Overview of Real Property Law in Malaysia

In West Malaysia, land law is governed by the National Land Code, 1965 (“NLC”) which is modelled on the Torrens system. The states situated in East Malaysia (Sabah and Sarawak) are governed by their respective land laws. Under the NLC, no title to or interest in land will be transferred or created until the instruments effecting a dealing which is capable of being registered (i.e. transfers, leases, charges and easements) has been registered with the relevant local land registry or office. All relevant data, records and information pertaining to a real estate in Malaysia is kept by the local land registries or offices and shows the ownership and other rights that exist on the real estate. This record is open to public inspection upon payment of a fee. There are two categories of titles in Malaysia available for property owners, namely, freehold title (owner has permanent ownership of the property) and leasehold title (owner has possession of the property for a limited period).
 

Restrictions on Foreign Ownership of Property
 

Non-Malaysian citizens and foreign companies (“Foreign Purchasers”) are allowed to buy properties in Malaysia provided that they comply with certain requirements and restrictions imposed under the NLC, the Guidelines on the Acquisition of Properties (“EPU Guidelines”) issued by the Economic Planning Unit (“EPU”), and the relevant rules and regulations that may be imposed by the state authorities.

NLC Requirements

Under the NLC, Foreign Purchasers are not allowed to acquire any land (other than industrial land) in West Malaysia unless approval of the relevant state authority has been obtained.

EPU Requirements

Under the EPU Guidelines, Foreign Purchasers are NOT ALLOWED to acquire:
· properties valued less than RM1 million per unit;
· residential units under the category of low and low-medium cost as determined by the state authority;
· properties built on Malay reserved land; and
· properties allocated to Bumiputera interest in any property development project as determined by the state authority (NB. Bumiputera means a Malay individual or aborigine as defined in Article 160(2), Article 161A (6)(a) and Article 161A (6)(b) of the Federal Constitution of Malaysia).

Further, the acquisition of any residential unit by Foreign Purchasers valued at RM1 million and above does not require the approval of the EPU (but falls under the purview of the state authorities and requires the relevant state authorities’ consent).

Source: CBRE, PW Tan & Associates

Minimum Purchase Price

As land is a state matter, each state authority may impose conditions in respect of real property transactions involving foreign interests. For instance, the minimum purchase price for properties imposed on Foreign Purchasers in the Federal Territory (Kuala Lumpur and Putrajaya) is at RM1 million, whereas the minimum purchase price for residential properties imposed on Foreign Purchasers in the state of Selangor is at RM2 million (Zones 11 & 22 ) and RM1 million (Zone 33 ). Further, Foreign Purchasers are prohibited from purchasing landed residential properties in the state of Selangor unless the said property is issued with a landed strata title (e.g. gated community). Set out below are the various minimum purchase price for properties imposed on Foreign Purchasers as at 1 August 2017:

The minimum purchase price in table above and other conditions imposed by the state authority may change from time to time and it is prudent for Foreign Purchasers to obtain legal advice on this matter.
 

Real Property Gains Tax (“RPGT”)

Under the Real Property Gains Tax Act 1976, every person including Foreign Purchasers are subject to real property gains tax and is required to file CKHT Form 1A to the Inland Revenue Board of Malaysia for chargeable gains on any disposal of any property. Set out below are the applicable RPGT rates imposed on capital gains arising from the sale of any property with effect from 1 January 2014:

Stamp Duties

It is pertinent for a Foreign Purchaser to note that every conveyance of any property in Malaysia shall be subject to the following stamp duties:

• 1. 1% on first RM100,000
• 2. 2% on next RM400,000
• 3. 3% on the subsequent amount

Source: CBRE, PW Tan & Associates