Development Charge on Change of Use Q1

Q.
(a) State five (5) differences between 'quit rent' and 'assessment'. (10 marks)

(b) Encik Ahmad owns a 5 hectares agricultural land. He plans to develop the land with a 3 stars hotel with 150 rooms. Encik Ahmad seeks your advice on the procedures as well as all the payments involved for the conversion and development of the land. Based on the State Land Rules you are familiar with, advice Encik Ahmad. (15 marks)

(25 marks, 2015 Q1)

(19.09.2015)
A.
(a) differences between quit rent and assessment.

Refer to Kuala Kangsar Municipal Council website FAQ here.

Generally, the 5 differences are:

1. Quit rent (Cukai Tanah) is paid to State Authority in the office of Land and Mines, or Land and Survey (East Malaysia), whereas Assessment (rates) - Cukai Pintu, is paid to Local Government, ie Municipal Council.

2. Quit rent is levied on land or building with strata title with title issued irrespective whether there is any use of the land - even vacant unused land is levied the tax, whereas Assessment is levied on building of which there is a annual value or improved value (of use). Unoccupied holdings can get refund or remission of assessment paid.

3. Quit rent varies with the category of use like Agriculture, Industry or Building, whereas Assessment is determined by the annual value of rental of the holding, and valued by periodical process of review of the valuation list.

4. Quit rent is provided by National Land Code, whereas Assessment is provided by Local Government Act.

5. Payment of Quit rent is annually by 31st May, whereas payment of Assessment is biannually, by February 28th and August 31st.

Ref:
What is quit rent? Malaysia Loan, available at
http://www.malaysialoan.com.my/2008/09/quit-rent/
Service and Utility Charges, Malaysia My Second Home, available at
http://www.mymm2h.com/property/service-a-utility.html

(b) Conversion and Development of land - Ahmad. (22.09.2015 - Need Improvement)

The original Type of Use or Category of Use for Ahmad's 5 hectares land was 'Agriculture'. Now, En Ahmad needs to apply to the State Planning Authority and Office of Land and Mines (West Malaysia) or Land and Survey (East Malaysia) to convert the Use to 'Building' in West Malaysia or 'Commercial' in East Malaysia.

There being a premium for this conversion, the calculation is dependent on the State which the land belongs. See earlier post on this issue of 'Premium on land conversion'. According to this write up FAQ, there is no standard formula for this premium calculation. It is very much in the office of State Authority - which means Menteri Besar would have a big say in this matter!

For Sarawak, see earlier posts here - Premium and Land Use in Sarawak. The application for conversion is called AVTC - Application for Variation of Title Condition. For commercial use, the premium multiplier is 100% of the market value of the land, which means upon conversion, the difference in the market value of the 'commercial' and 'agriculture' had to be 100% paid as premium for conversion.

For renewal of land lease in Sarawak, go here.

For the procedures of land development process, refer to earlier posting below:

Land Development Process in Malaysia.
Planning Structure in Malaysia.

Upon application of the plan for development, under the Town and Country Planning Act, 1976, there is development charge for the 3 Star Hotel.

Development Charge under TCPA.

Section 32 of the Town and Country Planning Act, 1976,

32(1) Where a local plan or an alteration of a local plan affects a change of use, density, or floor area in respect of any land so as to enhance the value of the land, a development charge shall be levied in respect of any development of the land commenced, undertaken, or carried out in accordance with the charge.