May 9, 2011
extracted from starproperty
Corporatise the purchase of your properties under a commercial entity to realise your investment potential, says KPMG partner Ooi Kok Seng.
He said if the purchase of a property was placed under a company, the loan to ratio value which allowed borrowings of only up to 70% for a third house did not apply.
“Property investors should explore the option of parking their property investments under a company,” he said at a property forum ‘Invest in Malaysia, Invest in Kuala Lumpur’ organised by Eastern & Oriental Berhad recently.
Ooi said the loan to ratio value applied only to individual buyers of properties.
He said the annual tax rate for such a company renting out the properties that it owned was only 20% for the first RM500,000 profit, compared to the flat tax rate of 26% if the rented properties were to be parked under an individual’s name.
“There are also other benefits such as when a purchaser buys the shares in an entity that owns a property, he only has to pay a stamp duty of 0.3% as compared to 3% for buying a property directly from an individual owner.
“In the case where a purchaser buys the entire shares in a company that owns a property with a market value of say RM1mil, the maximum stamp duty is around RM3,000, whereas a purchaser who buys the property directly from an individual owner has to incur a stamp duty of approximately RM24,000,” he said.
Ooi, however, said the disadvantage of setting up such a commercial entity was that the loans offered by banks would not be as attractive as compared to those provided for individual buyers.
“The other setback is that there will be an annual maintenance cost of about RM3,000 to RM5,000 for auditing, tax, and secretarial charges,” he added