In recent years, Malaysia has become an attractive destination for foreign investors looking to tap into its burgeoning property market. The country's strategic location, favourable economic policies, and robust infrastructure have made it an attractive destination for foreigners to buy property in Malaysia and seek opportunities in various sectors, including the industrial property market.

 

However, these investors must familiarise themselves with the concept of 'foreigner consent' to ensure a smooth and compliant investment process. It is important to note that Malaysia prioritises the reservation of land, particularly for Malay reserved land properties.

 

Foreigner consent refers to the regulations and restrictions the Malaysian government imposes on non-citizens seeking to acquire real estate or purchase any properties within the country. These regulations are in place to maintain a healthy balance between local and foreign participation in the industrial sector, protect national interests, and support the nation's economic goals.

 

By grasping the intricacies of foreign consent, foreign investors can make informed decisions and navigate the complexities of the Malaysian industrial property market units such as expensive and medium-cost residential units and commercial properties. This understanding will not only help them comply with legal requirements but also enable them to maximise the potential opportunities available and contribute to the growth and development of Malaysia's industrial landscape.

 

Foreigner Consent Regulations in Malaysia

 

When it comes to real estate acquisitions, including industrial properties, Malaysia has specific regulations in place to govern the involvement of non-citizens. These regulations safeguard the nation's economic interests, maintain a balanced industrial landscape, and encourage sustainable foreign investment.

 

National Land Code (NLC)

 

At the core of land ownership and transactions in Malaysia is the National Land Code. This legislation establishes the legal framework for property purchase and ownership, distinguishing between leasehold and freehold titles such as agricultural land names. Understanding the ownership rights and restrictions associated with industrial properties is essential.

 

Industrial Coordination Act (ICA) 1975

 

Industrial Coordination Act is a key legislation that governs the ownership and occupation of industrial properties by foreign individuals or entities. Its primary objective is to foster balanced industrial growth with balance purchase price and protect local industries from excessive foreign competition. The act provides the regulatory framework for obtaining consent for foreign ownership of industrial properties.

 

Malaysian Investment Development Authority (MIDA)

 

Malaysian Investment Development Authority, commonly known as MIDA, plays a pivotal role in regulating foreign investments in Malaysia. As the central agency responsible for approving and facilitating foreign investment applications, MIDA ensures that industrial property acquisitions by foreign investors align with the nation's economic objectives. Foreign investors must often engage with MIDA to obtain approvals and guidance.

 

Foreign Investment Committee (FIC)

 

Foreign Investment Committee oversees and regulates foreign investments in Malaysia, focusing on their impact on national interests. This committee evaluates proposed industrial property acquisitions by foreign investors to determine their suitability and alignment with Malaysia's economic goals. Their assessment considers factors such as job creation, technology transfer, and potential benefits to the local economy.

 

Land Acquisition Act 1960

 

Land Acquisition Act grants the Malaysian government the authority to acquire privately-owned land for public purposes. Foreign investors should be aware of this act as it may affect land ownership, and property minimum purchase price, particularly in cases where industrial properties are achieved through government-initiated projects. Understanding the implications and procedures associated with land acquisition is crucial to ensure a smooth investment process.

 

Guidelines on Acquisition of Properties

 

Ministry of Finance and relevant authorities have issued comprehensive guidelines to facilitate foreign investors' acquisition of properties, including industrial properties. These guidelines outline the application procedures, eligibility criteria, and conditions for using state authority properties and obtaining foreign consent. They serve as valuable resources for understanding the requirements and processes of acquiring industrial properties as a non-citizen.

 

Thresholds and Conditions

 

Foreigner consent thresholds differ across states in Malaysia and depend on the type of property being acquired. Generally, foreign individuals and companies must seek approval from the respective state authorities if the property's value exceeds a specified threshold. Furthermore, certain conditions may be imposed upon consent, such as minimum investment requirements, job creation targets, or commitments to technology transfer. Complying with these thresholds and conditions is essential for successful industrial property acquisitions.

 

Sectoral Restrictions

 

Some sectors, such as strategic industries or those of national importance, may have additional restrictions on foreign ownership of industrial properties. These restrictions safeguard national security, protect critical sectors, and encourage local participation. Foreign investors should be aware of any sector-specific regulations that might impact their ability to acquire industrial properties in specific industries.

 

Guidelines for Foreigners Buying Industrial Properties

 

 

If you're a foreign buyer interested in purchasing industrial properties in Malaysia, you must familiarise yourself with the detailed guidelines and understand the documentation and application process. This will ensure a smooth and compliant acquisition journey. Continue reading to find out about the comprehensive documentation and application process for foreign buyers.

 

State Authority Consent

 

Foreign buyers must obtain Consent from the state authority where the industrial property is located. To initiate the application process, you must submit various documents and information. These typically include:

• Completed application form: You must complete an application form provided by the state authority. Ensure that all the necessary fields are completed accurately and signed by your authorised representative.
• Copy of passport: Submit a clear and valid copy of your passport as Proof of your identity.
• Proof of legal presence: Demonstrate your company in Malaysia by providing a valid visa, work permit, or other relevant documentation.
• Details of the industrial property: Furnish comprehensive information about the industrial property, including its location, title information, property description, and any relevant lease agreement or tenancy agreement.
• Business information: Provide details about your business or company, including registration documents, company profile, and financial statements.
• Source of funds: Submit documentation that verifies the source of funds for the acquisition, such as bank statements or financial records. This is to ensure compliance with anti-money laundering regulations.
• Project proposal: In some instances, you may be required to submit a proposal outlining the intended use of the industrial property, investment plans, potential job creation, or technology transfer. This proposal highlights your commitment to contributing positively to Malaysia's industrial sector.
• Application Review and Approval Process: Once you have submitted the complete application, the state authority will review the documents and assess your proposal. The duration of the review process can vary, ranging from several weeks to a few months. During this time, the state authority may conduct due diligence or request additional information or clarifications.

 

Conditions and Restrictions

 

The state authority may impose certain conditions or restrictions on the acquisition upon approval. These conditions include a minimum purchase value, investment requirements, job creation targets, or commitments to technology transfer. Carefully review and ensure compliance with these conditions to maintain ongoing compliance with the granted Consent.

 

Execution of the Sale and Purchase Agreement

 

After obtaining approval, you can proceed with the execution of the Sale and Purchase Agreement (SPA) with the property seller. The SPA outlines the terms and conditions of the sale, including the property prices, payment schedule, and transfer of ownership. Engaging a lawyer to review the SPA is highly recommended to protect your interests and ensure a fair agreement.

 

Stamp Duty and Transfer of Title

 

Foreign buyers must pay the applicable stamp duty upon executing the SPA. This duty is calculated based on the purchase price of the industrial property. The payment of stamp duty is necessary to complete the transfer of title, officially transferring ownership from the seller to you as the foreign buyer.

 

Read more: How to Transfer Property Ownership in Malaysia.

 

Challenges and Considerations for Foreign Buyers

 

When foreign buyers are considering acquiring industrial properties in Malaysia, it is crucial to understand and address the challenges and considerations concerning taxation, legal matters, and zoning requirements. Let's dive into each aspect in detail:

 

Taxation

 

• For properties valued up to RM1 million, the stamp duty is 1% of the purchase price. For properties valued above RM1 million, the stamp duty increases to 2% for the portion exceeding RM1 million. It is essential to budget for this expense when calculating the total cost of the property acquisition.Stamp Duty: As a foreign buyer, you must pay stamp duty on the industrial property's Sale and Purchase Agreement (SPA). The stamp duty rates vary depending on the purchase price.
  Read more: Stamp Duty in Malaysia.
• Goods and Services Tax (GST): Malaysia previously had a Goods and Services Tax (GST), which was replaced with the Sales and Services Tax (SST) in 2018. Industrial properties are generally exempt from the SST. However, it is advisable to stay updated on any changes to tax regulations that may affect your transaction. Consulting with a tax professional will help you understand the tax implications and obligations of your industrial property acquisition.
• Income Tax: Foreign buyers who derive rental income from industrial properties are subject to income tax in Malaysia. The rental income with rent and assessment receipt is taxed at progressive rates, ranging from 0% to 30%. Deductions for expenses related to the property, such as maintenance costs and property management fees, can be claimed to reduce the taxable income. Complying with the income tax regulations and fulfilling the register and getting income tax number, reporting and payment obligations is essential.

 

Legal Considerations

 

• Contractual Agreements: Engaging a lawyer specialising in real estate transactions is highly recommended to review and ensure the legality and fairness of contractual agreements, especially the Sale and Purchase Agreement (SPA). The lawyer will help protect your interests and ensure that the agreement's terms and conditions align with legal requirements.
• Due Diligence: Conducting thorough due diligence on the industrial property is crucial before proceeding with the purchase. This involves verifying the property's ownership through a land search, conducting physical inspections, and reviewing relevant documentation such as land titles, planning approvals, and building permits. Due diligence helps identify any encumbrances, legal issues, or discrepancies that could affect the property's value or your ownership rights.
• Land Titles: In Malaysia, land registration operates under a Torrens system, which provides secure and reliable ownership records. Before finalising the purchase, verifying that the industrial property's land title is in order is essential. This can be done by conducting a land search and obtaining an official copy of the land title. Ensuring the authenticity and validity of the land title safeguards your ownership rights and protects against potential disputes.
• Legal Representation: Throughout the acquisition process, having legal representation is advisable. A lawyer with expertise in real estate transactions will guide you through the legal complexities, assist in negotiations, review contracts, and ensure compliance with all relevant laws and regulations. They can also advise on additional legal requirements specific to your situation, providing a smooth and legally sound acquisition process.

 

Zoning Requirements 

 

• Land Use Planning: Industrial properties in Malaysia are subject to zoning regulations, which determine the specific purposes for which the land can be used. It is essential to confirm that the industrial property is zoned for industrial activities before acquiring it. This information can be obtained from the local planning authorities or the relevant state authority. Compliance with zoning requirements ensures that your intended use of the property aligns with the designated land use, preventing any future legal complications.
• Environmental Considerations: Industrial properties often have specific ecological regulations that must be adhered to. These regulations aim to ensure the protection of the environment and mitigate the potential negative impacts of industrial activities. As a foreign buyer, being aware of and complying with these regulations is crucial. This may involve obtaining permits or licences for pollution control, waste management, or environmental impact assessments. Engaging with ecological consultants or experts can help you navigate the environmental considerations and ensure compliance with the applicable regulations.
• Development Restrictions: Some industrial properties may have development restrictions imposed by local authorities. These restrictions are in place to regulate the type and scale of development allowed in specific areas. They may include limitations on building height, setbacks from neighbouring properties, or requirements for infrastructure development. Understanding and complying with these restrictions is essential to avoid potential conflicts or legal issues in the future. Engaging with planning authorities or consultants can provide valuable insights into the specific development restrictions that apply to the industrial property you intend to purchase.

 

Foreigners Buying Industrial Properties in Malaysia

 

 

Purchasing property in Malaysia as a foreign buyer can be a rewarding venture, but it requires careful consideration of various factors. By understanding the challenges and considerations related to foreigners buying property due to taxation, legal matters, and zoning requirements, you can navigate the process more effectively and ensure compliance with the relevant regulations.

 

If you are considering investing in industrial properties in Malaysia, Industrial Malaysia is here to assist you. With our deep knowledge of the real estate market and extensive network of professionals, we can provide valuable guidance and support throughout your acquisition journey. WhatsApp us today to take the first step towards your industrial or commercial property in Malaysia investment. Together, let's unlock the opportunities in the thriving Malaysian industrial sector.