Update on GST and commercial property in Malaysia
Do you know that you need to register for GST when investing in commercial property? It is a crucial step in your investment roadmap. However, some investors might forget to include GST into their budget and this is a big mistake- because the figures involved can be significant. In Malaysia, the sale of commercial properties (including land zoned for commercial purposes) is usually subject to 6% GST.
Many thought that private properties would fall outside of this category. In other words, non-commercial properties are not subject to the 6% GST. However, according to the guidance released by the authorities, the facts show otherwise. The recent guidance shows that if an individual owns more than two commercial properties, more than one acre of commercial land or commercial property, or land with a market value of more than RM2mil and has an intention to sell, they are considered to be in business.
If you are buying a property, there are a number of specific conditions to adhere to if you want to be eligible to claim back GST. Also, there are some circumstances determine whether you are liable to pay GST when selling a property, and how the tax will be calculated if you are.
Can I purchase the property and register for GST thereafter and claim back my GST?
Generally, the transactions involving sale and lease of residential properties is an exempt supply which means you can neither charge nor collect GST on the sale or lease of these properties. However, treatments of sale, purchase and rental of non-residential properties are subject to GST. As such, if you are GST-registered, you will have to charge GST on the sale and lease of such properties and account for the GST as output tax in the GST returns.
According to the latest “GST General Guide” (amended on 25 January 2017), in the case of goods including capital goods (such as property), the registered person may be allowed to claim input tax on the goods he holds at the time of registration based on the approved amount by the Director General.
An approval from the Director General is a must-have document in order to claim for input tax under Regulation 46 of GST Regulations 2014. In short, if you are a GST-registered person, you must obtain Director General’s approval before you can submit the pre-registration GST claim. Therefore, it is advisable to get your company register for GST before you purchase the property under the Company.