Taxes are an essential source of funding for government expenditures, and there are various types of taxes in Malaysia levied on real estate properties. Understanding property tax in Malaysia can be confusing for foreigners. In this article, we will discuss the different property taxes in Malaysia and cover relevant information about the tax rates and where to pay property taxes in Malaysia.
1. Property Stamp Duty (Memorandum of Transfer)
One property tax in Malaysia is Property Stamp Duty, a tax levied on various legal, commercial, and financial documents, often called “instruments.” These can include agreements, contracts, deeds, licenses, and other documents specified by law. Stamp Duty is a mandatory tax to generate government revenue and manage economic activities. It aims to authenticate and formalize transfer instruments, ensuring their legal recognition.
On the other hand, a Memorandum of Transfer (MOT) in Malaysia is a crucial document constituting the legal agreement that transfers property ownership from the developer or previous owner to the new buyer. MOT Malaysia Property Stamp Duty is a requirement for the legality of this transfer document. You can pay property tax in Malaysia for MOT Stamp Duty at any Stamp Office. These offices are located throughout Malaysia and can be found on the Inland Revenue Board (IRB) website.
Property Stamp Duty rates
The property buyer pays the property tax in Malaysia for stamp duty. The MOT Malaysia Property Stamp Duty is calculated as a percentage of the property price following a tiered system indicated below:
| Price tier | MOT stamp duty (% of property price) |
|---|---|
| First RM 100,000 ($21,000) | 1% |
| RM 100,001 ($21,000) to RM 500,000 ($105,000) | 2% |
| RM 500,001 ($105,000) to RM 1 million ($210,000) | 3% |
| Above RM 1 million ($210,000) | 4% |
Property tax in Malaysia for foreign companies paying stamp duty is generally at a flat rate of 4%. This rate applies to non-citizens and foreign-owned companies unless they have permanent resident status in Malaysia.
Property Stamp Duty exemptions
Malaysia Property Stamp Duty has exemptions based on the Budget 2024 announcement:
- Stamp Duty exemption for first-time homebuyers: Malaysians purchasing their first home valued at RM 500,000 ($105,000) or less will benefit from a total Stamp Duty exemption until 2025.
- Increased Stamp Duty for foreigners: Starting January 1st, 2024, foreigners will face a property tax in Malaysia at a flat rate of 4% Stamp Duty on property transfers, regardless of the property’s value.
- Transfer between loved ones: Instead of the previous variable rate, a fixed fee of RM 10 ($2.10) will apply for transfers made through wills, Faraid (Islamic inheritance), or the Distribution Act 1958. This change in the property tax in Malaysia aims to streamline the process for beneficiaries receiving property from their loved ones.
2. Loan Agreement Stamp Duty
Loan Agreement Stamp Duty is another property tax in Malaysia that is applied to loan agreements. A loan agreement is a formal contract that outlines the terms of a loan between two parties. This document is evidence of the loan, preventing it from being misconstrued as a gift. A Malaysian property tax in the form of Stamp Duty is a tax levied by the government on these documents to ensure the legal validity and proper recording of the loan agreement.
Stamp Duty on loan agreements is capped at 0.5% of the total value of the loan. However, there’s a favorable provision for property tax in Malaysia for unsecured loans. Unsecured loans are loan agreements without any collateral (unsecured) and are repayable in a single lump sum or on demand. Unsecured loans have a reduced Stamp Duty rate of 0.1%. Moreover, Stamp Duty on foreign currency loan agreements in Malaysia is typically limited to a maximum of RM 2,000 ($420). Stamp Duty for loan agreements is paid at any stamp office in Malaysia. You can search for the nearest stamp office on the Inland Revenue Board (IRB) website.
3. Cukai Taksiran
Cukai Taksira, or Cukai Pintu, are terms used to refer to a Property Assessment Tax in Malaysia. This type of property tax in Malaysia is a local land tax levied on property owners to fund essential public services and infrastructure. All property owners pay this property tax in Malaysia since Malaysian properties are subject to Assessment rates, regardless of property type (residential, commercial, industrial). Moreover, the property owner, not the tenant, is responsible for paying the assessment rate in Malaysia.
Property Assessment Tax in Malaysia is calculated based on the estimated annual rental value of the property. Furthermore, Assessment fees in Malaysia may differ between states and localities, with the general rate being around 2-7% of that value. This value is also affected by the property’s size and type. The Assessment rate in Malaysia is typically due on the last days of February and August. This schedule allows for semi-annual payments covering the first and second halves of the year. However, specific payment deadlines may vary between different states.
You can personally pay Assessment fees in Malaysia at the Local District Council Office. To find the location of your local district council office, you can check the Inland Revenue Board (IRB) website. Furthermore, post offices in Malaysia accept Cukai Taksiran payments. It can also be paid through banking services or designated government portals like Pos Malaysia for more convenient payment of property tax in Malaysia.
4. Cukai Tanah
Quit Rent (Cukai Tanah) is one of the types of taxes in Malaysia for real estate properties. It is a land tax in Malaysia levied on property owners by the local governments. It is a fee for the right to occupy and use the land on which the property is built. As a property owner, you must pay Quit Rent each year, regardless of whether you occupy or rent out the land. All property owners, including those with residential and commercial properties, must pay Quit Rent due annually, with the deadline varying by state but often falling around May 31st.
Quit Rent is the property tax in Malaysia calculated based on the property’s size and a specified rental rate per square foot. To check the Quit Rent rates for your property, you can contact the Land Office (Pejabat Tanah Dan Galian) in the specific Malaysian state. The Land Office can provide the particular rates and any recent changes. You can pay Cukai Tanah at the Land Office, any authorized banks, and through online banking platforms or designated government portals like Pos Malaysia.
5. Cukai Petak
Parcel Rent (Cukai Petak) is another property tax in Malaysia previously under Quit Rent. Cukai Petak is a land tax in Malaysia levied explicitly on the owners of stratified properties such as apartments, condominiums, and townhouses. Previously, Quit Rent for these properties was charged to the Joint Management Body (JMB), which then passed the cost on to individual parcel owners through maintenance fees. However, in 2018, Selangor introduced Parcel Rent as a separate land tax in Malaysia. Penang followed in 2019, and Kuala Lumpur in 2020.
The introduction of Parcel Rent as a property tax in Malaysia aimed to streamline the selling and transferring of strata properties. Under the previous system, unpaid Quit Rent by other parcel owners could hinder the sale or transfer of a specific unit. With Parcel Rent, the Land Office can directly monitor individual defaulters, ensuring that the sale or transfer of a property is not delayed due to others’ non-payment. Now, parcel owners directly pay Cukai Petak to the relevant local authority instead of going through the JMB.
6. Real Property Gains Tax
Another property tax in Malaysia that the Inland Revenue Board of Malaysia manages is the Real Property Gains Tax (RPGT) under the Real Property Gains Tax Act of 1976. When someone buys property in Malaysia, the “gain” or profit from that sale is chargeable of RGPT. Real Property Gains Tax in Malaysia is imposed on sellers or disposers in the year the disposal occurs from the date of property acquisition. Both residents and non-residents in Malaysia are taxable on the gains from disposing of chargeable assets located in the country, including individuals, companies, partnerships, organizations, trustees, and other taxable entities. You can pay RPGT personally at any authorized bank or the IRBM Revenue Management Centers. You can also make online payments using the e-TT system of the Inland Revenue Board (IRB) MyTax portal.
Real Property Gains Tax rates
Below are the RPGT rates for specific individuals and entities based on the Schedule 5 RPGT Act:
| Disposal period | Disposer/Rates | ||
| Citizens and permanent residents | Companies incorporated in Malaysia, trustees of a trust, or societies registered under the Societies Act 1966 | Non-citizen and non-resident individuals, companies not incorporated in Malaysia, or executors of a non-resident and non-citizen deceased person | |
| Within three years | 30% | 30% | 30% |
| In the 4th year | 20% | 20% | 30% |
| In the 5th year | 15% | 15% | 30% |
| In the 6th year and subsequent years | 0 | 10% | 10% |
Frequently Asked Questions (FAQs)
What is Quit Rent in Malaysia?
Quit Rent, also known as Cukai Tanah, is a property tax in Malaysia imposed on property owners. It’s a fee paid to the government for the right to occupy and utilize the land on which your property is built.
What is the difference between Quit Rent and Assessment?
The difference between Quit Rent and Assessment is the purpose of each property tax in Malaysia. Quit Rent is a general tax for government revenue, while Assessment is a local tax for funding specific services in the area where the property is located.
What is the tax for selling a house in Malaysia?
Real Property Gains Tax (RPGT) is the tax for selling a house in Malaysia. This house tax in Malaysia is imposed on the profit you make from selling a house. Malaysian citizens and permanent residents pay rates ranging from 0 to 30%, depending on the year of disposal. Foreigners pay 30% for disposal within five years of ownership and 10% for six and subsequent years.
How much is the assessment rate in Malaysia?
Assessment rates (Cukai Taksiran) in Malaysia vary depending on several factors, including property location, type, size, and land value. To determine the specific assessment rate for a property, contact the local council nearest to the property or refer to the relevant government website.
Is rental income taxable in Malaysia?
Yes, rental income is generally taxable in Malaysia. Individuals and companies earning rental income from properties in Malaysia are subject to income tax.
How much is the rental income tax in Malaysia?
Rental income tax in Malaysia is progressive. Depending on your overall taxable income, rates will differ, which includes your rental income and any other income sources. The tax ranges from 0 to 24%, depending on your tax bracket.
How much annual income is taxable in Malaysia?
Annual income exceeding RM 50,000 ($10,500) is taxable in Malaysia.
How much is the agent fee for selling a house in Malaysia?
The agent fee for selling a house in Malaysia is typically between 2% and 3% of the property’s selling price. The Malaysian Institute of Estate Agents (MIEA) caps this fee at 3%.
What is Real Property Gain Tax in Malaysia?
Real Property Gains Tax (RPGT) is a property tax in Malaysia imposed on the profit or gain realized from the disposal of chargeable assets such as houses, commercial buildings, farms, and vacant land.
How much is Real Property Gains Tax in Malaysia?
Real Property Gains Tax rates in Malaysia vary depending on the type of taxpayer and the year of the property disposal from when it was acquired. Malaysian citizens and permanent residents pay RPGT ranging from 0 to 30%. Companies incorporated in Malaysia, trustees of a trust, or societies registered under the Societies Act 1966 pay 10% to 30%. Non-citizen and non-resident individuals, companies not incorporated in Malaysia, or executors of a non-resident and non-citizen deceased person pay rates between 10% and 30%.
