GST on the Sale of Property for Commercial and Residential use

Updated on Thursday 01st February 2018

Public Ruling No. 1/2018 issued by the Malaysian Tax Agency sets forth the applicability of the goods and services tax on the sale of buildings located on commercial land, used for both commercial and residential purposes. Our lawyers in Malaysia describe the provisions of the Public Ruling and can help you determine how the tax applies in your case for the property sale.

The taxation of real estate transactions in Malaysia

According to the First Schedule of the Goods and Services Tax Act, the transfer of ownership, including strata-ownership (for multi-level apartments and houses with shared areas) is a supply of goods and thus taxable under the normal GST rate. On the other hand, the supply of buildings used for residential purposes is exempt from the same tax. For this purpose, the developer must be able to prove that the property or part thereof will be used for residential, rather than commercial purposes.

A property may be exempt from the GST if it received a planning permission from the local authorities for commercial and residential use and it is suitable to function as a permanent dwelling. The developer must obtain a license and a permit in order to be able to benefit from a GST exemption. Moreover, a Sale and Purchase Agreement must also be issued and must comply with the existing regulations for this type of contract.

The GST guidance also mentions buildings that are used for both purposes, the commercial residential purpose which are small home offices or small, flexible offices and small virtual offices. Our lawyers in Malaysia can help you with further information if your property falls into one of these categories.

Taxation in Malaysia 

The goods and services tax in Malaysia is the equivalent of the value-added tax. It applies to the provision of certain goods and services and has a rate of six percent. Companies that have a turnover of over 500,000 RMN need to register for GST purposes.

Contact us for more information on the goods and services tax and one of our attorneys in Malaysia can give you additional details on the obligations for filing and payment.