Overview Of Malaysia’s Legal Framework For Acquisition Of Real Estate By Foreign Company
Introduction
Malaysia is a popular destination for foreign investment due to its relatively reasonable real estate costs. To further attract foreign investors, the country’s real estate sector offers opportunities for regional bases, manufacturing, and commercial or residential projects.
This article provides a clear and concise overview of Malaysia’s legal framework for foreign companies seeking to acquire property in Malaysia. It outlines key regulatory requirements and important considerations to help foreign investors navigate the process and make informed decisions.
What is Considered a “Foreign Company”?
It is necessary to determine whether a company is considered “foreign” under the laws of Malaysia. Section 433A of the National Land Code (“NLC”) provides that a foreign company means:-
- a foreign company as defined in the Companies Act 2016 (“CA 2016”) which includes the following:-
- a company, corporation, society, association or other body incorporated outside of Malaysia; or
- an unincorporated society, association or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia.[1]
- a company incorporated under the CA 2016 with 50% or more of its voting shares being held by a non-citizen, or by a foreign company referred to in paragraph (a) or both at the time of land acquisition; or
- a company incorporated under the CA 2016 with 50% or more of its voting shares being held by a non-citizen, or by a foreign company referred to in paragraph (a) and/or (b) or both at the time of land acquisition.
This definition is crucial when determining whether the foreign acquisition regulatory requirements apply, as will be expanded further below.
Regulatory Requirements
Foreign acquisitions of real estate in Malaysia are subject to regulatory requirements under the NLC and the Economic Planning Unit (“EPU”) Guidelines[2], both of which impose approval conditions, restrictions, and procedural requirements.
Requirement under the NLC
Under Section 433B of the NLC, any foreign company or non-citizen intending to acquire land in Malaysia must obtain approval from the State Authority. Additionally, under Section 433E of the NLC, generally any person or company who wishes to transfer or dispose of property to a foreign company or non-citizen must also first obtain the prior approval of the State Authority. This imposes the obligation of obtaining State Authority Approval on both the vendor and the foreign company.
Prior to the 2017’s amendments on NLC, foreign acquisitions of industrial land were exempted from State Authority’s approval. However, following the amendment, all categories of land are now subject to State Authority approval, removing the previous exemption for industrial land.
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What is the State Authority
Each state in Malaysia has its own “State Authority” responsible for land administration and development planning. This authority typically consists of state executive council members and land officers operating under the respective Menteri Besar or Chief Minister. Because land is a state matter, foreign purchasers must obtain consent from the relevant State Authority before acquiring land in that state.
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Restrictions
Several categories of property remain off-limits or restricted for foreign purchasers under various federal and state laws:
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- Malay Reserved Land: Protected under state enactments enacted pursuant to Article 89 of the Federal Constitution, Malay Reserved Land can only be owned by Malays or natives of Malaysia. Foreigners are strictly prohibited from acquiring such land.
- Low-Cost and Medium-Cost Housing: Under state regulations, low-cost and medium-cost properties are specifically allocated for Bumiputera buyers as part of government housing policies. Foreign entities are barred from purchasing these units, with restrictions enforced at the state level through housing policies and development guidelines.
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Minimum Purchase Price
Each state authority sets the minimum property price threshold for foreign buyers, which varies based on state policies, property type, location, and ownership status. Factors such as freehold vs. leasehold, landed vs. strata properties, and whether the area is a designated international or high-demand zone influence these thresholds.
For example, in Selangor, foreign buyers face higher thresholds in Zones 1 and 2 (Petaling, Gombak, Hulu Langat, Klang, and Sepang) compared to Zone 3 (Kuala Selangor and Kuala Langat). For example, in Selangor foreign buyers are also restricted to purchasing leasehold residential properties, with a minimum price of RM1,500,000 for strata properties (including landed strata) and RM2,000,000 for landed properties like bungalows and semi-detached houses that have not been sold by 2018.[3]
As these thresholds are subject to periodic review, foreign buyers should check with the Land and Mines Office of the respective state for the latest requirements before proceeding with any purchase.
Requirement under the EPU Guidelines
The EPU operates under the Ministry of Economy which oversees high-level economic strategies for Malaysia. Its Properties Acquisitions Guidelines (“Guidelines”) seek to protect Bumiputera interests and ensure that foreign investment aligns with broader national development goals.[4] For this reason, the EPU imposed certain restrictions on the acquisition of real estate by foreign companies.
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Transactions Requiring EPU Approval
The two types of transactions requiring EPU approval are as follows:[5]
Direct Purchase
The first involves a direct purchase of property valued at RM20 million or more, where the acquisition reduces Bumiputera or government-linked ownership.
Indirect Purchase
The second occurs when a foreign entity acquires shares in a local company that owns real estate, effectively transferring control of the property.
In both cases, the EPU evaluates whether the transaction aligns with national policies, particularly regarding the preservation of Bumiputera ownership, which refers to the property rights of Malays and indigenous groups recognized under the Federal Constitution.
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Conditions for EPU Approval
The following are the conditions for EPU approval:[6]
30% Bumiputera Equity Stake
To obtain the approval of the EPU, the foreign company must have a 30% Bumiputera equity stake. This stake must be in place prior to finalizing any property transfer.
Paid-Up Capital
The foreign company must also meet the paid-up capital requirement. If the company is owned by local interests, it must have at least RM100,000.00 in paid-up capital. If the company is owned by foreign interests, the minimum paid-up capital required is RM250,000.00.
For direct acquisitions of property, these conditions must be fulfilled before the transfer of ownership while indirect acquisitions require compliance to the conditions within one year from the date of EPU’s approval. Concurrently, EPU must be notified once all conditions have been met.[7]
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Restrictions Against Foreign Interest
Even under the EPU Guidelines, certain types of properties are strictly off-limits to foreign buyers to safeguard national and Bumiputera interests.[8] Foreign parties are generally prohibited from purchasing the following:
- Properties priced below RM1 million;
- Properties built on Malay reserved land;
- Low-cost and medium-cost housing units as determined by State Authority; and
- Properties allocated for Bumiputera interest in property development projects.
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Exemptions
Appendix I of the EPU Guidelines details scenarios where EPU approval is not needed. One recognized program is Malaysia My Second Home (MM2H), which offers eligible foreigners a long-term social visit pass and, in certain states, a lower threshold for property purchases. Each exemption request is subject to EPU discretion and may come with specific conditions.
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Procedures
Appendix II of the Guidelines outlines the steps for applying for EPU approval, which includes the submission of corporate documents, financial statements, and a justification for the acquisition’s strategic benefits to Malaysia. Once submitted, the EPU aims to respond within ten working days, though more complex cases can take longer, especially if additional information is required.
Other Key Remarks
Another important aspect of foreign property acquisition in Malaysia is the Real Property Gains Tax (“RPGT”), which is imposed on the gains made from the disposal of real property. RPGT applies to both citizens and non-citizens, including foreign companies, however, the rates vary as follows:
| Category of Disposer | Disposal within 3 years | Disposal in the 4th year | Disposal in the 5th year | Disposal in the 6th year or later |
| Individuals (Malaysian citizens and permanent residents) | 30% | 20% | 15% | Nil |
| Companies incorporated in Malaysia (including companies as specified in paragraphs 2(b) and 2(c) above. | 30% | 20% | 15% | 10% |
| Non-citizens, non-permanent residents, and companies not incorporated in Malaysia | 30% | 20% | 15% | 10% |
It is important to note that companies with 50% or more of their voting shares held by foreign interest are treated the same as non-foreign companies for RPGT purposes, with the same tax rates applying. This is true unless the foreign company is registered outside of Malaysia, in which case the company will be treated as a foreign entity under the Real Property Gains Tax Act. In that case, it will be subject to the same tax rates applicable to non-citizens, and non-permanent residents.[9]
Conclusion
The Malaysian real estate market presents compelling opportunities for foreign investors, but it also entails navigating a multifaceted legal environment shaped by both federal and state-level regulations. Therefore, understanding whether a purchaser is deemed foreign under the NLC, securing the necessary State Authority approvals, and complying with EPU Guidelines are essential steps in ensuring a smooth transaction. With proper planning, foreign acquisitions can be accomplished in a compliant and beneficial manner that aligns with Malaysia’s broader development goals.
If you have any questions or queries, please contact our Financial Services & M&A Legal Associate, Ms Maryam Amilah (maryam@nzchambers.com) or our Pupil-in-Chambers, Alif Mustaqim.
Authors:
- Maryam Amilah
- Alif Mustaqim
References:
[1] Section 2(1) of the Companies Act 2016
[2] https://ekonomi.gov.my/sites/default/files/2025-01/GPPH%2013%20Julai%202022.pdf
[3] Pekeliling PTGS Bil 2/2020. Program Khas Berkenaan Had Harga Jualan dan Perolehan Hartanah bagi Warganegara Asing di Negeri Selangor. Accessed at: https://ptg.selangor.gov.my/index.php/database_stores/store_view/113?print=1.
[4] https://ekonomi.gov.my/en/department-profile/profile/functions.
[5] Paragraph 2 of the Guidelines.
[6] Paragraph 3 of the Guidelines.
[7] Paragraph 6 of the Guidelines.
[8] Paragraph 10 of the Guidelines.
[9] Part III, Schedule 5 of the Real Property Gains Tax Act 1976.
Published on: 24 March 2025