GST GUIDE FOR PROPERTY OWNER AND PROPERTY HOLDING COMPANIES
This article provides some insights on the application of GST for property transactions following the issuance of the Guide on Property Developer
REAL estate for this purpose refers to land and everything attached to it, whether on or below the surface. Land includes buildings, trees, vegetation and other structures and objects in, under or over it. Real property is the right to use real estate and includes activities concerned with ownership, use and transfers of immovable property.
WHAT IS DEFINED AS SUPPLY IN PROPERTY DEVELOPMENT?
The GST Bill 2014 provides that the tax “shall be charged and levied on (a) any supply of goods and services made in Malaysia, including anything treated as a supply under this Act and (b) any importation of goods into Malaysia.”
Land that is under charge (mortgage), lien or caveat is not a supply. Likewise, entering or lifting of caveat is not a supply by lender or borrower. A land title charged to the lender by the developer to obtain a loan is regarded as security for payment of debt and thus is not regarded as a supply, and hence is not subject to GST. However, when the lender sells land under power of sale in satisfaction of debt or foreclosures on the land of the developer, the developer is regarded as making a supply and the tax will be accounted for by the lender. Converting an inventory to investment property per se is not a supply as it is not considered as disposal. The supply of land and buildings used for commercial, administrative and industrial purposes such as shop lots, offices, retail business, small office home office (SoHo), small office virtual office (SoVo), small office flexible office (SoFo), factories, hotels, motels, inns, hostels and warehouses is subject to GST.
Whereas land used for agricultural, residential (such as link houses, semi-detached houses, detached houses, apartments including serviced apartments and condominiums) or general purposes such as burial grounds, playgrounds and religious purposes is exempt from GST i.e. exempt supply.