New guidelines were issued recently by the Royal Malaysian Customs Department that includes more people being required to pay the Goods & Services Tax (GST) when selling a commercial property, The Star reported.
Sales of commercial real estate, such as office towers, retail buildings and land zoned for commercial use, are subject to a 6 percent GST if the seller is an individual is engaged in the business.
The current regulations might confused a lot of people who originally thought they were exempt from this levy, according to Deloitte Malaysia, an accountancy firm.
“It was long thought that private individuals, who owned property and did not actively manage or trade in that property in any way, would fall outside of this net,” explained Wong Poh Geng and Senthuran Elalingam, GST directors at Deloitte Malaysia, in a joint report.
Per Customs’ Director General Dato’ Sri Khazali Bin Haji Ahmad, individuals are considered to be engaged in a business if they have the intention to sell the property, and if they meet any of the following criteria: possess more than two commercial real estates; own more than one acre of commercial land or property; or the land to dispose has a market value of more than MYR2 million (USD510,900).
However, the rule “does not take into consideration the person’s intention in owning the property and whether they have any business acumen or purpose as opposed to merely holding [a property]for investment,” per the Deloitte Malaysia report.
“To enforce a strict guideline in those circumstances would appear to be unfair as well as not being consistent with the definition of what is a ‘business’ under the GST Act.”
Deloitte Malaysia advises individuals to get an accountant or consult with an expert in the GST law for further clarifications on a case-by-case basis. The Customs Department are also open for enquiries from sellers.
Source : Property report