In Sam Choong’s experience over the past year, Malaysia is still drawing long-stay foreign visitors. In fact, apart from the traditional British long stay visitors, visitors from a wider range of nationalities are beginning to make Malaysia their home. Previously, visitors were attracted to Malaysia because it is safe, affordable (its advantages include a reasonable cost of living and high business potential) and is a good base if you are keen on visiting various destinations in the region for work or play. However, places like Penang, Malacca, Sabah & Sarawak have consistently been featured in international media by travel gurus and are attracting a lot of foreign interest. As such, there are many more enquiries on the various visas and passes that are available.
Malaysia My Second Home
This scheme is probably the most publicised visa and, consequently, the most requested one. It is also the most misunderstood. Some of the common misconceptions are that you need to qualify for the MM2H scheme in order to own a home in Malaysia; that it is only applicable to old people; or that it comes with arange of privileges. In a nutshell, MM2H is a long term visa which allows the holder to stay in Malaysia for up to 10 years whilst certain successful applicants are permitted limited work. Typically, my clients who apply for this visa are successful entrepreneurs who are well invested in properties or stocks within or outside Malaysia and have a more than adequate income source. There are also some who ply their trade outside Malaysia and visit Malaysia for its warmth during the winter or for certain tax considerations. Whatever the reason, those in this category don’t need to engage in employment in Malaysia. A fringe benefit of this visa is that it allows the successful applicant the right to purchase certain cars tax free. For instance, a brand new Volvo V40 would cost a Malaysian RM173,888 but is available to the MM2H visa holder for only RM108,193. This benefit does come with a condition that you are not to sell the car for 2 years from the date of purchase. (www.mm2h.gov.my)
Employment Pass
This pass is for those who are looking to engage in full time work, whether as an employee or undertaking a hands on management role for the company he sets up (if the investor elects to merely hold shares and/or sits on the board of directors in a non-executive or non management role then an employment pass is not necessary). Either way, the employer or the investor’s company need to apply to the Immigration Department for an employment pass and justify the need for such an expatriate. If the foreign investor were to set up a 100% wholly foreign owned company it should be capitalized to at least RM500,000 or more, depending on the industry, prior to the application. Typically, a successful applicant gets a two-year employment pass.
TalentCorp’s Resident Pass
This is a pass that was introduced by the government in 2011 and is applicable to highly qualified Malaysians working abroad and expatriates as well as top foreign graduates who have completed their tertiary education in Malaysia. If the foreign expatriate qualifies for this pass, this would be a good one to go for from a cost point of view as it allows the holder and his spouse to work in Malaysia for up to ten years. There is no requirement for a deposit and I’ve been made to understand that this is a relatively easy application for the applicant to make on his own so the applicant also saves agency fees. Furthermore, unlike the employment pass, this pass is not specific to one employer so the holder can move employment without needing to reapply. Advantages for returning Malaysians working abroad include lower income tax and a limited tax exemption on a locally made or imported car. (www.talentcorp.com.my)
Other visas
As I mentioned, there are many more visas that may suit the foreign applicant. These include visas commonly known as the Guardian visa (I came across this visa when I advised a developer on a development project catered exclusively for foreigners. During my research, I realised that there are a number of foreign mothers who reside in Malaysia just so that they can accompany their children who attend school in Malaysia. Holders of the Guardian visa are granted a long term stay visa provided their child attend an educational establishment in Malaysia), the Spouse visa (as the name suggests, this is available to spouses of Malaysians) and visas available to foreigners seeking medical treatment in Malaysia etc.
The above hopefully gives you an insight into the variety of options available to foreign visitors. Do send Sam a note to Sam@ckylegal.com if you require clarification on the above.
PROPERTY PURCHASE BY FOREIGNER (INCLUDING UNDER MM2H):
Just to be clear, although having MM2H does have benefits (see below), a foreigner does not need MM2H to purchase a property. This article will focus on the technical side of property purchase in Penang by foreigners including those holding the MM2H visas.
1) THE LAWS GOVERNING FOREIGN PURCHASE UNDER MM2H:
The main laws governing ownership of property include, the National Land Code 1965, The Housing Development (Control And Licensing) Act 1966 & Regulations 1989, The Strata Titles Act 1985 and The Strata Management Act 2013.
The National Land Code 1965 sets up the registry in the land office for how titles are to be registered and ownership of land are recorded. The Housing Development (Control And Licensing) Act 1966 & Regulations 1989 guards purchasers of properties pending construction and prior to completion of construction. Whereas the National Land Code is a general law that regulates land or land and building, the Strata Titles Act 1985 facilitates the issuance of individual titles for units in a building block called strata titles and their transfer to the purchasers. Last but not least, once the unit is delivered and owned by the purchaser, the Strata Management Act 2013 ensures that the building and its common areas are taken care of, such as management of common properties and collection of payments of maintenance fees and sinking funds, amongst others.
2) TYPES OF PROPERTY AVAILABLE TO FOREIGN PURCHASERS
Purchase of property by foreigners are regulated by Section 433B of the National Land Code. Section 433B requires a foreign purchaser to apply to the State Authority in which the property is located for their consent to the acquisition. Each state, in turn, has its own guidelines. In Penang, the fee for such an application is RM10,000* (* applicable for individual purchaser purchasing residential property and for each lot of title) with a further 3% of the purchase price being payable on the consent (effective from 1st February 2014). Registration fee for transfer of title has also been increased to RM10,000 for the first RM1,000,000 of the purchase price and 0.5% subsequently. The respective States may further impose restrictions as to the type of property a foreigner can purchase. For instance , on Penang Island, foreigners can only acquire apartments above RM1,000,000 or landed properties above RM2,000,000 and may also attach conditions of ownership (For example, the state may require the property to be owner occupied or not be sold within 3 years of purchase).
However, if a foreigner holds a MM2H visa, he is allowed to purchase two units of residential properties in Penang at the lower minimum threshold of RM500,000 each.
Other things to look out for when purchasing property are whether the property is leasehold (the balance number of years left to run on the title may be critical as banks are reluctant to lend on titles with approximately 50 years or less) or freehold, whether the individual titles have been issued and whether there are any restrictions on the title which would require State Consent prior to sale (a typical restriction would be the requirement for the State to approve the transfer and charge of the title, whereby delaying the completion of a conveyancing transaction).
3) CONVEYANCING PROCEDURES & TIMELINES
For residential properties under construction (“off plan”), the Housing Development (Control & Licensing) Act requires the Developer to utilize a standard format agreement that aims to protect the Purchaser’s interest. The timeline from the time of signing to vacant possession is 24 months for landed units & 36 months for stratified property.
For ready built properties, a sale and purchase agreement is to be drawn up by a solicitor on terms mutually agreed between the seller and purchaser. Typical terms & procedures include a land search conducted on the property, negotiations on commercial terms such as whether the purchase price include deposits with the developer, fixtures & fittings or is the purchase with vacant possession. Usually a deposit, being 10% of the purchase price is paid upon signing a conditional (on State Authority approval) sale and purchase agreement. The usual timeline for completion of a sale and purchase transaction by a foreigner would take between 3 to 6 months from signing to vacant possession.
Loans by local financial institutions are available to foreign purchasers for up to approximately 70% of the purchase price, provided that financial documents are submitted to support the application of the
loan. Release of loan sums would usually take between one to two months from bank’s letter of approval.
The Solicitors’ Remuneration Order 2006 regulates fees for the solicitors acting on behalf of a purchaser in respect of the purchase and/or loan.
This concludes our article. Whatever your reasons for reading this, I hope that this will give you an idea of what goes on in the purchase of a property in Malaysia by a foreigner.
Sam Choong Khuat Yau is an Advocate & Solicitor based in Penang whose areas of practice include advice on the purchase of Malaysian property, setting up and/or purchase of companies, representative office and the application of related visas or passes such as the Malaysia My Second Home scheme and employment passes. Sam practices at Messrs Khaw Cheow Poh & Associates (www.ckylegal.com) and can be contacted at Sam@ckylegal.com
The above article is correct as at the 27th, November 2014.
www.ckylegal.com
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