4 Costly GST Mistakes that Businesses should Avoid - Part 3 - Property Investors

This is the third of a 4 part series on GST written by Thenesh Kannaa, Partner of TraTax Malaysia
(Speaker for the upcoming Wolters Kluwer workshop, GST Health Check: Ensure Compliance - Avoid Costly Mistakes held in Kuala Lumpur on the 21st of July 2016)

The previous two instalments can be viewed here:

• Part one: Contractual terms
• Part two: Price displays

For our third instalment today, we discuss GST implications with regards to property investors. 

Property Investors

GST applies only when a person makes a taxable supply in the course or furtherance of a business carried on by him. It is vital for property investors to determine whether their property-related activities constitute a business. Often property investors do not occupy premises, employ staff or register themselves with the Companies Commission of Malaysia as carrying on a business. Nevertheless, they may be treated as carrying on a business for the purposes of GST.

The Royal Malaysian Customs has opined that individuals who are not GST-registered would be treated as carrying on a business if they own more than two commercial properties or more than one acre of commercial land or commercial property/land worth (market value) more than RM2 million. Thus, such individuals would be required to register for GST if the value of their annual taxable supply exceeds RM500,000. On the other hand, if the individual satisfies the criteria to be carrying on a business but the value of his annual taxable supply is below RM500,000, he/she may find it beneficial to register voluntarily.

Being GST-registered does not mean that GST must be accounted for only upon any rental or sale. It also makes him eligible to claim credit in respect of GST incurred on his costs such as repair and maintenance and, more significantly, the GST incurred on purchase of an additional commercial property.

Note that in any case, purchase, rental and sale of residential property and certain agricultural property is not a taxable supply and is exempt from GST. 

Stay tuned for our fourth and final instalment!

Thenesh Kannaa is a partner at Thenesh, Renga & Associates (a.k.a. TraTax Malaysia), a firm of tax advisors. He is the author of Wolters Kluwer’s Master GST Guide (2^nd Ed., 2015) and is a prominent speaker on tax topics. He can be contacted at thenesh@tratax.my. Views expressed are his own.