Real Estate Tax Guide
Rising Global Consultants
In Malaysia, tax planning is crucial when investing in real estate.
Malaysian Real Estate Taxation
Stamp Duty
Stamp duty is a tax levied on transfer documents according to the First Schedule of the Stamp Act 1949. Buyers of real estate (whether individuals or companies) must pay stamp duty on the property transfer documents. If the property is purchased with a loan, stamp duty must also be paid on the loan agreement and mortgage documents. The stamp duty for property transfer documents is based on the transaction price or the current market value of the property (whichever is higher), ranging from 1% to 4%. Additionally, the stamp duty on loan agreements is 0.5% of the loan amount (a flat rate).
Real Property Gains Tax (RPGT)
In Malaysia, capital gains are generally not subject to income tax. However, gains from the sale of property located in Malaysia, or any interests, options, or other rights related to the property, as well as the sale of shares in property companies, are subject to Real Property Gains Tax (RPGT).
Land Tax (Cukai Tanah)
All landowners must pay land tax annually to the respective state governments, whether for freehold or leasehold property. This tax also applies to owners of strata-titled apartments, luxury apartments, and other real estate. The land tax rates may vary between states and even within the same state.
Personal Income Tax
In Malaysia, rental income from real estate is taxable under Section 4(a) (business income) or Section 4(d) (rental income) of the Income Tax Act 1967. If comprehensive and active maintenance or support services are provided for the property, the rental income is considered business income. However, if the property is rented out without providing maintenance and support services, the rental income is considered rental income (non-business income).
Selling residential property is a tax-exempt supply. If you are not required to register for GST, you do not need to register even if the sale price exceeds RM500,000.
Does selling property require GST registration?
The sale of non-residential property (commercial property) is a taxable supply. If you were not originally registered for GST, you may need to register if selling commercial property is considered a business activity. How to determine if you are engaged in a commercial transaction? Please refer to the following guidelines from the authorities.
The Malaysian Customs has updated DG Decision No. 4/2014, effective from October 28, 2015, clarifying the treatment of individuals supplying commercial property and whether they need to pay GST.
According to DG Decision No. 4/2014 (amended on October 28, 2015):
(1) GST applies to the supply of any taxable goods and services in Malaysia (Section 9 of the GST Act).
(2) A taxpayer is defined as anyone who is registered or may need to be registered under the GST Act if the total taxable supplies for the month and the next 11 months exceed RM500,000.
(3) Anyone who is not registered for GST but has the following real estate is considered to be engaged in business (effective from October 28, 2015):
More than 2 commercial properties;
Commercial land exceeding one acre; or
Commercial properties or land with a market value exceeding RM2,000,000.
(4) An individual mentioned in point (3) can register for GST if:
They intend to supply any commercial property or land;
The total value of such supplies exceeds the threshold (RM500,000) within 12 months.
(5) The term "at any time" in point (3) refers to any point in their lifetime (effective from October 28, 2015).
(6) An individual is considered to be running a business and supplying taxable services if:
They supply rental, lease, easements, occupation, or rental permits;
Their annual turnover exceeds the threshold within 12 months (effective from October 28, 2015).
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