July 05

Investment Opportunities in Malaysia for Foreigners

In one of our previous articles, we shared how foreigners like you can invest in Malaysia through cash, growth, and defensive investments, and fixed assets. This time around, we’ll be looking at one of the type investment opportunities in Malaysia for foreigners in specific – property investment. For your information, property investment is a common form of investment in Malaysia for foreigners.

You see, many people are choosing to invest their money elsewhere to serve as their safety net, to create more wealth, or to achieve their financial goals. So, it isn’t uncommon to do so due to the abundance of investment opportunities everywhere, including Malaysia.

That said, there are several reasons why The World Bank considers Malaysia’s economy to be one of the most open in the world with regard to ease of doing business. This includes having a:

- Skilled workforce with a good command of English
- Diversified economic structure
- Proactive economic policy support
- Sound financial system

Aside from the vibrant and business-ready environment, Malaysia is considered a great place for work and life based on HSBC’s Expat Explorer survey which ranked Malaysia among the top 20 best countries in the world for expats to live in and notably ranked 7th for its cultural, open, and friendly communities.

With that, it’s easy to see why foreign investors and foreigners alike often express their admiration for Malaysia after spending some of their time here. Moving forward, let’s look at the property investment opportunities available for foreigners in Malaysia since property investment is one of the hottest investment opportunities in Malaysia for foreigners.

Property Investment Opportunities for Foreigners in Malaysia

The property market in Malaysia has been going through a period of growth in the past decade due to demand for progressive infrastructure and connectivity. This has in turn made property investment a common form of investment in Malaysia for foreigners.

However, foreigners who wish to invest in Malaysian properties need to be aware of certain restrictions and requirements applicable to them when searching for a property to purchase. A case in point would be Malaysia’s Real Property Law and the Guidelines on the Acquisition of Properties.

In West Malaysia, land law is governed by the 1965 National Land Code, modeled on the Torrens System, while East Malaysia (Sabah and Sarawak) is governed by their respective land laws. Under the code, no title or interest in land will be registered until dealings or transactions have been made with the relevant local land registry or office.

What kind of properties can foreigners own?

Before we dive deeper into the kind of properties that foreigners can own, know that there are two categories of titles in Malaysia that’s available for property owners – freehold and leasehold.

The former allows you to have permanent ownership of the property while the latter lets you own the property for a limited period.

That said, the Malaysian government encourages foreigners in Malaysia to make Malaysia their second home, be it for long-term stay, retirement, or investment purposes. Hence, property investment is a common form of investment in Malaysia for foreigners.

For this reason, foreign ownership of property is liberal whereby foreigners can own 100% of the property as long as you meet the minimum requirements and the minimum property value is RM1 million (applicable to all kinds of property in every state in Malaysia).

This means you can easily own a bungalow, terrace house, condominium, landed property, studio unit, commercial property, industrial property, agricultural land, and industrial land EXCEPT:

Having an investment plan will allow you to achieve capital growth and minimize capital loss. You can achieve capital growth by selling your investment assets at a higher price than the price you paid while selling at a lower price will lead to capital loss. If you want capital gains, you should invest in securities for a longer term.

- Properties built on Malay reserved land
- Properties allocated to Bumiputera groups as part of a development project
- Properties defined by state authority as low- and medium-cost residential units

iv) Tax minimization

What are the costs involved?

Like any Malaysians who are subject to property tax, legal fees, and stamp duties when purchasing or investing in a property in Malaysia, foreigners like you are no exception.

Real Property Gains Tax (RPGT)

Imposed by the Inland Revenue Board (LHDN), RPGT is introduced to curb property speculation and to prevent the formation of property bubbles. This means every person who purchases a property in Malaysia is subject to real property gains tax and is required to file CKHT Form 1A for chargeable gains on any disposal of any property.

For individual foreigners who invest in Malaysian property (investment in Malaysia for foreigners) and the property is disposed of with capital gains made, the gains are subject to RPGT. The tax rate is 30% where the property has been owned for up to 5 years and 5% for the 6th year and thereafter.

GST on Commercial Property

In Malaysia, commercial property is subjected to GST. If you set up a Malaysian company to purchase the commercial property, you are eligible to claim the GST from the Customs Department. Once your company is GST-registered, the monthly rental income and the sales proceeds of your property will be subjected to GST. This is what you can expect when property investment is considered a common form of investment in Malaysia for foreigners.

Taxable Rental Income

If a foreigner earns Malaysian rental income, he/she will be taxed by LHDN, after deduction for loan finance interest, assessment, quit rent, insurance, repairs, maintenance, service charges, and sinking fund payments. The income tax for foreigners is 28% while the tax rate for company is 24%.

How can a foreigner buy/invest in a Malaysian property?

Now that you’ve learned about the rules and regulations as well as the eligibility for certain homes, it’s time to find your property. The steps are as follows:

1. Explore the variety of properties for sale in Malaysia to find the right one for you.

2. Submit your purchase intention through an offer letter or developer’s sales form, and agreed upfront payment (2-3%).

3. Apply for property financing if you need to but bear in mind that the finance margin available to you varies depending on your circumstances.

4. Provide your lawyer with relevant documents – a copy of your passport, correspondence address, contact details, income tax details, etc.

5. Sign your Sales and Purchase Agreement (SPA) within 14 days from the offer letter. This lays out the terms and conditions of the sale, including details of what is covered in the sale. At this stage, you’ll be required to pay 10% as a down payment. The 2-3% paid during Step 2 contributes to this 10% deposit total.

6. Your solicitor will apply for final state authority consent to ensure that your property meets the requirements set by the state before this step. Documents to be submitted include:

● 1 certified true copy of SPA
● 1 certified true copy of your passport
● 1 certified true copy of company constitution (if applicable)
● Latest quit rent assessment receipt for the property
● Application form as per section 433B of National Land Code

7. Pay the remaining balance on the property purchase price as defined under the SPA or Schedule H of the Housing Development (Control and Licensing) (Amendment) Regulations 2015.

8. Developer delivers vacant possession within 24 months for individual title or 36 months for strata title properties under development. In sub-sale/secondary market purchases, the transfer date is based on the agreed timeframe as per the SPA and signing of the Memorandum of Transfer.

While property investment seems like a lot of work with complicated procedures, it makes a good investment for the long term, hence it is one of the favourite investment opportunities in Malaysia for foreigners. So make sure you know which rules apply to you and contact the right persons to help you deal with all these.

You can also start to invest in Malaysia with Gene App – an investment plan that allows you to earn a daily income and convert your earnings to invest in property and jewellery. It generally works to multiply your wealth, manage and increase your digital assets. You can also consider this option as one of the many investment opportunities in Malaysia for foreigners.

To find out more info other than investment opportunities in Malaysia for foreigners, contact us at 011 6939 2180 or email your queries to [email protected]