(Tax Update) Buy Property Under Company or Individual

(Tax Update) Buy Property Under Company or Individual

Buying property under your personal name or through a Sdn Bhd (Sendirian Berhad, which is similar to a Private Limited Company) in Malaysia involves several considerations, including tax implications, liability, financing, and estate planning.

As an approved tax agent, we would guide you through the pros and cons of each approach, tailored to your specific circumstances. It's important to remember that the right choice depends on your financial situation, investment goals, and personal preferences.

Personal Name Purchase

Pros:

  • Simpler process: Generally more straightforward than company purchase.

  • Tax Benefits: Eligible for RPGT exemptions and potentially lower stamp duties, especially for first-time buyers.

  • Better Financing Rates: Often lower mortgage interest rates than those available to companies.

  • Stamp duty : Residential properties purchased worth between RM500,001 to RM1 million will get a 75% stamp duty exemption only up until 31st December 2023.

Cons:

  • Personal Liability: You're personally liable for debts and legal issues.

  • Limited Tax Deductions: Fewer opportunities for deductions on rental income-related expenses.

Sdn Bhd Purchase

Pros:

  • Limited Liability: Shareholders' liability is capped, protecting personal assets.

  • Tax Advantages: Can benefit from tax deductions on property expenses and potentially favorable corporate tax rates. Eligible for Investment Building Allowance (IBA) when leasing as industrial buildings. Watch out S60F Income Tax Act 1967 tax restriction on expenses.

  • Estate Planning: Easier transfer of ownership through shares.

  • Asset Management: Suited for managing multiple properties.

Cons:

  • Higher Costs: Involves setup, annual compliance, and accounting fees.

  • Complex Tax Filings: Must file audited accounts and annual returns.

  • Less Favorable Financing: Lower loan margins compared to individual purchases.

Tax Considerations

  • Rental Income: Non-SME Investment Holding Companies face a 24% tax on rental income.

  • RPGT: Individuals benefit from no RPGT from the sixth year, whereas companies face up to 30% depending on the sale timing.

  • Tax Audit Risks: High-risk profiles may trigger LHDN audits.

  • Industry Building Allowance: Potential tax reduction for property used as industrial buildings.

  • Capital Gain Tax : Be cautious of the new tax implications associated with the transfer of shares.

Loan Considerations

  • Financing: Individuals can secure up to 90% financing for residential properties, while Sdn Bhds may only get up to 60%.

Administrative Expenses

  • Setup and Maintenance: Sdn Bhd entails initial and ongoing costs, whereas personal purchases incur no extra administrative expenses.

Conclusion

Your decision should be informed by a comprehensive analysis considering your financial situation, investment strategy, and goals.

While personal purchases offer simplicity and certain tax benefits, Sdn Bhds provide liability protection and estate planning advantages but come with higher costs and stricter tax treatment on rental income.

Consulting a tax professional or financial advisor is crucial for personalized advice, ensuring your choice aligns with financial goals and legal requirements.

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