New Property Incentives in 2020 for Malaysian Property under the Penjana Economic Package
The Home Ownership Campaign (HOC), which was first introduced in 2019, was intended to facilitate new home ownership among Malaysian citizens. To recap, there were several criteria under the HOC 2019: –
- This campaign was only applicable for residential properties purchased by Malaysian citizens (foreign buyers do not qualify);
- The purchase must be of a new property from a property developer (and not sub-sale); and
- A minimum 10% discount given by the developer to the purchase eligible properties that are registered with REHDA Malaysia (for Peninsular Malaysia) and SHEDA or SHAREDA (for Sabah and Sarawak);
The Malaysian government announced on 5 June 2020 the HOC 2020 and several new incentives as part of their strategy to stimulate the property market, as Malaysia enters the Recovery Movement Control Order (“RMCO”) phase. The following are designed to assist the home seller / buyer: –
- Stamp Duty exemption
Stamp duty exemptions are granted for instruments of transfer (partial exemption) and loan agreements (full exemption) for sale and purchase agreements signed between 1st June 2020 until 31st May 2021.
The reintroduction of the Home Ownership Campaign (HOC) for 2020 provides a partial exemption of the stamp duty for residential properties priced between RM 300,000 to RM 2,500,000 (before 10% discount), subject to at least 10% discount provided by the Developer.
The stamp duty exemption on the instrument of transfer is limited to the first RM 1,000,000 of the home price (which translates to a maximum stamp duty saving of RM 24,000 for a property priced at RM 1 million), while full stamp duty exemption is given to the loan agreement. However, do be reminded that stamp duty of 4% will likely still apply to amounts above RM 1 million.
Subject to the actual wording of gazetted legislation, it is yet to be confirmed whether the other criteria in the HOC 2019 will continue to apply for HOC 2020.
- 70% margin of financing limit
The 70% margin of financing limit that was applicable for 3rd residential property valued at RM 600,000 and above will be uplifted. However, the ability to obtain loans is subject to internal risk management and assessment of the respective financial institutions.
- Real Property Gains Tax (RPGT) exemption
From 1st June 2020 to 31st December 2021, the gains arising from disposing residential property is now exempted for all Malaysian citizens. It is unclear if Malaysian PRs are included, but foreigners and companies appear to be excluded. The RPGT exemption is limited to the disposal of 3 units of residential property per individual during the prescribed period.
This article was written by Shawn Ho (Partner) & Suzanne Fam (Senior Associate) from the corporate practice group of Donovan & Ho. Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020. We are also ranked as a Recommended Firm by IFLR1000 2020.
Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. We also advise on property transactions and real-estate related tax planning. Feel free to contact us if you have any queries.