Property taxes are taxes issued on a property owned by an individual. For a first time property investor, knowing all the types of taxes that will be issued to you when you buy a property may be a hassle. Here is a concise and general summary of several important property taxes that you need to pay in Malaysia.
Stamp Duty
Stamp duty is the tax placed on property documents during the sale or transfer of a property. This includes the stamp duty for the Sales and Purchase Agreement (SPA) of a property, Memorandum of Transfer (MOT) and Loan Agreement.
The Property Stamp Duty, aka – Memorandum of Transfer (MOT) is the first Stamp Duty that will be issued to an individual who purchases a property. It is calculated based on the purchase price of a property according to the Sales and purchase Agreement (SPA). In general, this tax is paid by a property buyer for the transfer of ownership of the property from the developer to the buyer. The tax issued is tiered, so property buyers will have to pay an increasing fixed percentage on the first RM100,000, then following RM500,000 and then the remaining amount that follows.
The SPA Stamp Duty is a nominal fee of RM10.00 charged for each copy of Sales and Purchase Agreement that is stamped.
Loan Agreement Stamp Duty is a fixed rate of 0.5%, from the full amount of the loan.
Real Property Gain Tax (RPGT)
Real Property Gains Tax (RPGT) is a form of Capital Gains Tax that is imposed by the Malaysian Government when property owners intend on selling their property. Property owners will have to pay taxes on the profits (gains) of their property, if they decide to sell their property.
If profits are made from the property, owners will have to pay the RPGT within 60 days of the sale. Initially, this tax only applied to individuals who sell their property within 5 years after the property is bought, but recent amendments in the law states that individuals who sell their property on the 6th year onwards will have to pay 5% from the profits made. The tax can be either paid directly by the owner of the property to the Inland Revenue Board (IRB) or a fee can be paid to the solicitors that are handling the sales of the property.
Quit Rent (Cukai Tanah)
Quit rent, or better known in Malaysia as cukai tanah, is a form of tax issued by the state government to individuals who own a piece of land. The quit rent amount varies, depending on the type and size (per square meter/foot) of the land, or the state government’s tax rate itself.
While quit rent is applied for landed properties, parcel rent is applied for strata properties. Both taxes are similar, where parcel rent is when property purchasers of strata properties pay tax for their own units.
Assessment Tax (Cukai Taksiran)
Assessment Tax, or Cukai Taksiran is a tax issued by the local district city hall (Majlis Perbandaran) to any land or property owners, which acts as funds to finance the maintenance of the infrastructures and amenities in the district. This tax is valued based on the rental value of the property multiplied by a fixed rate, ranging between 2% to 9%, depending on the type of property.
The Assessment Tax is issued twice a year, paid in two installments, between two periods: 1st January – 28th February & 1st July – 31st August.
