With only 1 day to go, all Malaysian braces up to faced the 1st April 2015, that is implementation of the GST (Goods and Service Tax) with the rate of 6%. As a property investors, are we impacted with the implementation of GST?
Of course, we all as a consumer in one way or another, will get impacted by the GST. Let’s explore this topic from the perspective of the property investment aspect.
How would GST impact on Rental Property?
There are 2 typical question raised:
- Do I need to pay 6% GST for my rental income?
- Can I start charging my tenants 6% GST from 1st April 2015 onwards?
What do Royal Malaysian Customs said about the GST on Rental property?
The Royal Malaysian Customs said the implementation of the goods and services tax (GST) should not be used as an excuse to increase rental on the house as well as maintenance bills for residential properties which are GST-exempt. It has been announced that the sale or leasing of residential property will be spared the value-added tax as it is categorized exempt-rated. However for the leasing of commercial property will be subject to 6% GST.
Now look back again on the first two question above, we as a property investor answer the following questions:
a) Is your total rental income exceeds $500,000?
b) Is your property title under commercial title?
c) Is your property used for commercial purpose?
If your answer for above questions (a),(b),(c) is big “NO”, then you do not need to pa 6% GST for your rental income. At the same time, you cannot charged your tenant 6% GST.
Any of your answer is “YES”, then you need to pay standard 6% GST.
How would tenant know if need to pay GST?
If you are tenant and unsure of it, I will suggest that you look at you tenancy agreement, under purpose of used is it under “Residential” or “Commercial used”. If purely residential, then there is no GST imposed. But if the unit is used as an office, the owner is responsible for declaring for GST if his rental income from commercial properties exceed $500,000.
Will property Developer charged buyer 6% GST?
Sale of residential property is GST exempt. However, developers will pay GST on some of their production inputs. Sale of commercial properties will be subject to 6% GST.Developers may choose to absorb GST as part of their sales package.
