According to the Customs DG, “individuals are considered to be engaged in a business if they have the intention to sell the property, and if they meet any of the following criteria: possess more than two commercial properties; own more than one acre of commercial land or property; or the land to dispose has a market value of more than RM2 million.”
The Sun Daily reports that tax experts are having their hands full trying to help clients in dealing with this new development.
“The Customs DG’s decision is very controversial because, according to the GST Act, only individuals doing business need to charge GST. However, under the new definition, an individual who owns more than three commercial properties and sells one, is considered conducting a business.
“In income tax’s eyes, such a sale is an investment but Customs now defines that as business. Therefore, individuals have to register for and charge GST, and for property transactions, we are talking about big amounts,” YYC & Co managing partner Yap Shin Siang was quoted as saying by SunBiz, the business pullout of The Sun.
There is also a clear conflict between the ruling on an individual “possessing more than two commercial real estates” and “the land to dispose has a market value of more than RM2 million”, as that would make individual property owners who only have one commercial property having to impose GST if the unit is sold at more than RM2 million.
“A lot of individuals will be registering for GST. You can challenge Customs but it is expensive to do so. This was announced in October last year but a lot of people are still not aware and they are confused.
“I’ve been getting many calls from property agents and lawyers because nobody really gets the full picture of what Customs wants,” Yap told The Sun.
She also spoke on the issue of joint-ownership by several individuals, all not involved in business, intending to sell commercial property.
Taking a particular case as an example, Yap said eight joint-owners of a plot of land measuring over one acre faced several issues when trying to sell their land.
“Based on the Customs DG’s decision, they had to register for GST. But do all eight individuals have to register or just one?
“It was eventually registered under one name but it was very difficult to do so because at the Customs’ Department, even their officers were unfamiliar with such cases,” she said.
She also brought up the matter of individuals having to deregister after having sold their commercial property.
“After any commercial property is sold and GST is paid to Customs, what happens next? If the individual does not deregister themselves, then they have to keep submitting the GST returns, every month or every quarter.
“So, we have to help them deregister. But this took a few more months, because again, Customs officers were unsure of how to deal with it,” she added.
With a wide scope of issues involved when it comes to individuals owning and selling commercial property, Yap told SunBiz that the Customs Department needs to address the practical concerns more clearly, and be more tolerant when it comes to enforcement.
“The net is very broad – more than three properties, more than one acre – and there are many individual property owners who will have such transactions. What about those who are unaware? What will Customs do? Although there is a moratorium, it is subjective.”