KUALA LUMPUR: The Royal Malaysian Customs Department Director General’s Decision (DG’s Decision) on the treatment of Goods and Services Tax (GST) on individual supply of commercial property could slow down the recovery of the market.
“The one that is hotly debated is whether GST is imposed or not on commercial properties under individual names. The Royal Malaysian Customs came out with a DG’s Decision, which is very controversial because according to the GST Act, only individuals doing business need to charge GST. Under their definition, an individual who owns more than three commercial properties and sells one, is considered conducting a business,” said YYC & Co managing partner Yap Shin Siang.
“In income tax eyes, it is an investment but Customs now defines that as business. Therefore, individuals have to register for and charge GST, and for property transactions, we are talking about big amounts,” she told SunBiz in an interview.
In addition to the sale of commercial properties, individual land owners who sell land measuring more than one acre also have to charge GST on the buyer, as the land is considered commercial land.
Individual property owners who only have one commercial property may also be affected by the ruling, if the unit is sold at more than RM2 million.
“A lot of individuals will be registering for GST. You can challenge Customs but it is expensive to do so. This was announced in October last year but a lot of people are still not aware and they are confused. I’ve been getting many calls from property agents and lawyers because nobody really gets the full picture of what Customs wants,” said Yap.
She highlighted a particular case whereby eight owners of a plot of land measuring over one acre faced several issues when trying to sell the land.
“Firstly, they were unsure if they had to register for GST. The answer is yes, according to the DG’s Decision. So we registered for them but under eight names or one? It was eventually registered under one entity but it was very difficult to do so because, on Customs’ side, they (officers) were also unfamiliar with such cases,” she said.
“After the land is sold and GST is paid to Customs, what happens to this entity? If you don’t deregister it, you have to keep submitting the GST return, every month or every quarter. We had to help them deregister, which took a few more months as Customs was also unsure of how to deal with it,” she added.
Yap said it is important for Customs to address the practical issues involved.
“The net is very broad – more than three properties, more than one acre – and there are many individual property owners who will have such transactions. What about those who are unaware? What will Customs do? Although there is a moratorium, it is subjective,” she said.
While many individuals are more cautious due to the heavy penalties and are trying their best to comply, the grey areas cause uncertainty that could slow down the recovery of the property market.
“If the property market is already not so good, then this would not speed up the recovery of the property market. Property transactions are not so straight forward, people will think twice before selling,” she added.
