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Malaysia Topping Rankings of Most Expensive Places to Invest in Commercial Rental Property

Malaysia Topping Rankings of Most Expensive Places to Invest in Commercial Rental Property

Research conducted by Taxand, the world's largest global organisation of tax advisors to multinational businesses has shown that Malaysia is one of the most expensive countries in which to invest in commercial real estate deals by total tax take.

The Taxand Total Tax Take (T3) research into the real estate market, conducted across 23 countries across the globe, reveals that the tax rate on rental income, currently 33.70%, is the fifth highest of the countries analysed in the research.

Given that Malaysia does not have one of the World's largest commercial property markets; the impact on possible returns for investors is relatively huge, especially when considering that Malaysia boasts the cheapest tax rate of all countries analysed for residential property.

Malaysia ranks as follows in the Taxand rankings for tax taken on property investment and property sales:

  • No 11 for healthcare property with 33.37% of income taken by tax. Switzerland offer the best rate of 18.66% whilst the global average is 31.66%
  • No 21 for apartment sales with 5.23% of the sale taken by tax. Romania is the most expensive country in which to sell an apartment, with 21.60% of the sale taken by tax. The global average is 14.61%
  • No 16 for buy-to-let property (home for rent) with 29% of the income taken by tax. China is the most expensive country for buy to let investments at 50%, with the global average coming in as 32.54%
  • No 20 and well below average for the tax taken on commercial property sales. Malaysia ranks at 5.21% and the global average is 9.5% with Norway leading the table with 21.18%

Keith O'Donnell, Global Head of Real Estate, at Taxand said:

"Real estate prices in Malaysia are some of the lowest in the world and this research goes far in explaining some of the reasoning behind this. The Malaysian Government's policy to encourage home ownership and the current absence of VAT/GST for residential home buyers is a key factor in maintaining an attractively low tax take and does much to encourage ownership in the country.



Whilst the tax rate on commercial property for rent is seemingly high at 33.70%, investors enjoy significant saving in terms of capital gains tax when the properties are sold and/ or upgraded as Malaysia offers competitive capital gains tax at the rate of 5% or 0% (for properties sold after 5 years of ownership)."



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Taxand T3 research methodology
Taxand has updated and expanded its T3 data.

To arrive at the figures, Taxand has taken into account VAT (or its local equivalent), corporate income tax, and property taxes based on 2010 rates. The property taxes were usually subject to various country-specific assumptions and modifications as they often differ on municipality basis or sometime just location basis. Those were reviewed by the coordinating Taxand team to assure comparability. Administrative fees, notary fees, court fees were excluded as having a relatively low impact on the overall tax take.

To ensure comparability of the results, certain data has been fixed such as size of the building, investment costs, and 100 percent non-interest bearing equity financing.

With all of that built into the model, Taxanders adopted it to the local law.

Your Taxand contact for further queries is:
Abigail Tarren, Global Operations Director
T. +44 (0)207715 5243

Taxand's Take

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