Since the turn of the New Year, there have been a series of investment friendly announcements by the Malaysian Government in the media. We have been tracking the development since and it is timely to report to you on the status and the operation of these good news:

1. FIC (Foreign Investment Committee)

1.1 This is a special purpose committee set up under the Economic Planning Unit of the Prime Minister’s Department of Malaysia to regulate and administer foreign investment in the country.

1.2 Notwithstanding that Malaysia is one of the more liberal countries in the region in welcoming foreign investment, there remain a handful of guidelines issued by FIC to be complied with by the foreign investors.

You can read all these guidelines at:
http://www.epu.jpm.my/New%20Folder/application%20and%20approval/foreignInvestmentCommittee.htm

1.3 Effective 21st December 2006, any acquisition by foreign interest of a dwellings above Ringgit Malaysia Two Hundred Fifty Thousand (RM250,000.00) shall not require any approval of the FIC and there shall not be any condition its usage and no limitation on the number of unit to be acquired.

You can access to the full text of the Media Statement in Malay at:
http://www.epu.jpm.my/New%20Folder/application%20and%20approval/kenyataanmedia.pdf

1.4 This is a welcomed relaxation from the need for FIC approval previously for all foreign acquisitions (unless expressly exempted) and foreign acquisition is only allowed for property above Ringgit Malaysia One Hundred Fifty Thousand (RM150,000.00) Only notwithstanding that there might be further conditions attached to the FIC approval issued.

1.5 In line with the announcement on item 1.3 above, FIC later confirmed that no foreign acquisition is allowed for any unit of dwellings priced below Ringgit Malaysia Two Hundred Fifty Thousand (RM250,000.00).

1.6 Therefore, foreigners are allowed to purchase:

• (a) any number of units of dwellings priced above Ringgit Malaysia Two Hundred Fifty Thousand (RM250,000.00); and
• (b) for any purpose (including both own use and investment).

Without the need for FIC approval, there is now one process less leaving only the State Authority Consent to be obtained under the National Land Code.

2. RPGT (Real Property Gain Tax)

2.1 RPGT is introduced in 1976 in Malaysia through the enactment of the Real Property Gain Tax Act 1976 as a tax on chargeable property gain.

2.2 Under the said Act, there is an obligation on both the Vendor and the Purchaser to inform the Inland Revenue Department (IRD) on the details of the transaction via a prescribed form for their assessment of the RPGT payable for every real property transaction in Malaysia. The rates of RPGT under the said Act are as follows:

Sale/ Disposal from the Date of Acquisition/ Purchase	Citizens/ Permanent Residents	Non-Citizens/ Non-Permanent Residents	Companies
Within 2 Years	30%	30%	30%
In the 3rd Year	20%	30%	20%
In the 4th Year	15%	30%	15%
In the 5th Year	5%	30%	5%
In the 6th Year & Subsequent Years	NIL	5%	5%

2.3 Through His Majesty’s Government Gazette of 1 April 2007 and the Minister’s making of the Real Property Gains Tax (Exemption) (No.2) Order 2007, all persons shall be exempted from all provisions of the Act in respect of any disposal of chargeable assets after 31 March 2007.

You can access to the full text of this Order (please read the last page of the Gazette) at:

RPGT(Exemption)(No.2)Order2007.pdf

2.4 It is believed that the said Act shall soon to be tabled for abolition at the Parliament.

2.5 Based on the above order and subsequent clarification from Ministry of Finance Malaysia, we gathered the followings:

(a) The said exemption of RPGT shall take effect on 1 April 2007 for property disposal starting 1 April 2007.

(b) Starting 1 April 2007, among others: 

1. the obligations to inform the IRD as mentioned above shall no longer be required for all real property transaction; and
2. there is no further need to retain 5% of the purchase price pending the clearance issued by the IRD.

(c) The said exemption is applicable to individual and corporate, including non-resident.

(d) For the said exemption, the disposal date is taken as

1. the date of the principal contractual document and not the completion date; or
2. the date of completion if the principal contractual document is conditional; or
3. the date of transfer/ completion if there is no agreement signed.

(e) Real property disposal on and after 1 April 2007 is not required to be declared under personal income tax return.

You can access to the full text of the letter from the Treasury dated 4 April 2007 at:

Letter from Tax Analysis Div - RPGT (2) - in Malay

Letter from Tax Analysis Div - RPGT (2) - Translated in English

3. 20% Stamp Duty Exemption on Certain Islamic Financing Instruments

3.1 Consistent with Malaysia’s aspiration to be the International Hub for Islamic Financing, 20% stamp duty exemption has been granted on certain Islamic financing instruments for the period commencing 2 September 2006 until 31 December 2009 vide the Stamp Duty (Remission) (No.2) Order 2007.

You can access to the full text of this Order (please read the last page of the Gazette) at:

SD(Remission)(No.2)Order2007.pdf

We trust the above to be useful for your comprehension in these investment friendly matters. We shall keep you informed of any later development in this matter.

Feel free to contact us for any clarifications in this matter at consult@churassociates.com.

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