The Royal Malaysian Customs Department has recently issued a new guidance that would result in more people being subjected to the Goods & Services Tax (GST) when they sell a commercial property.
Under existing the rules, the sales of commercial real estate, like office/retail buildings and land zoned for commercial use, are liable for the six percent GST if the seller is a person engaged in the business.
Given this rule, many people originally felt they were exempt from this levy, explained 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,” said a report jointly-written by Wong Poh Geng and Senthuran Elalingam, GST directors at Deloitte Malaysia.
But according to the Customs’ Director General Dato’ Sri Khazali Bin Haji Ahmad, persons are considered to be engaged in business if they have the intention to sell and meet any of the below conditions:
1. They possess more than two commercial real estates.
2. They own more than one acre of commercial land or property.
3. The land to dispose has a market value of over RM2 million.
According to Wong and Senthuran, the new guidance “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.”
“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.”
Nevertheless, they lauded the Customs Department for considering the public’s feedback on the new guidelines and is now in the process of reviewing it. Hopefully, the latest guidance would be acceptable by all parties.
In the meantime, Deloitte is advising individuals concerned about whether their sales would be subject to the six percent GST to engage an accountant or an expert in the GST law. They may also approach the Customs Department to verify if a potential sale would be covered by it.
Image: Sourced from Free Malaysia Today
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
