian Government.
It is, therefore, a program, that the Government will continuously work to ensure its success.

Standard of living :
Malaysia has one of the highest standards of living in the region with all the modern infrastructure and facilities in place.


Cost of living :
Cost of living is one of the lowest in Asia and will remain so for a very long time. This is achieved through the Government's efficient monitoring of the economy in ensuring that inflation is kept low at all times and thereby also the prices of goods and services.

Weather :
The weather is pleasant, warm and balmy with moderate rain throughout the year, There are also highland residential areas and resorts with permanent spring-like weather throughout the country.

Infrastructure :
The whole country is very well connected with up-to-date, modern road, rail, air, and sea transportation systems. Public transport by buses, taxis, trains and planes are comfortable, efficient and relatively low in cost.

Political stability :
The ruling Government is the longest serving freely elected Government in the world. It is a Government representing all the races, religions, cultures etc. found in Malaysia. In fact, Malaysia is one of the most politically stable countries in the world.

Rule of law :
The rule of law is one of the fundamentals in Malaysia's constitution. Everyone is subjected to the law and also equal before the law. Malaysia practises basically the British system of justice with an independent reliable and dependable judiciary.

Safety :
Statistics can proof that Malaysia is one of the safest countries in the world, its crime rate is relatively low.

Religion :
Islam is the official religion of Malaysia but the constitution guarantees the right of people to practise other religions.

Culture and language :
The Malay language (Bahasa Melayu) is the national language of the country; English is the second language but other languages can be freely used and practised. Similarly the Malay culture is dominant in the country because the Malays are the dominant race in Malaysia and in the region. But other cultures can be practised very freely and there is a free intermingling of different cultures.

Food and Fruit :
All the food of the world can be found here at very reasonable cost. With so many races and cultures living together in harmony, it is understandable that each race has picked up the best of each other's food and made Malaysia into Asia's Food Paradise. Similarly the tropical fruits of Malaysia are unique, exotic and available in abundance practically throughout the year. It should be a real joy to savour these fruits.

Recreation/Entertainment :
The country has everything for the family,-theme parks, jungle trails/sports, water sports and one of the highest number of golf courses - ratio or population.

Shopping :
Most of the items that tourists normally like to buy - perfumes, cosmestics, watches, fountain pens, a long list of electronic goods, branded goods etc. are completely free of tax. Quality goods from all over the world are imported and are relatively low in price and sold throughout Malaysia.

Education :
The country has one of the best developed and quality educational systems - both public and private. There are international schools of repute in all major towns with English as the medium of instruction. There are also private colleges and universities offering twinning programs with other well-known universities and major colleges from throughout the world. Therefore, it is the place for quality education from nursery right up to the highest level of university education. It is already becoming an educational center of excellence for the region. Relatively speaking, it is also the place to get quality international class education at a very reasonable cost.

Medical facilities :
The country has a very efficient health system where medical services are provided at nominal cost. Private doctors, clinics and also hospitals of international standards are easily obtainable at very reasonable cost. Malaysia is also becoming a centre for medical facilities in the region.

Residence :
There are quality residences - terrace houses, semi-detached, bungalows, apartments and condominiums all over the country. There are also some of the finest residences available in tourism zones - on beaches, near jungles and near theme parks, recreational places and city centres. Foreigners are eligible to buy 2 houses at a cost of not less than RM150,000 each. For this purpose, they are also entitled for 60% loan from local banks.


Requirements
The Malaysian government welcome foreign citizens from all over the world (except Israel & Yugoslavia) to enter and stay in Malaysia on a long term Social Visit Pass (duration of 5 years with a Multiple Entry Visa) under the “ MALAYSIA – MY SECOND HOME PROGRAMME”.

However, this programme DOES NOT PROMISE a Permanent Resident status.

Terms and Conditions

1. Age:
This programme is open to all categories of citizens with no limit of age. They are allowed to bring their dependent (below 18 years of age) and apply for a maid.

Notes:

1.1 Dependant above 18 years of age will have to make a separate
application.
1.2 Application for maid can be submitted after the approval of Malaysia –
My Second Home Programme.

2. Financial Requirement:

2.1 Applicant by a person above 50 years of age

2.1.1 Applicant and spouse (either one must be above 50 years of age) will
have the privilege of choosing either:
• To have a fixed deposit of RM 150,000.00 in a Malaysian Bank; OR
• Derive a fixed monthly income of not less than RM 10,000.00 (from abroad).

2.1.2 Single (individual) applicant will have the privilege of choosing either:
• To have a fixed deposit of RM 100,000.00 in a Malaysia Bank; OR
• Derive a fixed monthly income of not less than RM 7,000.00 (from abroad).

2.2 Applicant by a person below 50 years of age (application must be submitted to the Headquarters of Malaysia Immigration Department)

2.2.1 Applicant and spouse MUST POSSES:
• A fixed deposit of RM 150,000.00 in a Malaysia Bank; AND
• Derive a fixed monthly income of not less than RM 10,000.00 (from abroad).

2.2.2 Single (individual) applicant MUST POSSES:
• A fixed deposit of RM 100,000.00 in a Malaysia Bank; AND
• Derive a fixed monthly income of not less than RM 7,000.00 (from abroad).

Notes:

The Government of Malaysia has determined ONLY the following local bank of fixed deposit installment.

1. Affin Bank Berhad
2. Bumiputera Commerce Bank Berhad
3. Maybank Berhad
4. RHB Bank Berhad

3. Sponsor

The requirement of a local sponsor can be waived but the final decision lies upon the Immigration Officer at the counter. Applicant can also acquire the services of companies registered with the Malaysia Immigration Department.

4. Insurance Coverage / Medical Report

Applicant must possess a medical insurance policy from any insurance company in Malaysia and attach a medical report from recognized medical institutions. The requirement for insurance policy is however an optional for a person of old age and denied by the insurance company.

5. Education

Dependant below 18 years of age and still studying are required to apply for Student Pass to further their education in schools or institutions of higher learning.

6. Government Taxes

Successful applicants are bound by the policies, systems and regulations of tax of this nation. They do not posses any exemption as granted to the Diplomatic Missions in Malaysia.

7. Application Procedure

7.1.1 Application can be submitted while the applicant isin the country
provided that the applicant is in the possession of a valid pass.
7.1.2 Once approved, Visa and Social Visit Pass will be issued in Malaysia.

8. List of Document

1. Application letter
2. 2 copies of Imm. 12-Social Visit application forms (obtainable at all
Malaysian Immigration Departments)
3. 2 passport sized photographs of applicant and spouse (if accompanied
by spouse)
4. A copy of applicant’s (and spouse) Passport / travel document (all pages)
5. An endorsed / certified copy of a Marriage Certificate by the embassy
(if accompanied by a spouse)
6. A copy of a certified fixed deposit, medical report and medical Insurance
7. A Personal Bond stamped RM 10.00 by the Stamp-Duty Office (signed by
the sponsor)
8. A copy of the sponsors Identity Card (if applicable)
9. A proof of monthly income (origin country / abroad) as stated at (Para. 2)
Financial Requirement

9. Exemption

The following requirement can be relaxed by conditional approval. However, the applicant must produce these documents (stated below) before the endorsement of the Social Visit Pass be given upon approval.

• The fixed deposit as pre-required
• Medical insurance policy in Malaysia
• Medical report

10. Location of Application

- The Headquarters of Malaysian Immigration Department
- State Immigration Department
- All Malaysian Representative Offices Abroad and;
- All Malaysian Tourism Offices

11. Restrictions

Successful applicants are STRICTLY forbidden from the following:

Taking part in activities such as political, missionary, provocative or instigative which is considered sensitive and threat to the national security.

12. Fee Rate

• Social Visit Pass – RM 90.00 per year
• Visa – following existing rate applicable to each country (not exceeding
RM 10.00)

13. Extension of Social Visit Pass

- Form Imm. 55
- Form Imm. 38(if visa required)
- The latest certified fixed deposit from a local Bank / a proof of monthly
income (origin country / abroad) (Para. 2)
- A copy of applicant’s (and spouse) passport / travel document
(if accompanied by a spouse)

14. Client Charter

New application – 30 working days from the date of submission.
Application for an extension – 14 working days from the date of submission.

Foreign Investment Committee ( F I C )

NEW GUIDELINES ON THE ACQUISITION OF PROPERTIES BY MALAYSIANS AND FOREIGN INTERESTS RELEASED BY THE ECONOMIC PLANNING UNIT ON MAY 02, 2001

The relaxation of the Foreign Investment Committee Guidelines on the acquisition of properties is to clarify on the acquisition of properties by Malaysians and foreign interests with the purpose amongst others, to expedite and simplify the FIC procedures pertaining to the acquisition of properties.

GUIDELINES

The new guideline is divided into the following categories: -

1.
The acquisition of properties by Malaysians under RM10 million does not require the approval of the FIC (this new acquisition limit is to replace the current limit of RM5 million). This measure is taken in order to simplify and expedite transactions below the limit of RM10 million to be dealt with by the State Authorities.


2.
Transactions for the disposal of properties below RM20 million, involving parties as follows: -

a. Bumiputera to Bumiputera;
b. non-Bumiputera to Bumiputera;
c. non-Bumiputera to non-Bumiputera; and
d. foreign interests to Malaysians.

With regard to the above transactions, only transactions which have been duly executed are to be reported to the FIC Secretariat. In such cases the State Authorities do not need to await for the FIC's approval.


3.
Foreign interests involved in manufacturing activities but are exempted from obtaining manufacturing licenses from the Ministry of International Trade and Industry (MITI) are permitted to acquire industrial lots/ factories for manufacturing purposes only. This is to facilitate foreign interests in acquiring industrial properties, without equity conditions, for the purposes of undertaking manufacturing activities but not for renting of the said properties.


4.
Further relaxation of the conditions in the Special Guidelines ( 22 April 1998):-

4.1 Foreigners are allowed to purchase all types of residential units, shop houses, commercial and office spaces comprising of old buildings and newly launched projects, subject to price exceeding RM250,000 per unit, without having to incorporate a company with local equity participation (the current relaxation is only for newly completed projects or those that are at least 50% in progress).

4.2 The above acquisitions are allowed to be financed by domestic financial sources (currently such acquisitions can only be financed by foreign financial sources).


5.
In order to encourage foreign companies to be incorporated in Malaysia to operate as the Headquarters or Regional Offices, these companies are allowed to own offices or office spaces including office branches (the price exceeding RM250,000 per unit) without any restrictions as to the number of units that can be owned and without imposition of equity conditions.


6.
Foreign companies incorporated in ASEAN countries which intend to set up joint-venture companies or to undertake trading and business activities in Malaysia are allowed to own offices or office spaces (the price exceeding RM250,000 per unit) without imposition of equity conditions.


7.
In respect of the acquisition of residential units under the "Silver-Haired Programme", foreigners are allowed to purchase residential units priced at RM150,000 and above, subject to the condition that the unit purchased are located in areas designated for such programme.

Monday, January 02, 2006

Body / Association Links

Web Link Hits
Real Estate & Housing Developers’ Association
REHDA was established in 1970 with 13 pioneer members to represent the private sector in property development in Malaysia. 234

Pertubuhan Akitek Malaysia
The Malaysian Institute of Architects PAM was founded in 1920 and represents the Malaysian architectural profession at home and abroad. 101
The Malaysian Institute of Estate Agents

Official website of Malaysian Institute of Estate Agents 200
International Real Estate Federation

FIABCI International Real Estate Federation is a worldwide network open to all professionals involved with the property industry 111

Board of Valuers, Appraisers and Estate Agents Malaysia
Regulates valuers, appraisers, and estate agents. 242

Association of Valuers & Property Consultants in Private Practice Malaysia
Official site of Persatuan Penilai dan Perunding Harta Swasta (PEPS) 242


Professional Bodies (6)
Government (13)
Developers (12)