Property Taxes in Malaysia: [A Complete Guide]

There are a lot of websites that talk about property taxes in Malaysia but none are wholesome enough to give you all the information you need without having to surf around a bit.

Therefore, I’ve decided to help collate everything that you would possibly ever need to know in one single location, giving you access to all you could have ever wanted to know about property taxes in Malaysia, through a single click.

There are 5 different property taxes in Malaysia; SPA Stamp Duty (Memorandum of Transfer aka MOT), Loan Agreement Stamp Duty, Cukai Taksiran, Cukai Tanah and Real Property Gains Tax.

 

Property Stamp Duty (Memorandum of Transfer)

The worst taxes are the ones you get slapped with before you even own a property. Way before you even get your hands on your keys.

Stamping is in no way a small affair either. Be ready to fork out a significant amount of additional cash.

The first Stamp Duty that you pay when you buy your unit is the Property Stamp Duty. It’s also known as Memorandum of Transfer (MOT) Stamp Duty and even many-a-time, wrongly referred to as SPA Stamp Duty.

The SPA Stamp Duty tax is actually a nominal fee that costs RM10.00 for each SPA copy stamped. It is indeed not the MOT Stamp Duty (which we love to hate) but it gets commonly referred to as SPA Stamp Duty because it’s rather insignificant.

Property Stamp Duty or MOT, is calculated based on the purchase price of the property according to the SPA and not after whatever discounts or rebates are given by the developer. It is basically the tax you are incurring for the transfer of ownership title from the owner or developer to yourself.

Why do we love to hate our favourite Malaysian property tax?

Well… for the simple reason, that it costs a lot!

The tax is tiered, so you pay an increasing fixed percentage on the first RM100,000, the following RM400,000 and then the remaining amount after that. The table below, explains it better.

Tiered Scale Stamp Duty Fee
First RM100,000 1%
Next RM500,000 2%
Next RM100,000+ 3%

Confusing?

I certainly feel it is.

So, let’s look at an example to try make things clearer. Assuming your property price on the SPA is RM700,000, let’s work out how much you would have to pay for the Property Stamp Duty.

1% on first RM100,000 – RM1,000
2% on next RM500,000 – RM10,000
3% on next RM100,000 – RM3,000

So, that makes a grand total of RM14,000. (Ouch!)

This is how much your Property Stamp Duty (or MOT Stamp Duty) would cost you for a RM700,000 property.

Property Stamp Duty is normally paid upfront with your property purchase but it can take up to a year or even more before you to have to pay this, if you’re dealing with a strata title (as opposed to a landed title) transfer from a new development.

As of January 1st 2017, the Malaysian government began offering an exemption of this stamp duty for first time Malaysian home buyers. The tax exemption is 100% for properties below RM300,000 and will be an exemption of the excess above RM300,000 for properties bought for RM300,001 to RM500,000. [1]

The exemption is only applicable for property purchases up till December 31st 2018, so if you’re yet to buy a property, there’s still time to take advantage of this amazing offer and get your first property at a superb discount.

 

LA Stamp Duty

Using the same example let’s look now at the the Loan Agreement Stamp Duty.

When I first started on my property investing journey, I always got confused between these two. It took me a while to even realize that there were two different Stamp Duties that had to paid up front!

Loan agreement Stamp Duty is a much simpler ordeal though, both for calculation and as a financial burden.

Loan Agreement Stamp duty is simply calculated by multiplying the loan amount by 0.5%.

So, for a RM700,000 property, the loan amount after 10% down payment would be RM630,000. This would make the Loan Agreement Stamp Duty RM630,000 x 0.5% – RM3,150.

The LA Stamp Duty is also paid up front with your property purchase.

These two stamp duties are paid as you buy your property so you don’t have to worry about how to settle these payments. You almost always will need to pay these taxes as few developers ever have schemes for which they absorb them.

Thankfully you won’t need to do this math yourself every time you’re working out these Stamp Duties, Loanstreet.com has got a handy calculator on their site which I use all the time. You can check it out here – https://loanstreet.com.my/calculator/calculate_home_loan_legal_fees_stamp_duty

 

Cukai Taksiran

Property Assessment Tax or Cukai Taksiran as it’s known in Malaysia is something that new property investors who are buying property in Malaysia might not be very aware about.

So, what is Cukai Taksiran?

Cukai Taksiran is a tax that is charged to all property or land owners by local district city halls. The tax is supposedly used by the city halls to finance the construction and maintenance of surrounding infrastructure including area cleaning and upgrading works.

The tax is calculated based on the annual rental value of the property, which is then multiplied by a fixed rate. This can range anything from 2% to 9% depending on whether the property is deemed residential, low cost, serviced apartments, landed houses, commercial or industrial. They have several different classifications of property types and different types have different tax rates with low cost flats being the lowest at 2% and luxury serviced residences at 9%.

The Cukai Taksiran is due twice a year and paid in two installments within the two separate periods from:
1st January – 28th February and;
1st July – 31st August.

Across the various city hall districts, the rates do not differ much. The rates you pay to one city hall will be very similar to what you would pay in another city hall. The thing that differs from district to district is the annual rental value of the property.

The annual rental value can be very different as certain areas are expected to fetch a higher rent compared to others. This value is determined by the individual district city halls.

How big of a deal is it?

Not very, to be honest. Let’s look at a real example:

Property: Luxury Condo in Gohtong Jaya
Annual Rental Value: RM9,300
Tax Rate: 8.5%
Cukai Taksiran: RM790.50

[Find out why I think Genting Highlands could be the next best area for property investment in 2018]

As you can see, there isn’t too much to be worried about. Cukai Taksiran is a relatively manageable burden where taxes are concerned.

You should receive a letter that will be mailed to your address that is tied to your property. The letter will inform you of the tax amount and the due date for payment much like it is displayed above. You just need to proceed to your local city hall to make payment.
Do note that your city hall will vary depending on which locality your property is located in.

For example, in Kuala Lumpur, there’s just one – DBKL, but in Selangor, there are 12 district city halls – Klang, Hulu Selangor, Shah Alam, Petaling Jaya, Kuala Langat, Kuala Selangor, Sabak Bernam, Ampang Jaya, Kajang, Selayang, Sepang and Subang Jaya.

 

Cukai Tanah

Cukai Tanah (also known as quit rent) or land tax is the tax you pay on owning whatever it is that you own on a piece of land, even if it’s just the land itself. Cukai Tanah is calculated at a varying rate depending on the type and size of the property that is built on the land. This figure also varies from state to state and can also vary within each state depending on the exact location of the property.

Cukai Tanah is charged at a set amount for each square meter of the property. It is difficult to find out the rate for each state as the amount varies a lot depending on the type of property and is not listed for easy reference on any of the land office websites.

Just like Cukai Taksiran, it’s not really something you should be overly concerned about. You should probably not even be worried at all.

Kedah for example, charges RM0.35 per square meter for landed residential and RM0.50 – RM1.50 per square meter for strata residential. The strata residential Cukai Tanah increases from RM0.50 onwards based on the value of the property.

So, assuming you had a brand new 1200 sqft (112 square meters) condominium, you’d only end up paying about RM167 a year.

Payment however, is easy. Almost all the land offices allow for online payment through their websites and you can find the list of websites here – https://www.jkptg.gov.my/ms/content/pembayaran-cukai-tanah-atas-talian

 

Real Property Gains Tax

Real property gains tax or RPGT is one tax that can make or break your investment earnings. RPGT is a tax that is charged only when you sell a piece of property.

So basically, it’s a capital gains tax with a different name?

Sort of, but not exactly.

RPGT is charged on the net gains of the sale of your property. The net gains are the gross capital gains after deducting all the fees that go along with your property sale such as legal fees, stamp duties and other miscellaneous admin fees.

So, assuming that your total profit on your property sale, after deducting all your other fees associated with your sale, was RM100,000. You would be taxed only on this RM100,000.

What is the tax rate of RPGT though?

This is where RPGT differs from Capital Gains tax (which is not charged in Malaysia on any capital appreciation whatsoever). RPGT has a scaling mechanism in place to determine how much you will have to pay.

It depends on how long you have owned the property. Selling a property less than or equal to 3 years of ownership results in a 30% tax on your net gains and reduces to 20% after the third year and 15% on the fourth year and finally 0% after 5 years of ownership.

This however, does only apply to citizens and permanent residents. Non-citizens and companies have slightly different scaling and will pay a minimum of 5% regardless of how long the property is owned.

Years of Ownership Before Sale Citizens/ Permanent Residents Foreigners Companies
< 3 Years 30% 30% 30%
< 4 Years 20% 30% 20%
< 5 Years 15% 30% 15%
> 5 Years NA 5% 5%

So, based on the above, let’s say you’re going to be taxed on this RM100,000 profit.

That would mean that selling before 3 years, you would pay a thunderous RM30,000 or RM20,000 before 4 years and RM15,000 before 5 years.

Just waiting things out seems to be the best choice and perhaps the reason why the government set the rule in the first place. The RPGT is heavy enough to put speculators off from flipping property. I certainly wouldn’t be comfortable giving the government RM30,000 for nothing and I don’t think you would either.

RPGT is paid through the lawyers who handle the sale of the property. The purchasers’ lawyers are required to retain 3% of the purchase price from the deposit and remit the same to the Inland Revenue Board within sixty (60) days from the date of the Sale and Purchase Agreement (SPA) to meet the RPGT payable if the seller is Malaysian. For foreigners, this has been recently increased to 7% as of January 2018. [2]

There is however, one special grant that the government has given to all its citizens.

Every citizen is entitled for a one-time tax exemption from this RPGT but it only applies for the disposal of a ‘private residence’. The RPGT act defines a private residence as a building or part of a building in Malaysia owned by an individual and occupied or certified fit for occupation as a place of residence.

To get this exemption, you will need to show two things:

The first being that the private residence is owned and occupied by an individual (not a company) and;

the Certificate of Fitness for Occupation or that the Certificate of Completion & Compliance has already been issued for that private residence. [3]

The only other time that RPGT is exempted is when the property is transferred between family members ‘by way of love and affection’. This only applies when transferring a property between husband and wife, parent and child and grandparent and grandchild.

 

Conclusion

Property taxes in Malaysia are not as bad as one might expect. Apart from the SPA Stamp Duty and Real Property Gains Tax (RPGT), all the other costs are very manageable and even RPGT can be avoided completely or at the very least, kept to a minimum (if you’re a foreigner).

Getting the pain out of the way up front might not be so bad after all. After that initial task is taken care of, just make sure to keep your property for at least 5 years and you’ll be on easy street. At least where your property taxes in Malaysia are concerned anyway.

Let us know how you feel about these taxes or if you have any peculiar experiences to share where things went unexpectedly in the comments below. Perhaps we can all learn from what happened to you.

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