Malaysia is home to some beautiful places to live, in vibrant Kuala Lumpur and further afield as well. It could be the perfect place to set up your new home. Slightly different rules apply for foreigners buying property in Malaysia, but it’s certainly possible to do.
Buying property always comes with tax implications though. Here’s a look at what taxes you’ll have to pay if you buy, sell or simply own property in Malaysia.
Property tax is any tax paid to the government, state or local authority because of property that you own, buy or sell. This includes taxes on the sale of a property and also taxes paid each year.
In Malaysia, there are a variety of property taxes to pay for both buyer and seller.
You have to pay property tax if you buy or sell a property in Malaysia, and owners also have to pay two taxes on a recurring yearly schedule.
There are a few different rules for foreigners, as outlined below - but you do have to pay, whether you’re Malaysian or not.
In general, foreigners are allowed to buy Malaysian property, although each state sets a minimum purchase price so that they can only invest in property if they pay more than a certain amount. The amount varies between RM 400,000 and RM 2,000,000.
Malaysian property taxes can be broken down into two categories:
- Sales taxes
- Maintenance taxes
This article will look at each tax in these two categories in turn.
There are just two principal sales taxes in Malaysia:
- Stamp duty
- Real property gains tax
Stamp duty is a tax frequently paid on the sale of property. Some form of stamp duty exists in most countries.
- This tax is usually paid by the buyer.
- It’s paid on either the sale value or the official market value - whichever is higher.
- The rate is set progressively: you pay 1% on the first RM 100,000, then 2% up to RM 500,000, and 3% above that.
- You also have to pay stamp duty on a bank loan, if you take one out when you buy the property. The rate you pay on the loan is 0.5%.
You don’t have to pay capital gains tax in Malaysia, but you do have to pay a specific tax on gains from property.
- If you’re not a Malaysian citizen, the rate is 30% if you’re selling a property within 5 years, or 5% if you’ve owned it for longer than that.
- For Malaysian citizens and permanent residents - and also for companies - the rate is 30% if you’re selling within 3 years, 20% within 4 years and 15% within 5 years. Individuals are exempt if they’ve owned the property for more than 5 years, while companies pay 5%.
- The tax is charged on the net gain, so you subtract the price for which you bought the property from the sale price. Renovation costs and the like can also be deducted.
- Individuals are exempt if they sell to close family members.
- And individuals can claim an exemption of either RM 10,000 or 10% of the net gain - whichever is higher.
|Any property||Buyer||Seller||Malaysian citizen, permanent resident||Foreigner, non-permanent resident|
|Stamp duty||✓||✓||Progressive rate, 1%- 3%||Progressive rate, 1%- 3%|
|Real property gains tax||✓||✓||Sliding scale, 30%- 0% of profit||30% or 5% of profit|
If you own property in Malaysia, you’ll find that you have to pay two taxes on a recurring basis:
- Assessment tax
- Quit rent
Additionally, if you rent out a property then you also have to pay income tax on the rent you receive.
This tax is known in Malaysia as cukai pintu.
- It’s a tax based on the rental value of a property, paid by the owner.
- It’s paid to the local authorities, who set their own rate, but it’s most often around 4% of the rental value.
- The rental value of the property is calculated according to the property type and location.
- It can be paid in two installments each year, due at the end of February and the end of August.
The curiously named quit rent is known as cukai tanah.
- Quit rent is a land tax paid yearly by the owner before the end of May.
- It varies according to the type and size of the land - it tends to be set at a given rate per square foot.
- It’s levied by each state’s government, so the rate may also vary from place to place.
- It often works out at less than RM100 per year.
Though not strictly a property tax, property owners should also be aware that they do have to pay tax on money they make from renting out a property.
If you’re a foreigner, the rate depends on whether or not you’re resident in Malaysia. If you’re a foreign resident, which means you’ve been there for more than 182 days in the year, you pay between 0% and 28% tax on rental income. If you’re not a resident and not Malaysian, you pay a flat rate of 28%.
(Source 3 January 2018)
|Any property||Rented out property only||Malaysian citizen, permanent resident||Foreigner, non-permanent resident|
|Assessment tax||✓||~ 4% of rental value||~4% of rental value|
|Quit rent||✓||Varies, may be less than RM100||Varies, may be less than RM100|
|Income tax on rent||✓||0%- 28%||28%|
Buying or selling property always comes with more than just taxes - you’ll have many other expenses to deal with too, and the precise nature of these will vary a lot depending on the nature of the transaction. Here are just a couple more to look out for.
You’ll very likely have to pay an attorney to sort out all the documentation that goes with buying a property. There are fixed rates for legal fees based on the purchase price: it’s 1% on the first RM 150,000, and steadily lower percentages as the price increases.
Buyers might also have to pay a valuation fee if they’re not buying from a property developer. It’s structured like the legal fees: you pay 0.25% on the first RM 100,000 and then gradually lower percentages on higher prices.
- Be sure to check your residency status carefully. If you count as a permanent resident in Malaysia, you’ll get preferable rates on a couple of the above taxes.
- When working out real property gains tax, do include all your expenses on the property.
- You can also deduct expenses from rental income tax, but only for expenses directly related to renting the property out. Check with your local authority, but this should include both assessment tax and quit rent.
- Malaysians are allowed to claim one tax exemption in their lifetime, which they may claim on selling a private residence.
Various extra exemptions and deductions have recently been proposed by the Malaysian government to try and stimulate the housing market, so look out to see if these come into force in 2018:
- A few stamp duty exemptions have been proposed, for loan agreements and abandoned projects.
- Malaysian resident landlords: a 50% tax exemption is proposed on rental income, taking up to RM 2,000 out of tax.
Each tax has its own rules, so you should confirm with your attorney about when sales taxes are due. You can also check the Inland Revenue website for official details about paying your Malaysian taxes.
It’s possible to pay various taxes through the Inland Revenue website, which has sections dedicated to stamp duty, real property gains tax and of course income tax.
You can calculate your stamp duty online with an official tool. You’ll need to know the property value to do so.
The availability of an online payment system means that paying property tax need not involve too many special trips to local offices. But if you’re not always in Malaysia, it still might be a challenge to make the payments. International money transfers made using a bank can be very expensive, with the banks charging as much as 4-5% markup on the transaction. They can also take a long time to come through.
TransferWise can help with this. Only ever using the mid-market exchange rate, which is the only one it’s fair to use, TransferWise ensures more of your money makes it to its destination. And it only ever charges one low fee, stated upfront.
So whether you’re paying a bill directly (make sure the payee accepts third-party payments first, and what reference they need) or simply transferring money into your Malaysian bank account, TransferWise may well be a cheaper option than a bank or a traditional money transfer service. Take a look now and see if you could save on your transfer.
Property tax can be a complicated affair, which is why it pays to know the rules. Good luck with your Malaysian property!
|This publication is provided for general information purposes only and is not intended to cover every aspect of the topics which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content is the publication is accurate, complete or up to date.|
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