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Disclaimer

This book is designed to provide information on the GST only. This information should not be deemed as a professional advice. In the case of a need for any such expertise consult with the appropriate professional. This book has not been created to be specific to any individual’s or organizations’ situation or needs. Every effort has been made to make this book as accurate as possible. However, there may be typographical and or content errors. Therefore, this Ebook should serve only as a general guide and not as the ultimate source of subject information. The author and publisher shall have no liability or responsibility to any person or entity regarding any loss or damage incurred, or alleged to have incurred, directly or indirectly, by the information contained in this book. You are advised to refer to Customs gst. customs.gov.my/ for further clarifications or latest updates.

G s T

imPacT ON PrOPerTY iNVesTOrs/OWNers

WHaT is GsT?

Goods and Services Tax (GST) is a multi-stage tax on domestic consumption. GST is charged on all taxable supplies of goods and services in Malaysia except those specifically exempted. GST is also charged on importation of goods and services into Malaysia.

Payment of tax is made in stages by the intermediaries in the production and distribution process. Although the tax would be paid throughout the production and distribution chain, only the value added at each stage is taxed thus avoiding double taxation. In Malaysia, a person who is

registered under the Goods and Services Tax Act 2014 is known as a “registered person”. A registered person is required to charge GST (output tax) on his taxable supply of goods and services made to his customers. He is allowed to claim back any GST incurred on his purchases (input tax) which are inputs to his business. Therefore, the tax itself is not a cost to the intermediaries and does not appear as an expense item in their financial statements.

registered under the Goods and Services Tax Act 2014 is known as a “registered person”. A

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DeFiNiTiON OF TaXaBle PersON

According to the Malaysian Customs Department, a taxable person is:

“Any person who makes a taxable supply for business purposes and the taxable turnover of that supply exceeds the threshold of RM500,000 is required to be registered for GST.”

Taxable turnover means the total value of taxable supply for a period of 12 months excluding the amount of GST.

A taxable person can be an individual, a sole proprietor, a partnership, a property holding company or a company.

GST is to be levied and charged at the proposed rate of 6% on the value of the supply. GST can be levied and charged only if the business is registered under GST.

It can be simplified as per chart below.
It
can
be simplified
as
per
chart
below.

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TYPe OF sUPPlY?

HOW GsT aFFecTs PrOPerTY
HOW
GsT
aFFecTs
PrOPerTY

iNVesTOrs /OWNers

Property investors are affected by GST in various stages of the value chain i.e. from the time of purchase, getting financing, execution of legal documents, to the sale and rental of property, or when engaging a real estate agent and in the disposal of property.

Below are summary of how GST has an impact on the property investor.

GsT ON PrOPerTY TraNsacTiONs

Real

estate

refers

to

land

and

everything attached to it, whether on or below the surface. Land includes buildings, trees, vegetation and other structures and objects in, under or over it. Real property is the rights to use real estate and includes activities concerned with ownership, use and transfers of immovable property.

  • i. Deposit/ Booking Fees

In order to secure the purchase of the property, developers are allowed to collect deposit or booking fees. Deposit or booking fees given in respect of a supply is not regarded as payment and is not subject to GST. However, if the developer

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applies such deposit or booking fees as consideration or part payment, then they are subject to GST.

ii. administrative services

Administrative services such as provide endorsement of deed of assignment are subject to GST because administrative fees are standard rated supplies.

iii. interest for late payment

Interest payment related to late payment is regarded as a penalty and is considered to be out of scope. Therefore, it is not subject to GST.

iV. commissions

All commissions derived from the sale of properties are subject to GST, regardless whether the property is a taxable or exempt supply.

  • V. stamp Duty

GST

is

exclusive

of

stamp

duty

payable on the transfers of property.

Vi. sale & lease of property

If the property is a standard rated supply such as commercial property, it is subject to GST. If the property is an exempt supply such as residential premises, then the disposal is not subject to GST.

Vii. Progressive payment

You

have

to

account

for

GST

at

the

various

stages

of

the

progressive/ scheduled payment

for

uncompleted

nonresidential

properties.

 

Example:

A

purchaser enters

into an agreement to buy a commercial building which is under construction. The sales price of the building is RM500,000. The payment

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is scheduled for four successive interval payment and the respective amounts to be paid are as follows:

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Viii. car Park

FREE Car park from Developer as stated in the SPA for residential property is not subject to GST. However, purchase of an additional car park in a separate car park agreement is subject to GST.

iX. Fixtures & Fittings

All

fixtures

and

fittings installed

upon vacant possession

for

both

residential and commercial properties are subject to GST.

X.

service

charges

&

sinking

fund

Service charges & sinking fund for residential properties are not subject to GST but for commercial property it is subject to GST.

Xi. Water & TNB Deposits

Deposit for supplies of water and electricity is not subject to GST if the money received is a deposit for purpose of security and does not form as part of consideration.

Xii. Quit rent & assessment

Quit rent and assessment are out of scope supply.

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TeNaNcY

General rule:

TeNaNcY General rule: leGal Fees aND cHarGes All charges and fees, excluding disbursements such as landwww.rapidpropertyconnect.com " id="pdf-obj-12-6" src="pdf-obj-12-6.jpg">

leGal Fees aND cHarGes

All charges and fees, excluding disbursements such as land registry fee, stamp duty etc imposed for services provided will be subject to GST.

These include fees in respect of contentious or non-contentious business, preparing and completing agreements, conducting and completing transactions, preparing

filing or witnessing of miscellaneous documents. It also includes charges such as miscellaneous expenses, cost of extra work, travelling or accommodation expenses, allowances for the time of the solicitor and his clerk. General expenses such as telephone, telex, postage, advertising, and stationery charges are incurred in the course of providing services to the client and shall be treated as business costs. They are not to be treated as disbursements for GST purposes.

Non-billed income such as oath fees received by the legal firm or by individual solicitor under GST.

Non-billed income such as oath fees received in respect of oaths administered by a solicitor in sole practice or a partner in a legal firm are regarded as consideration for services supplied in the course of business, and thus is subject to GST

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real esTaTe aGeNTs & ValUer

agent Fees/commission

Estate agents, negotiators and brokers would generally receive fee (commission) for their services in performing estate agency work (i.e. buying, selling or leasing of properties) from their clients who can be the buyers, sellers, landowners or tenants. The provision of such services in relation to estate agency work is a taxable supply regardless of whether the property is residential or non-residential.

Estate

agents,

negotiators or

brokers have to charge GST on the fee that they receive regardless whether the property is a taxable or exempt supply

agent Fees/commissions for aborted sale

The fee or commission received is still subject to GST because it is the

payment for the supply of services.

Valuation services

Valuers or appraisers would impose certain fee for their services in performing their valuation work to their clients. The provision of such services in determining the value of fixed property, executing the feasibility studies or providing expert advice on property is a taxable supply regardless of whether such property is residential or non- residential. Thus it is subject to GST .

FiNaNcial iNsTiTUTiONs

Provisions of loan – loan

interest on

The loan provided to the borrower by the moneylender is an exempt supply. As a consideration for the supply of the loan, the borrower is required to make installment

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payment of the principal amount plus the interest to the lender. This interest payment is not subject to GST. Loans or advances given can be secured or unsecured. The provision of a security for such debt (if any) is also an exempt supply.

loan conversion

Services of loan conversion where terms of loan (e.g. amount of loan) are being changed or loan revision (e.g. changing the original terms and conditions of loan) are out of scope supplies. Therefore, they are not subject to GST.

loan

Transfer

(change Bank)

to another Bank

The transfer

of

a

loan

from

one

moneylender

 

to

another

moneylender

is

an

out

of

scope

supply. Therefore, it is not subject

to GST.

loan renewal

The renewal of a loan i.e. granting of another loan after the maturity of the original loan is reached is an exempt supply and therefore it is not subject to GST.

loan assignment

Loan/credit assignment to another assignee is an out of scope supply and therefore it is not subject to GST

Other Bank charges

Attestation fees on attesting the money-lending agreement by the lawyers’ .GST should be imposed on the attestation fee by the attester if he is a registered person.

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charges for loan account statement Or any Documents on loan

For example if you request for a copy of the bank statement and the bank charge you RM3 per copy. This charges is subject to GST as they are standard rated supplies.

charges for loan account statement Or any Documents on loan For example if you request forwww.rapidpropertyconnect.com " id="pdf-obj-18-6" src="pdf-obj-18-6.jpg">

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