Capital Gains Tax on Property Scrapped by Malaysia in Bid to Promote Investment

Malaysia has announced plans to abolish Capital Gains Tax payable on property, as well as implementing a system of incentives to attract foreign investment into the country’s southern state of Johor. Industries including tourism and financial services will have exemption from Corporate Income Tax for ten years.

Malaysia’s Prime Minister Abdullah Ahmad Badawi intends to boost growth in his country’s economy through increasing investment levels. The redevelopment of the Johor region is expected to cost $109 billion and create 800,000 jobs over the next twenty years, transforming the region into a centre for business and tourism.

These latest plans add to a number of incentive systems introduced by Malaysia to attract investment into the country. Earlier this year, Malaysia cut the rate of Corporate Tax by 1% down to 27%, and introduced incentives to real estate trusts and Islamic finance institutions. In December, Malaysia first began to relax the regulations surrounding property investment by foreigners. Before the Capital Gains Tax on property was scrapped, foreign buyers were liable for a 30% tax for the first five years, reduced to 5% from the sixth year onwards.

The removal of Capital Gains Tax on property could cost the government 200 million ringgit annually (almost $58 million) which accounts for 0.2% of government revenue, according to estimates by OSK Research Sdn economist Sia Ket Ee, but abolishing the tax will attract increased foreign investment.

Malaysia’s economy of $147 billion is forecast to reach a three-year high in growth in 2007, according to the Central Bank earlier this month, and Bank Negara Malaysia predicts it will follow last year’s growth of 5.9% with expansion of 6% in 2007.

If you wish to see the original article please click here