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Malaysia - Mortgages and Other Financial Issues

Raising finance in Malaysia has become a little more difficult since the global financial crisis as lending criteria have been tightened up. With Malaysia’s liberal attitude towards foreign investment in property, there are many alternatives to raising finance. There are also a number of tax incentives to enjoy.

Mortgages for Expats

Malaysia has a range of banking services that offer mortgage-lending facilities. International banks such as HSBC have a Malaysian arm. These banks offer mortgage lending facilities:

Bank of Nova Scotia
Royal Bank of Scotland

These banks have an international section and offer a range of lending services within Malaysia. Other banks operate on an off-shore basis and you can bank internationally.

For expats who are on the Malaysia My Second Home Program (MM2H) there is a range of options from local banks for mortgage lending and with the financial investment required for MM2H, expats are able to raise finance without too much difficulty. Those who are not on the program, raising finance overseas is the preferable option.

Tax-related Liabilities on Property Purchase for Expats

Expats who are seeking a rental income from property investment will be taxed at 28% of the rental income on an annual basis.

Government stamp duty is payable on property purchases for all foreign investors. This is a tier-based tariff. As the threshold for expats purchasing property is 500,000 RM, the stamp duty rates are as follows:

- 1% on the first 100,000 RM
- 2% on the next 400,000 RM
- 3% on the remaining amount

Do note how the Malaysian Government has ensured that all foreign property investments fall within the highest band.

Mortgage fees also apply on the loan which varies depending on the lender.

In total, a foreign buyer could expect to pay between 4% and 5% of the property purchase price on the sales purchase agreement and stamp duty.

There are certain fees associated on the sale of the property; however, there are no restrictions on selling a property. If a property is sold within five years of its purchase then Real Property Gain Tax is payable. The current rates set in January 2013 are here:

- Below three years – 10%
- Three – five years – 15%
- Over five years – 0%

All expenses associated with selling will be included in the disposal tax.

All properties in Malaysia are subject to Assessment Tax. This is based on the market rental income of the property and is payable by registered home owners on a bi-annual basis.

Property tax is payable on all properties and this is dependent on the local authority and where the property is located. This is based on the square footage of the property. This is tax that is for residential and commercial property.

Tax Advantages in Property Purchases

Due to Malaysia being the cheapest Asian country in terms of property purchasing, tax advantages are many. There is no tax payable on income brought into the country and there is no tax payable on the repatriation of income or resale funds (once the fees have been paid for reselling). Malaysia is an attractive option for foreign investment due to the tax advantages and the liberal stance on money transfers. Expats who reside in their properties for more than 180 days per year are liable for income tax on any income they receive just as any other resident.

Insurance Requirements

As with any property purchase various insurances are necessary. Mortgage borrowers will have to take out life insurance usually incorporated within the loan. Expats who choose to rent out their properties will be liable for building insurances. Home contents insurance is the responsibility of the person who is resident in the property.


Property purchase in Malaysia is liberal to foreign investors, yet a lengthy process. Expats can expect to wait three to five months for the sale to complete whether buying or selling. As a former British colony, the property buying process is based on the British property ladder.

Property investment in Malaysia is a popular foreign investment choice and as a politically stable country with a growing economy, free movement on money being brought into Malaysia, truly is an attractive option.

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