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DISCLAIMER

This book is designed to provide information on the GST only. This informationshould 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 createdto 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 betypographical 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 andpublisher 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, bythe information contained in this book. You are advised to refer to Customs gst.customs.gov.my/ for further clarifications or latest updates.

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WHAT IS GST?

Goods and Services Tax (GST) isa multi-stage tax on domesticconsumption. GST is charged onall taxable supplies of goods and

services in Malaysia except thosespecifically exempted. GST is alsocharged on importation of goodsand services into Malaysia.

Payment of tax is made in stages bythe intermediaries in the productionand distribution process. Althoughthe tax would be paid throughout theproduction and distribution chain,only the value added at each stage is

taxed thus avoiding double taxation.In Malaysia, a person who is

G S TIMPACT ON PROPERTYINVESTORS/OWNERS

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Stephy Lim

registered under the Goods andServices Tax Act 2014 is known as

a “registered person”. A registeredperson is required to charge GST(output tax) on his taxable supplyof goods and services made tohis customers. He is allowed to

claim back any GST incurred onhis purchases (input tax) which areinputs to his business. Therefore,the tax itself is not a cost to theintermediaries and does not appearas an expense item in their financial

statements.

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3 G S T - IMPACT ON PROPERTY INVESTORS/OWNERS


DEFINITION OF TAXABLE PERSON

According to the Malaysian CustomsDepartment, a taxable person is:

“Any person who makes a taxablesupply for business purposes and

the taxable turnover of that supplyexceeds the threshold of RM500,000is required to be registered for GST.”

Taxable turnover means the totalvalue of taxable supply for a period

of 12 months excluding the amountof GST.

A taxable person can be an individual,a sole proprietor, a partnership,

a property holding company or acompany.

GST is to be levied and charged atthe proposed rate of 6% on the valueof the supply. GST can be levied

and charged only if the business isregistered under GST.


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It can be simplified as per chartbelow.

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TYPE OF SUPPLY?

HOW GST AFFECTS PROPERTYINVESTORS /OWNERS

Property investors are affected byGST in various stages of the valuechain i.e. from the time of purchase,getting financing, execution of legaldocuments, to the sale and rental ofproperty, or when engaging a real

estate agent and in the disposal ofproperty.


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

GST ON PROPERTY TRANSACTIONS

Real estate refers to land andeverything attached to it, whetheron or below the surface. Landincludes buildings, trees, vegetationand other structures and objectsin, under or over it. Real propertyis the rights to use real estate andincludes activities concerned with

ownership, use and transfers ofimmovable property.

I. Deposit/ Booking Fees

In order to secure the purchase ofthe property, developers are allowedto collect deposit or booking fees.Deposit or booking fees given inrespect of a supply is not regarded

as payment and is not subject toGST. However, if the developer

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applies such deposit or booking feesas consideration or part payment,

then they are subject to GST.

II. Administrative Services

Administrative services such as

provide endorsement of deed ofassignment are subject to GSTbecause administrative fees arestandard rated supplies.

III. Interest for late payment

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

IV. Commissions

All commissions derived from thesale of properties are subject to GST,regardless whether the property is

a taxable or exempt supply.


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V. Stamp DutyGST 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 isan exempt supply such as residentialpremises, then the disposal is notsubject to GST.

VII. Progressive payment

You have to account for GSTat the various stages of theprogressive/ scheduled payment

for uncompleted nonresidentialproperties.

Example: A purchaser entersinto an agreement to buy acommercial building which is under

construction. The sales price of thebuilding is RM500,000. The payment

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is scheduled for four successiveinterval payment and the respective

amounts to be paid are as follows:

VIII. Car Park

FREE Car park from Developer asstated in the SPA for residentialproperty is not subject to GST.However, purchase of an additionalcar park in a separate car park

agreement is subject to GST.


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IX. Fixtures & Fittings

All fixtures and fittings installed

upon vacant possession for bothresidential and commercialproperties are subject to GST.

X. Service charges & sinkingfund

Service charges & sinking fundfor residential properties are notsubject to GST but for commercialproperty it is subject to GST.

XI. Water & TNB Deposits

Deposit for supplies of water andelectricity is not subject to GST if

the money received is a deposit forpurpose of security and does notform as part of consideration.

XII. Quit Rent & Assessment

Quit rent and assessment are out ofscope supply.

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TENANCY

General rule:

LEGAL FEES AND CHARGES

All charges and fees, excludingdisbursements such as land registryfee, stamp duty etc imposed for

services provided will be subject toGST.

These include fees in respect ofcontentious or non-contentiousbusiness, preparing and completing

agreements, conducting andcompleting transactions, preparing


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filing or witnessing of miscellaneousdocuments. It also includes chargessuch as miscellaneous expenses,

cost of extra work, travellingor accommodation expenses,allowances for the time of thesolicitor and his clerk. Generalexpenses such as telephone, telex,postage, advertising, and stationerycharges are incurred in the courseof providing services to the clientand shall be treated as businesscosts. They are not to be treated asdisbursements for GST purposes.

Non-billed income such as oathfees received by the legal firm or byindividual solicitor under GST.

Non-billed income such as oathfees received in respect of oathsadministered by a solicitor in solepractice or a partner in a legal firmare regarded as consideration forservices supplied in the course of

business, and thus is subject to GST

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REAL ESTATE AGENTS & VALUER

Agent Fees/CommissionEstate agents, negotiators andbrokers would generally receivefee (commission) for their servicesin performing estate agency work(i.e. buying, selling or leasing ofproperties) from their clients who canbe the buyers, sellers, landownersor tenants. The provision of suchservices in relation to estate agencywork is a taxable supply regardless

of whether the property is residentialor non-residential.

Estate agents, negotiators orbrokers have to charge GST on the

fee that they receive regardlesswhether the property is a taxable orexempt supply

Agent Fees/Commissions forAborted Sale

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


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payment for the supply of services.

Valuation ServicesValuers or appraisers would imposecertain fee for their services inperforming their valuation workto their clients. The provision of

such services in determining thevalue of fixed property, executingthe feasibility studies or providingexpert advice on property is a taxablesupply regardless of whether suchproperty is residential or non-

residential. Thus it is subject to GST.

FINANCIAL INSTITUTIONS

Provisions of Loan – Interest onLoan

The loan provided to the borrowerby the moneylender is an exemptsupply. As a consideration for the

supply of the loan, the borroweris required to make installment

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payment of the principal amountplus the interest to the lender. This

interest payment is not subject toGST. Loans or advances given can besecured or unsecured. The provisionof a security for such debt (if any) isalso an exempt supply.

Loan Conversion

Services of loan conversion whereterms of loan (e.g. amount of loan)are being changed or loan revision

(e.g. changing the original termsand conditions of loan) are out ofscope supplies. Therefore, they arenot subject to GST.

Loan Transfer to another Bank(Change Bank)

The transfer of a loan fromone moneylender to anothermoneylender is an out of scope

supply. Therefore, it is not subjectto GST.


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Loan Renewal

The renewal of a loan i.e. grantingof another loan after the maturityof the original loan is reached is anexempt supply and therefore it is

not subject to GST.

Loan Assignment

Loan/credit assignment to anotherassignee 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 thelawyers’ .GST should be imposed onthe attestation fee by the attester ifhe is a registered person.

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Charges for Loan Account statementOr Any Documents on Loan

For example if you request for acopy of the bank statement and thebank charge you RM3 per copy. Thischarges is subject to GST as they

are standard rated supplies.

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