Foreign entities, whether an individual or a company, are permitted to buy or acquire title / interest in land only in some States in Malaysia. In the States that do permit a foreigner to purchase / acquire land the transaction will be subject to various requirements and restrictions prescribed by the National Land Code (Revised 2020) (Act 828) (the ‘NLC‘).
Any dealings of Malaysia land are strictly governed by the provisions of the NLC. See post on Notes on the Malaysia Land Title Registration System.
Prior Approval by the State Authority
Section 433B of the NLC applies to a non- Malaysian citizen or foreign body (referred to in this post as a “foreigner“). The foreigner must apply to the State Authority and be granted prior approval before the foreigner can acquire title / interest in land in the following scenarios, broadly set out as follows :
- A foreigner may acquire land by way of disposal by alienation and obtain Registry title / Land Office title and qualified title, thereby, being registered as the owner of the land;
- A foreigner may “deal” with land provided it does not result with the land becoming divided into subplots each with an area of less than two-fifths hectare unless the land was already less than two-fifths hectare prior to the “dealing”. Where the land was already less than two-fifths hectare prior to the “dealing”, then it can only be transferred to one person (presumably to prevent any further subdivision by operation of law). “Dealings” relate to any transfer of a whole plot of land, an undivided share in land, any lease, charge , lien or easement relating to the land;
- Land may be transferred to trustee(s) or a beneficiary who are foreigners;
- The Registrar may make a memorial in respect of any land register for any person or body as “representative” if such person or body is a non-citizen or foreign company
- A non-citizen or a foreign body can create any dealings or transmission on the register document of title of any land under the endorsement of any memorial by the Registrar.
A fee is payable for the application. Upon obtaining the state consent, a levy may also become payable before the transfer of interest / title in favour of the foreigner is registered. The amount of the levy is determined by the State government. Typically, the amount is calculated based on a fixed percentage of the purchase price, subject to a minimum specified amount.
Foreigners cannot purchase / acquire interest in off-limit properties. These include the following:
- Malay Reserved Land
- Land allocated for Bumiputera interest
Purchase Price Thresholds
Where States permit a foreigner to purchase agricultural land, a minimum price threshold may be set by the State Authority. The minimum purchase price for agricultural land in the following listed States are as follows (as at 31st July 2020):
- Federal Territory – RM1,000,000
- Melaka – RM1,000,000 (by way of lease only)
- Johor – RM1,000,000 (by way of lease only)
- Pahang – RM1,000,000 (leasehold only)
Purchase price thresholds may be amended from time to time by the respective State government.
Real Property Gains Tax on Foreigner Disposing Property
Foreign investors of land should note tax becomes payable when the investment is realised. For instance, real property gain tax (RPGT) is payable by a foreigner owner disposing property where a profit (difference between the purchase price and the sale price, also referred to as the chargeable gain) is generated by the foreigner through such sale / disposal.
Computation of the amount of RPGT payable is based on the chargeable gain amount. The applicable tax rate is based on the holding period. If the sale / disposal is made within 3 years of the acquisition, the foreigner is liable to pay RPGT at a rate of 30% on the chargeable gain. After 5 years, the tax rate reduces to 10%.
Economic Planning Unit (EPU) – Guideline on the Acquisition of Properties
The EPU approval is required in 2 situations and is required for a legal purchase and transfer of property to take effect.
The 2 situations are as follows:
- direct acquisition of property valued at RM20 million and above, resulting in the dilution in the ownership of property held by Bumiputera interest and/or government agency; and
- indirect acquisition of property by other than Bumiputera interest through acquisition of shares, resulting in a change of control of the company owned by Bumiputera interest and/or government agency, such property being more than 50% of its total assets and valued more than RM20 million.
No EPU approval is required by a foreigner for the acquisition of agricultural land valued at RM1,000,000 and above or at least 5 acres in areas for the following purposes:
- to undertake agro-tourism projects;
- to undertake agricultural activities on a commercial scale using modern / high technology; or
- to undertake agricultural /agro-based industrial activities for the production of goods for export.
A transfer of property to a foreigner based on family ties is only allowed among immediate family members.
The latest EPU Guideline is found at Official Portal of the EPU, Prime Minister’s Department.
** A Note to Readers – For the Avoidance of Doubt
This blog post serves to, from the outset, raise various points of consideration that a potential purchaser of agricultural land may wish to take note of or by way of general information. It does not purport to provide any legal advice/opinion on the subject matter, nor does it suggest that such information should be relied upon as a whole or in part.
Please engage a qualified lawyer to advise on dealings with land and ensure that a thorough due diligence of matters relating to the property to be purchased is conducted.
Written by Mike Lee (Koh Dipendra Jeremiah Law) and edited by Ken Teoh