In Malaysia, whether you buy or sell the property, you must face the property taxes.
When the time you become a homeowner, you must face these property taxes from buying, holding till selling of property. However, do you know how many property taxes are exist in Malaysia? Through your property agent and lawyer, you may know some. But, once you know the taxes you have to pay after buying a property, the number probably will scare you away. Therefore, before even plan to buying a property, you’ll need to do your homework – know all the property taxes and understand your financial status to see if you can afford for this number.
Here are simple guides for every Malaysians who planning to buy a property and understand not much about property taxes. Through this article, you will have a better idea of what are the most common taxes, under what circumstances they apply and how to calculate them throughout the different stages of buying, holding to selling of property.
➊ Stamp Duty
You will require a lawyer during the property purchase as there is a ton of paperwork involved and you need a lawyer to look out of those papers. Therefore, the first tax you will face is stamp duty and its really costly.
Stamp duty is imposed on the “instrument of transfer” related to the purchase or transfer of the property – its usually paid by the buyer. These include the Sales and Purchase Agreement (S&P) and Memorandum of Transfer (MOT), and even loan documents.
Besides, the Inland Revenue Board stipulates that the amount the stamp duty is levied upon the value of the property. The higher of the property value is, the higher the stamp duty charges.
Let’s take an example of the property valued at RM 600,000:
|Amount of Stamp Duty|
|First RM 100,000||1%||RM 100,000 x 1% = RM 1,000|
|Following RM 100,001 to RM 500,000||2%
|RM 400,000 x 2% = RM 8,000|
|Remainder afterRM 500,001||3%||(Based on RM 600,000 property value)(RM 600,000 – RM 500,001) x 3% = RM 3,000|
|Total Payable Stamp Duty||RM 1,000 + RM 8,000 + RM 3,000 = RM 12,000|
Hence, the total amount of stamp duty you have to pay is RM 12,000.
As mentioned earlier, stamp duty also imposed on the loan documents (if you taking up bank loan to finance the purchase), and you have to pay a 0.5% of the loan amount on top of that.
➋ Goods and Services Tax (GST) for Commercial Properties
A 6% GST is applicable when you buy a commercial property from the seller who is GST-registered.
Criteria of commercial property owners who have to be GST-registed:
➢ Own 2 or more commercial properties.
➢ Own a commercial property/ land valued at more than RM 2 million (based on market price).
➢ Own land larger than 1 acre.
➢ Earn more than RM 500,000 (total annual taxable supply) from the commercial properties owned (eg: renting).
For example, if you buying a shop lot at RM 500,000 from a seller who is GST-registered, you will be charged a 6% GST on that amount (RM 500,000 + 6% GST @ RM 30,000 = RM 530,000) which you have to pay for this total amount.
➌ Property Assessment Tax (Cukai Taksiran/Cukai Pintu)
Property assessment tax is a tax that imposed on every household to finance the maintenance and construction efforts of various public infrastructure around the neighborhood, town or city where the property is located.
These include the cost of cleaning and maintaining drains, road works to repair potholes, replacing broken street lamps and so on, The tax is payable to the local council of the area in which your property is located, such as Dewan Bandaraya Kuala Lumpur (DBKL), Majlis Bandaraya Petaling Jaya (MBPJ), Majlis Bandaraya Ipoh (MBI) and etc.
This type of tax is evaluated based on the annual rental value of a property set by the state government or local authority where the property is located. Rates are vary according to the type o property (such as residence, serviced apartment, flats, SOHO and etc), location, market rate and state of the property.
The calculation of property assessment tax as below (based on DBKL):
|Type of Property||Assessment Tax Rate||Monthly Rental Value||Annual Rental Value||Total Payable Property Tax per year|
|Serviced Apartment||7%||RM 2,000||RM 2,000 x 12 = RM 24,000||RM 1,680 per year|
|Landed Residence||4%||RM 3,000||RM 3,000 x 12 = RM 36,000||RM 1,440 per year|
|Flat||2%||RM 500||RM 500 x 12 = RM 6,000||RM 120 per year|
Another thing to remind you that property assessment tax is even imposed on the empty residential and commercial lands.
NOTE: Property assessment tax is payable in 2 installments, which are on February 28 or 29 for the first half of the year (January to June) and on/ before August 31 for the following half of the year (July to December).
➍ Quit Rent (Cukai Tanah)
Quit rent is applicable to land owners, either freehold or leasehold and is an annual tax payable to the state government of each individual state. This tax also applies on homeowners of apartments, condominiums and other property that under strata titles. The rates of quit rent may vary between respective states and even within the same state.
All payments of quit rent must be made on/ before May 31 every year. Individual landowners can pay directly to the Department of Director General of Lands and Mines via online banking while owners of strata titles will have to make payment to the Joint Management Body (JMB) and Management Corporation (MC) of their respective residences/ property. The JMB and MC will then submit the collective payment to the land office.
Let’s take a house measuring 40’ x 70’ or 2,800 sf as an example;
|Location||Rate of Quit Rent per year||Amount of Payable Quit Rent per year|
|Kuala Lumpur||RM 0.035 psf per year||RM 0.035 x 2,800sf = RM 98 per year|
➎ Real Property Gain Tax (RPGT)
If you sell your property within the certain years, RPGT will be imposed on the net chargeable gains that you get from selling it. Which is the amount of profit leftover after deducting permissible costs from the gross profit, such as legal fees, property agent fees, repair costs etc..
Besides, if you sell out your property at the same/ lower price that you purchased, you will then no need to pay for RPGT.
The RPGT was recently amended in the country’s 2015 Budget, whereby new rates are as follows:
|Disposal of property||Malaysia citizen & PR)||Non-Citizens & Non-PR||Companies|
|Disposal within 3 years from the date of property purchase||30%||30%||30%|
|Disposal in 4thyear||20%||30%||20%|
|Disposal in 5thyear||15%||30%||15%|
|Disposal in 6thyear and subsequent year||0%||5%||5%|
The calculation method as below;
|Rate Applicable||Price Purchased||Price Sold||Gross Profit||Net Chargeable Profit||Amount of Payable RPGT|
|15%||RM 300,000||RM 600,000||RM 300,000||RM 250,000||RM 250,000 x 15% = RM 37,500|
One thing to mention that every Malaysian are entitled to get tax exemption only once in an individual life time, but, this exemption is only applicable for the disposal of a “private residence”.
Last but not least, paying taxes are the responsibility of every homeowners. Therefore, before to get ready to own a property, you must know which taxes apply to your property, calculate how much tax you have to pay and who to pay to.