Understanding the Economic Planning Unit (EPU) Guidelines on Property Acquisition in Malaysia for Foreigners

Malaysia’s Economic Planning Unit (EPU) plays a crucial role in regulating property acquisitions, particularly those involving foreigners and transactions that affect Bumiputera interests or government-owned properties. These guidelines aim to balance foreign investment with local economic stability while ensuring that opportunities remain accessible to Bumiputera and government agencies.

If you are a foreign investor or a company looking to acquire property in Malaysia, it is essential to understand:

• When EPU approval is required
• Conditions for approval,
• Exemptions from EPU approval
• Steps to comply with the regulations

When is EPU Approval Required?

EPU approval is mandatory under two main scenarios: direct property acquisition and indirect property acquisition via shares.

1. Direct Property Acquisition

If a Foreign or local entity is directly purchasing a property, EPU approval is required in the following cases:

• The property is valued at RM20 million or more.
• The transaction leads to the dilution of ownership held by Bumiputera interests or a government agency.

1. Indirect Property Acquisition via Shares

EPU approval is also necessary when property ownership is transferred indirectly through the acquisition of shares in a company. This applies if:

• There is a change of control in a company that is owned by Bumiputera interests or a government agency.
• The company’s assets primarily consist of property, where real estate accounts for more than 50% of total assets and the property value exceeds RM20 million.

Acquisitions by Foreign Interests

Foreign entities acquiring commercial, agricultural, or industrial properties valued at RM1,000,000 and above must register the acquisition under a local company.

A foreign interest includes:

• Non-Malaysian individuals
• Permanent Residents (PR) of Malaysia
• Foreign companies or institutions
• Local companies or institutions where foreign parties hold more than 50% of voting rights including:
  • Non-Malaysian individuals
  • Permanent Residents
  • Foreign companies or institutions

Restricted Acquisitions for Foreign Interests

Foreign interests are not allowed to acquire the following types of property:

• Properties valued below RM1,000,000 per unit.
• Low-cost and low-medium-cost residential units (as classified by the STate Authority)
• Properties on Malay Reserved Land
• Properties designated for Bumiputera ownership in a development project (as determined by the State Authority).

Conditions for EPU Approval

Where EPU approval is required, applicants must fulfill the following conditions:

1. Equity Requirement

Companies acquiring property must have at least 30% Bumiputera ownership.

1. Paid-Up Capital Requirements
   1. Local company owned by local interests: At least RM100,000 paid-up capital.
   2. Local company owned by foreign interests: At least RM250,000 paid-up capital.

1. Compliance with EPU Conditions

• For direct property acquisitions, the Bumiputera equity and paid-up capital requirements must be fulfilled before ownership transfer
• For indirect acquisitions (via shares), these conditions must be met within 1 year after EPU approval is granted.
• Companies must notify EPU once the conditions have been fulfilled.

Exemptions from EPU Approval

There are certain exemptions where EPU approval is not required. These include:

1. Agricultural Land Acquisition by Foreigners

Foreigners do not need EPU approval if they purchase agricultural land valued at RM1 million or above or land covering at least 5 acres, provided the land is used for:

1. 1. Agro-tourism projects that promote Malaysia’s tourism industry.
   2. Commercial-scale agricultural activities utilizing modern or high technology.
   3. Agricultural or agro-based industrial activities for export-oriented production.

1. Residential Units Under Malaysia My Second Home (MM2H) Programme

Foreigners participating in the Malaysia My Second Home (MM2H) programme do not need EPU approval for purchasing residential properties. However, they must still comply with the minimum price thresholds set by the respective State Authorities.

1. Industrial Land Acquisition by Manufacturing Companies

Foreign-owned manufacturing companies do not require EPU approval when acquiring industrial land, as long as they comply with the regulations set by the Ministry of Investment, Trade, and Industry (MITI) and other relevant agencies.

1. Family Property Transfers

Property transfers between foreigners are only allowed among immediate family members, such as spouses, children, or parents.

Essential Steps for Foreigners to Buy Lands in Malaysia

1. State Authority Approval

Under Section 433B of the National Land Code (NLC), foreigners must get state authority consent to acquire land. This process involves:

• Paying an application fee.
• Paying a levy, calculated as a percentage of the property value.

2. Understand Tax Obligation

Foreigners must comply with the following taxes:

• Real Property Gains Tax (RPGT):
  • 30% tax on gains if the property is sold within 3 years.
  • Rate decreases to 10% for sales after 5 years.