Q.
What are the differences between Premium, Charge and more specific Development Charge? How about change of category of use?
A.
PREMIUM
Land premium or additional premium is the tax payable to the State for the below few common dealings with land.
i) Alienation of State Land
ii) Extension of lease of State Land
Usually, it is a % rate x MV (current) x lease term extension - for leasehold land nearing expiry.
It may also be a % rate x MV (intended conversion) - for conversion of category of use or condition of use.
For example, a plot of agriculture land is leasehold expiry in 10 years, and the proprietor wishes to extend it to for another 99 years.
Formula = 1/4 x 1/100 x land value x (new lease term - balance of existing lease)
See below the various formula for Premium Calculation in different STATES in Malaysia.
Change of Category of Use - Premium
Change of category of use for conversion also attracts Premium on Change of Category of Use.
THIS CAN BE CONFUSING - please see further readings below:
- Premium v Charge v Development Charge here
- How to calculate premium on change of land use
- Premium and land use in Sarawak
For example, agriculture to residential use.
Formula = % Rate x MV (of the targeted conversion) - the Market Value of the intended conversion of use.
See another table on Selangor Land Rules on Land Use conversion.
Current Value = Market Value of the targeted conversion - the FUTURE APPROVED USE CATEGORY
Table extracted from:
Liyana Zainudin, Zaharah Mohd Yusoff, Saiful Aman Sulaiman, Jaiya Abu. LAND CONVERSION PROCESSES AND LOCAL COMMUNITY ASSESSMENT IN THE DISTRICT OF PETALING. Journal of the Malaysia Institute of Planners (2021) VOLUME 19 ISSUE 4 (2021), Page 185 – 196
CHARGES
Usually this is referred to Processing Fee, Maintenance Charges or Assessment Bills.
Processing Fee - charges in submitting documents to various offices of Land Office, Local Government, etc.
Maintenance charges - reference to Strata Management Act and its regulations, the charges by Management Corporation to the parcel owners.
Assessment bills - cukai pintu for all local government imposed on the holdings in the geographical region being rated by the local government.
Meter Charges - fees by utility companies
DEVELOPMENT CHARGE
This is about TOWN & COUNTRY PLANNING ACT, and its regulations. Development charge is levied when plan of development deviate from the approved town planning. It also involves ZONE PLANNING or ZONING by the Local Planning Authority.
For example, a residential house by a busy commercial area is converted to become commercial use - like bungalow along Jalan Ampang being converted to restaurant.
This will attract development charge with its increased usable value - from residential to commercial. For example the formula generally is:
% rate x (MV increment)
e.g. 30% x (MV commercial - MV residential)
If the original MV of bungalow = RM1 million, and the converted MV of using it commercially as restaurant = RM3 million, the development charge on land conversion for the above example is:
30% x (RM3 million - RM1 million) = 30% x RM2 million = RM600,000.
Development charge can also be levied on:
- Density of use, when increased number of people are housed inside the building.
- Floor area of use, when increased floor area is build on a limited plinth area & plot ratio.
Ref:
Saiful Nizam Hj Ali, GUIDELINES ON PROPERTY DEVELOPMENT IN MALAYSIA, Tenure of Land and Development Permission. Available on internet search verbatim here.