As the property game evolves globally, each country is picking up on the unique quirks and preferences of buyers and investors, both local and foreign. And Governments are catching on quickly now, with implementations of new rulings and taxation systems occurring more regularly, which changes the landscape of real estates all across the globe.
Singaporeans have always been fond of investing in homes in the neighbouring Malaysian state, Johor Bahru, and for some time, the sharp contrast in prices have drawn numerous buyers across the border. But now, a new taxation scheme will see future foreign property investors paying more in taxes. Johor state is planning to put higher tax rates on 130,000 foreign home owners starting end of 2013. Perhaps this is a means for the Johor government to rein in skyrocketing property prices spurred by foreign home buyers, 90 per cent of which are Singaporeans, but while time will tell whether this will deter buyers in the long run, the short term gains for the state through higher property returns may be substantial.
This property tax however does not apply for lower-priced properties, but with the restrictions already put in place, most foreign buyers may have to fork out an increased amount of property tax. Current tax for Johor properties are at 0.14 per cent of the property value. For example, a RM500,000 home will cost the owners RM700 a year in property tax. Foreign buyers are only allowed to purchase properties of a minimum of RM500,000, up from RM250, 000 a couple of years ago. Early up-takers may have benefited, but prices now will have more than doubled.
There is an additional charge of RM10,000 for government consent and if you choose to let go of your property, you will be charged a Real Property Gains Tax (RPGT) set by the Federal Government. RPGT Is set at 15 per cent of the net profit from sales of the property, is the property is held for less than 2 years. For properties held between 2 and 5 years, a 10 per cent RPGT is charged. And if the property is held above 5 years, no RPGT is charged. In general, owners of Malaysian properties are charged 2 types of property taxes:
- Assessment tax – This is based on the renal value of the property
- Quit Rent – This is based on the land size of the property
In Penang, another state where foreign buyers popularly choose to invest in, the price limits for foreign buyers stand at RM1 million. Property taxes vary from one municipality to another, thus if you are looking to invest in properties in Malaysia, it would be wise to engage the expertise of a property agent or agency.