Introduction

Generally, the acquisition of property by non-citizen and foreign companies are subject to the requirements as set out in the (i) National Land Code (revised 2020) (Act 828) (“NLC”), (ii) Economic Planning Unit (EPU) and (iii) relevant rules and regulations imposed by the State Authority.

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Definition of “non-citizen” and a “foreign company” under the Malaysian Law

In summary, the definition of foreign interest as provided under Section 433A of NLC is as follows:-

1. a) Non-citizen – an individual who is not a citizen of Malaysia; and
2. b) Foreign company – a foreign company incorporated in Malaysia under Companies Act 2016, or a company incorporated in Malaysia with 50% or more of its voting shares held by a non-citizen.

Under Section 2 of the Companies Act, foreign company is defined as a company, corporation, society, association or other body incorporated outside Malaysia or an unincorporated society, association which under the law of its place of origin may sue or be sued which does not have its head office or principal place of business in Malaysia.

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Requirements and Limitations

In acquiring properties in Malaysia, non-citizen and foreign companies shall take note and comply with the following requirements:-

1. a) Acquisition Approval under NLC;
2. b) Minimum Threshold on the Property Purchase Price & Types of Properties as determined by the State Authority; and
3. c) Guideline on the Acquisition of Properties issued by EPU.

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i) Acquisition Approval under NLC

As prescribed under Section 433E of the NLC, a non-citizen or a foreign company that intends to acquire a property in Malaysia shall submit for an application in writing to the relevant State Authority to seek for an approval by the State Authority. Upon the approval from the State Authority, such approval may subject to such terms and conditions as may be specified by the State Authority and to the payment of levy fees as may be prescribed. Any prescribed levy fees payable to the State Authority shall be in accordance with the directions of the National Land Council.

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ii) Minimum Threshold on Property Purchase Price & Types of Properties

Non-citizen and foreign company shall also take note on the minimum threshold on the property purchase price as may be determined by the State Authority and the types of properties allowed to be acquired in each State in Malaysia.

In this article, we will only discuss the minimum threshold, the types of properties allowed to be acquired by a non-citizen and a foreign company and whether levy fees will be imposed on a non-citizen and a foreign company in the acquisition of property in Wilayah Persekutuan Kuala Lumpur, Selangor, Pahang, Penang and Johor, as follows:-

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iii) Guideline on the Acquisition of Properties issued by EPU

Effective from 1 March 2014, a non-citizen or a foreign company are required to obtain a prior written approval from EPU in the event that:

1. a) any acquisition of property where the acquisition price is above RM20million and such acquisition would result in diluting Bumiputra ownership of the property held by Bumiputra interest and/or Government agency; and
2. b) any indirect acquisition of property by other than Bumiputera interest through the acquisition of shares, resulting in a change of control of the company owned by the Bumiputera interest and/or Government agency, having property more than 50% of its total assets, and its property asset being valued at more than RM20 million.

Additionally, foreign companies shall take note that EPU has imposed restrictions on foreign companies in the acquisition of properties in Malaysia such as the foreign company shall have at least 30% Bumiputra interest shareholdings and the paid-up capital of local companies owned by foreign interest shall be at least RM250,000.

However, the acquisition of the properties by foreign interest as set out below do not require the approval of the EPU but fall under the purview of the relevant ministries and/or government departments in Malaysia:

1. a) any acquisition of a unit of residential property valued at RM1million and above
2. b) any acquisition of commercial unit valued at RM1million and above;
3. c) any acquisition of industrial land valued at RM1million and above; and
4. d)any acquisition of agricultural land valued at RM1million and above or at least five (5) acres in area for the following purposes:
   1. i) to undertake agricultural activities on a commercial scale using modern or high technology;
   2. ii) to undertake agro-tourism projects; or
   3. iii) to undertake agricultural or agro-based industrial activities for the production of goods for export.

In addition to the above, EPU has imposed restrictions on non-citizens and foreign companies in acquiring the following types of property in Malaysia, such as:-

1. a) value of the property less than RM1,000,000 per unit;
2. b) residential units under the category of low and low-medium cost as determined by State Authority;
3. c) properties built on Malay Reserved Land; and
4. d) properties allocated to Bumiputera interest in any property development project as determined by the State Authority.

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Conclusion

In acquiring properties in Malaysia, non-citizens and foreign companies should be aware of the requirements as set out above and it is always important to take note of any latest requirements as may be announced by the Government of Malaysia which may be applicable.

Nevertheless, it is advisable for non-citizens and foreign companies to seek for professional advice on the procedures and costs involved to manage his/its expectation before acquiring a property in Malaysia.

This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.

About the Author
Hilary Lim Chiao Hann
Associate
Corporate & Real Estate
Halim Hong & Quek
hilary.lim@hhq.com.my

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[1] Garis Panduan Perolehan Hartanah issued by Economic Planning Unit (EPU) effective from 1 March 2014 which is referred to in Paragraph 4 of Pekeliling Ketua Pengarah Tanah dan Galian Persekutuan Bilangan 10/2020

[2] Pekeliling Ketua Pengarah Tanah dan Galian Selangor Bilangan 1/2014

[3] Notification of the extension of the Home Ownership Campaign 3.0 dated 13 December 2023 issued by Pejabat Tanah Dan Galian Negeri Pulau Pinang to Penang Bar Committee and REHDA Penang informing an extension from 1 January 2023 to 31 December 2023 for properties acquired by non-citizens and foreign companies from direct developers in Malaysia

[4] Garis Panduan Perolehan Hartanah Oleh Warganegara Asing Atau Syarikat Asing Bagi Negeri Pulau Pinang

[5] https://ptj.johor.gov.my/pendaftaran/perolehan-hartanah-oleh-kepentingan-asing/