What is the Property Tax Rate in Malaysia?

What is the Property Tax Rate in Malaysia?

How is property tax determined for foreigner buying property in Malaysia? Surprisingly, both foreigner and local will be imposed the same property tax rate effective from 1 Jan 2010 as according to the announcement of latest Budget 2010 Malaysia by government.

Real Property Gains Tax (RPGT) at a fixed rate of 5% will be imposed on the gains from the disposal of real property for all categories of owners. What is Real Property Gains Tax?

REAL PROPERTY GAINS TAX ACT 1976 (SCHEDULE 5)

RPGT is a tax levied by the Inland Revenue Board (IRB) on chargeable gains derived from the disposal of real property. This tax is provided for in the Real Property Gains Tax Act 1976. The tax is levied on the gains made from the difference between the disposal price and acquisition price. Source: Valuation and Property Services Department, Ministry of Finance Malaysia

RPGT EXEMPTION – EFFECTIVE FROM 1 APRIL 2007

With effect from 1 April 2007, RPGT would not be imposed on gains made from the disposal of real property. The Real Property Gains Tax Exemption Order was gazette as P.U. (A) 146 on 1 April 2007, which excludes the application of all the rules of the Real Property Gains Tax Act. Source: Jabatan Penilaian Dan Perkhidmatan Harta Malaysia

RPGT 5% FLAT RATE – EFFECTIVE FROM 1 JAN 2010

In the Budget 2010 presentation, the Government proposed that real property gains tax at a fixed rate of 5% be imposed on the gains from the disposal of real property effective Jan 1, 2010. The Real Property Gains Tax (Exemption) Order 2009 will be gazette as soon as possible and is effective Jan 1, 2010. Source:Datuk Seri Ahmad Husni Hanazdlah, Second Finance Minister of Malaysia

Impact of 5% RPGT on Property Investment in Malaysia

New fixed rate of 5% Real Property Gain Tax (RPGT) has been proposed in Budget 2010 presentation recently. It will be implemented start from 1st January 2010. So, what are the impacts of 5% RPGT on property investment in Malaysia?

FOR HOME BUYER WHO,

Scenario 1: Buying New House from developer

§  If buying for own stay, you are not really affected as you may notice the developer and banker still offering attractive packages for new property

§  If buying for investment purposes, at least you are now aware about the 5% RPGT and it should be taken into consideration.

Scenario 2: Buying Second Hand house from sub-sales market

§  As a buyer, you are not affected directly because the RPGT will be imposed only on the gains from the disposal of the property for seller.

§  However, it has a minor impact on sub-sales market. Sellers start to hold back their selling plan due to the changes and uncertainty. Both seller and buyer are now in the ‘wait-and-see’ mode, hope for good news from Government of Malaysia.

FOR HOME SELLER WHO,

Scenario 3: Selling their house bought from developer or sub-sales market within short period (5 years, 3 years or earlier)

§  I think it is fair for Government to impose tax on those Investors who are making money from their property investment at a reasonable rate.

Scenario 4: Selling their house which has been bought/built for own stay many years ago (20 years, 30 years or even longer time)

§  RPGT was introduced mainly to prevent the property investor over speculates the market and cause bubble. Therefore, it is not fair to impose RPGT on home seller who bought their house thirty years ago. Some of them bought for own stay, not for investment.

§  Generally, most of the property experts believe the sub-sales market will be slow down for this coming few months but for short term only.

Well, don’t be surprise; anything can be changed over the night in Malaysia. Just imagine, 30% of RPGT was imposed on foreigner few years back, and then become 0% after announcement of RPGT Exempted started from 1st April 2007, but now 5% of RPGT is coming back. The inconsistent policies of RPGT have confused our foreigner investor and affected their confidence to invest in Malaysia