Real Property Gains Tax by holding period, after the exemption.
RPGT payable
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Chargeable gain
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Exemption
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Taxable after exemption
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Net proceeds
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Your breakdown
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Item
Amount
Worked example
Take a citizen who sells a property for RM700,000 that was bought for RM500,000, with RM20,000 of incidental costs such as legal fees and agent commission. The chargeable gain is RM700,000 less RM500,000 less RM20,000, which is RM180,000. The individual exemption is the higher of RM10,000 or 10 percent of the gain, and 10 percent of RM180,000 is RM18,000, so RM18,000 applies. That leaves RM162,000 taxable. Since the property was held for 2 years, which is within the first 3 years, the rate is 30 percent, giving RPGT of RM48,600. After paying the tax, the net proceeds above cost are RM131,400. Had the owner held into the 6th year, the rate for citizens would fall to 0 percent and no RPGT would be due.
Step
Amount (RM)
Chargeable gain
180,000
Less exemption (10% of gain)
18,000
Taxable after exemption
162,000
RPGT at 30% (held 2 years)
48,600
Net proceeds above cost
131,400
How it is calculated
Malaysia has no general capital gains tax on shares for individuals, but gains on disposing of real property are taxed under Real Property Gains Tax, or RPGT. The chargeable gain is the disposal price less the acquisition cost and allowable incidental costs such as legal fees, valuation, and agent commission. Citizens and permanent residents then deduct an exemption equal to the higher of RM10,000 or 10 percent of the gain. The rate depends on how long the property was held: 30 percent within the first 3 years, 20 percent in the 4th year, 15 percent in the 5th year, and 0 percent from the 6th year onward. Foreigners and companies face different, generally higher schedules, with foreigners paying 30 percent within 5 years and 10 percent thereafter. The buyer's solicitor usually retains a portion of the price and remits it to the tax authority on account.
Frequently asked questions
How is RPGT calculated for a Malaysian citizen?
Take the chargeable gain (disposal price less acquisition cost and incidental costs), deduct the higher of RM10,000 or 10 percent of the gain, then apply the rate for your holding period: 30 percent within 3 years, 20 percent in the 4th year, 15 percent in the 5th year, and 0 percent from the 6th year onward for citizens and permanent residents.
Do foreigners pay RPGT at the same rate as Malaysian citizens?
No. Foreigners and companies face a different, generally higher schedule. Foreigners pay 30 percent within the first 5 years of holding and 10 percent in the 6th year onward, compared to citizens who pay 0 percent from the 6th year. Permanent residents use the same rate schedule as citizens. Confirming your residency status with a tax adviser before selling is important because the tax difference can be substantial on large gains.
What costs can I deduct when working out the chargeable gain for RPGT?
Allowable deductions include the acquisition price, legal fees paid on purchase, stamp duty, valuation fees, and estate agent commission paid on disposal. Renovation costs are not automatically deductible unless they are of a capital nature and you can document them properly. Keeping receipts for all these costs from the date of purchase reduces your taxable gain and can save a meaningful amount of tax.
Is there a once-in-a-lifetime RPGT exemption for residential property in Malaysia?
Yes. A Malaysian citizen is entitled to one lifetime exemption on gains from disposing a residential property, under an election made to LHDN. The exemption removes the entire gain from RPGT, which is especially valuable if the property has appreciated significantly. The exemption is available once per individual, so it is worth reserving for the disposal with the largest gain.