In Malaysia, property transactions are subject to several forms of taxation imposed by the government. Two of the most known taxes involved in the transfer and disposal of real property are Stamp Duty and Real Property Gains Tax (RPGT). These taxes are governed by different legislation and serve different purposes in the Malaysian legal and taxation system.
Stamp duty is imposed on legal instruments that evidence property transactions, whereas Real Property Gains Tax is imposed on the profit derived from the disposal of real property. Both taxes play an important role in regulating property transactions and generating government revenue. Understanding how these taxes operate is essential for legal practitioners, property investors, and individuals involved in conveyancing transactions.
2. Stamp Duty in Malaysia
Stamp duty in Malaysia is governed by the Stamp Act 1949. It is a tax imposed on written legal instruments that document certain transactions, including agreements, transfers, and other legal documents. In the context of property transactions, stamp duty is most commonly imposed on instruments such as the Sale and Purchase Agreement and the Memorandum of Transfer.
Under Malaysian law, stamp duty is generally payable by the purchaser of the property. The duty must be paid before the instrument can be admitted as evidence in court or registered at the relevant land office. Documents that normally requires payment of ad volarem stamp duty shall be Memorandum of Transfer and Facility/Loan Agreement in a buy and sale of property transaction.
Ad Volarem shall mean duty assessed and payable base on valuation of the transaction. Eg, purchase price of the property and/or loan amount of your housing loan. It shall be payable within 30 days from the date of notice of assessment is issued by the tax department of Malaysia.
Basis of Calculation
Can parties suggest fixing a lower purchase price in Sale and Purchase Agreement to avoid the scheme of paying higher stamp duty? No, the answer is a BIG NO.
Stamp duty on the transfer of property is calculated based on the higher of the following values:
- The purchase price stated in the Sale and Purchase Agreement; or
- The market value of the property as assessed by the Valuation and Property Services Department (Jabatan Penilaian dan Perkhidmatan Harta).
This rule ensures that stamp duty cannot be avoided by undervaluing the property in the transaction documents.
Stamp Duty Rates (subject to amendment of laws from time to time.
Stamp duty for property transfers follows a progressive rate structure. The current standard rates for Malaysians are:
Property value
|
Stamp duty rate |
| First RM100,000 |
1% |
| Next RM400,000 |
2% |
| Next RM500,000 |
3% |
| Amount exceeding RM1,000,000 |
4% |
For example, if a property is valued at RM800,000, the stamp duty calculation would be as follows:
• First RM100,000 × 1% = RM1,000
• Next RM400,000 × 2% = RM8,000
• Remaining RM300,000 × 3% = RM9,000
Total Stamp Duty = RM18,000
This duty must be paid to the Inland Revenue Board of Malaysia (LHDN) before the instrument can be stamped and registered.
Purpose of Stamp Duty
The primary purpose of stamp duty is to tax legal documents and transactions, rather than the property itself. It also serves an administrative function, as stamped instruments provide evidence that the transaction has complied with statutory requirements. Failure to stamp an instrument within the prescribed period may result in penalties, which increase depending on the length of delay.
3. Real Property Gains Tax (RPGT)
Real Property Gains Tax is governed by the Real Property Gains Tax Act 1976 (Act 169). Unlike stamp duty, which is imposed on the transfer document, RPGT is imposed on the profit or gain arising from the disposal of real property. RPGT applies when a property owner sells or disposes of real property and makes a profit from the transaction. The tax is payable by the disposer (usually the seller).
Chargeable Gain
The amount of tax payable depends on the chargeable gain, which is calculated using the following formula:
Chargeable Gain = Disposal Price – Acquisition Price – Allowable Expenses
Where:
- Disposal Price refers to the price at which the property is sold.
- Acquisition Price refers to the price originally paid for the property.
- Allowable Expenses include certain incidental costs related to the acquisition and disposal of the property.
Examples of allowable expenses supported with invoices and proof of payments shall include:
- Legal fees
- Stamp duty paid during purchase
- Valuation fees
- Advertising costs for the sale
- Real estate agent commissions
- Renovation and enchancements costs that increase the value of the property
These deductions reduce the amount of chargeable gain and therefore reduce the RPGT payable.
RPGT Rates
The RPGT rate depends on the holding period, which refers to the length of time the property is held before disposal. For Malaysian citizens and permanent residents, the typical rates are:
| Holding Period |
RPGT Rate (Citizen / PR) |
| Within 3 Years |
30% |
| 4th Year |
20% |
| 5th Year |
15% |
| 6th Year and above |
0% |
For companies and non-citizens, the rates may differ and are generally higher. The rationale behind this structure is to discourage short-term property speculation and stabilize the property market.
RPGT Withholding Mechanism
Under Section 21B of the RPGT Act 1976, the purchaser is required to retain a portion of the purchase price (usually 3% of the purchase price) and remit it to LHDN as a withholding sum within 60days from date of disposal. This ensures that the disposer fulfils their RPGT obligations. If the actual RPGT payable is less than the retained amount, the disposer may apply for a refund from LHDN.
However, you may qualify for exempting yourself from paying the RPGT in the following events:-
- Private residence exemption, which is only applicable once in lifetime for Malaysian;
- Transfer by way of gift between spouse, parents and children;
- Selling at loss and/or zeroised margin of earnings.
4. Key Differences Between Stamp Duty and RPGT
Although both taxes relate to property transactions, they differ significantly in their nature and purpose.
| Item |
Stamp duty |
RPGT |
| Governing Law |
Stamp Act 1949 |
Real Property Gain Tax Act 1976 |
| Purpose |
Tax on legal instruments |
Tax on profit from property disposal |
| Person Responsible |
Purchaser |
Seller (Disposer) |
| Basis of calculation |
Property value or purchase price |
Gain derived from disposal |
| Payment timing |
Upon execution of transfer documents |
Upon disposal of property |
Stamp duty focuses on taxing the transaction document, while RPGT focuses on taxing the profit obtained from selling the property.
5. Conclusion
Stamp duty and Real Property Gains Tax are two essential components of the Malaysian property taxation framework. Although both taxes arise from property transactions, they serve different functions and are governed by different legislation.
Stamp duty, imposed under the Stamp Act 1949, is a tax on legal instruments used in property transactions, particularly the transfer of ownership. It is calculated based on the property value and is usually paid by the purchaser.
Real Property Gains Tax, on the other hand, is imposed under the Real Property Gains Tax Act 1976 on the profit gained from the disposal of real property. The tax is calculated based on the chargeable gain after deducting allowable expenses, and the rate depends on the holding period of the property.
A proper understanding of these taxes is crucial for legal practitioners and individuals involved in property transactions, as compliance with these requirements ensures the smooth completion of conveyancing processes and adherence to Malaysian tax laws.
Chieng & Lum Associates offers legal services across property, corporate, family law, probate, dispute resolution, and real estate transactions. Get in touch to discuss your legal needs.
Posted by Chieng & Lum Associates on 29 Mar 26
Malaysia