Should You Buy Property Under Your Personal Name or an Investment Holding Company (IHC)?

Many people still believe that buying property through an Investment Holding Company (IHC) is the best way to save on taxes and secure assets, but this concept is changing.

While there are some benefits to using an IHC, the Malaysian government has been gradually reducing these advantages. If you’re still considering setting up an IHC for property investment, make sure you understand the following key points:

1. Real Property Gains Tax (RPGT) – No RPGT for Individuals After 5 Years
When selling property at a price higher than its purchase cost, you must pay Real Property Gains Tax (RPGT).
• Individuals: Since 2022, individuals no longer need to pay RPGT if they sell their property after five years.
• Companies (IHCs): Companies still need to pay a 10% RPGT on profits from property sales, even after five years.
Verdict: Buying under a personal name helps save 10% RPGT after five years!

2. Corporate Tax Rate – IHCs No Longer Enjoy 17% SME Tax Rate
• Before 2020, IHCs could qualify for the 17% SME tax rate on their first RM600,000 of taxable income.
• Now, IHCs do not qualify as SMEs and are taxed at a flat rate of 24%.
• Rental income under an IHC is taxed at 24%, while individuals only reach this tax rate if their annual income exceeds RM100,000.
Verdict: If you earn RM36,000/year in rental income, you may pay RM2,520 more in taxes under an IHC.

3. Bank Loans – IHCs Can Only Borrow Up to 70%
• Individuals: Can get up to 90% financing for their first two residential properties.
• IHCs: Can only get up to 70% financing, meaning you need a larger upfront cash investment.
Verdict: Buying under a personal name allows for higher loan amounts and better cash flow management.

4. Ongoing Costs – IHCs Have Minimum Annual Fees of RM4,000
• Running an IHC comes with recurring costs like secretarial fees, audit fees, accounting fees, and tax filing.
• These fees typically range from RM4,000 to RM8,000 per year and increase as the company grows.
Verdict: Individuals avoid these ongoing costs.

5. Property Transfer Costs – Only RM10 Stamp Duty for Individuals
• When an individual property owner passes away, transferring the property under a will only requires a RM10 stamp duty.
• For companies, standard stamp duty rates apply, which increase with the property value.
Verdict: Transferring personal property is significantly cheaper.
When Should You Use an IHC?

Despite the disadvantages, an IHC can still be beneficial in certain situations:

1 Asset Protection – If you own multiple properties, putting them under an IHC can separate business and personal assets.

2 Risk Mitigation – Personal legal issues won’t affect company-owned properties, and vice versa.

Conclusion: Personal Name or IHC?

For most people, buying property under a personal name is more tax-efficient and cost-effective.

Use an IHC only if asset protection and liability separation are top priorities.

Investment Holding Company


IHC

“IHC/” “”2022IHC

1. RPGT-
“RPGT”2022RPGT10% RPGT10%RPGT

2. – IHC17%
IHC17%2020IHCSME17%24%RM36,000RM3,000, 7%RM2,520RM100,000 24%
3. – IHC70%
90%70%20%
          
4. / – IHCRM4,000

RM4,000 – RM8,000
                        
5 – RM10

RM10




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