RPGT Exemptions in Malaysia: Seller Reliefs, Allowable Costs and Examples

RPGT exemptions in Malaysia can reduce the tax payable when a seller disposes of real property, but the relief depends on eligibility, allowable costs and proper filing. This guide narrows in on exemptions and deductions rather than the general RPGT calculation.

Introduction

This guide focuses on RPGT exemptions in Malaysia: the reliefs, deductions and filing details that can reduce a seller's Real Property Gains Tax exposure. It is written for sellers and agents who already understand the broad idea of RPGT and now need to know which exemptions may apply.

Use it alongside the broader RPGT guide when you need the exemption angle: private residence relief, family transfers, allowable expenses, losses, withholding and practical examples.

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How RPGT exemptions fit the legal framework

RPGT is governed by the Real Property Gains Tax Act 1976 (RPGTA 1976). The Inland Revenue Board (LHDN) administers and collects RPGT.

It applies to:

• Disposal of real property (land and any permanent structure on it)
• Disposal of shares in real property companies (a company where 75% or more of its total tangible assets consist of real property)

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2025 RPGT Rate Table

The rate depends on who the seller is and how long they held the property before disposal.

For Malaysian Citizens and Permanent Residents

| Disposal in Year | Rate | |---|---| | Year 1 (within 12 months of acquisition) | 30% | | Year 2 | 30% | | Year 3 | 30% | | Year 4 | 20% | | Year 5 | 15% | | Year 6 and beyond | 0% |

For Companies (including trustees)

| Disposal in Year | Rate | |---|---| | Year 1–3 | 30% | | Year 4 | 20% | | Year 5 | 15% | | Year 6 and beyond | 10% |

Note: Companies do not enjoy the 0% rate in Year 6 and beyond — a common misconception. Companies continue to pay 10% RPGT regardless of how long they hold the asset.

For Non-Citizens and Non-Permanent Residents

| Disposal in Year | Rate | |---|---| | Year 1–5 | 30% | | Year 6 and beyond | 10% |

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How to Calculate RPGT

The formula:

RPGT Chargeable Gain = Disposal Price − Acquisition Price − Allowable Expenses

RPGT Payable = Chargeable Gain × Applicable Rate

What counts as Acquisition Price

• Purchase price paid
• Legal fees, stamp duty, and agent commission on purchase
• Renovation or improvement costs (with receipts)
• Incidental costs of acquisition

What counts as Allowable Expenses

• Legal fees for the sale transaction
• Agent commission on the sale
• Advertising costs
• Any other costs wholly and exclusively incurred in the disposal

Example Calculation

A Malaysian citizen sells a property in Year 4 of ownership.

| Item | Amount | |---|---| | Disposal price | RM 750,000 | | Original purchase price | RM 480,000 | | Legal fees on purchase | RM 8,000 | | Renovation costs (with receipts) | RM 40,000 | | Agent commission on sale (3%) | RM 22,500 | | Legal fees on sale | RM 5,000 |

Acquisition Price: RM 480,000 + RM 8,000 + RM 40,000 = RM 528,000 Allowable Expenses on Disposal: RM 22,500 + RM 5,000 = RM 27,500 Chargeable Gain: RM 750,000 − RM 528,000 − RM 27,500 = RM 194,500 RPGT Payable (Year 4, 20% rate): RM 194,500 × 20% = RM 38,900

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Exemptions — Including the Ones Most Agents Miss

1. Once-in-a-Lifetime Private Residence Exemption

Malaysian citizens and permanent residents may claim an exemption on one disposal of a private residence in their lifetime. The property must have been used as the seller's primary residence.

This is the most widely known exemption, but the claim must be formally made — it is not automatic. File the election in the RPGT return (CKHT 1A).

2. RM 10,000 or 10% Low-Value Exemption

If the chargeable gain is RM 10,000 or less, or is less than 10% of the disposal price (whichever is greater), the seller is exempt from RPGT. This is a useful de minimis exemption for smaller transactions.

3. Disposal Between Family Members (Blood Line)

Transfers between husband and wife, parent and child, and grandparent and grandchild are treated as no-gain no-loss transactions — meaning no RPGT arises at the point of transfer. The recipient inherits the original acquisition price for future RPGT calculation.

4. Disposal Under a Will or Intestacy

Property transferred to a beneficiary under a will or through intestacy (no will) is similarly a no-gain no-loss transaction for RPGT purposes.

5. Compulsory Acquisition by Government

If your property is acquired compulsorily by the government or a statutory authority under the Land Acquisition Act 1960, the proceeds are exempt from RPGT.

6. Disposal at a Loss

If the disposal results in a loss (disposal price < acquisition price + allowable expenses), no RPGT is payable. The loss cannot, however, be offset against other income — it is an absolute loss for tax purposes.

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Withholding Mechanism — What Buyers Must Do

When a property is sold in Year 1–5 of ownership, the buyer is required to retain 3% of the total consideration (or 7% for non-citizens) and remit it to LHDN within 60 days of the disposal date. This is a withholding mechanism, not the final RPGT amount.

The seller subsequently files the RPGT return and either pays the balance or claims a refund if the withholding exceeds the actual tax.

Many agents forget to advise their buyer clients about this obligation. Failure to withhold and remit on time attracts penalties.

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Common Mistakes

• Not keeping renovation receipts: Renovation costs are allowable but must be documented. Cash receipts from contractors, properly dated, are acceptable. Undocumented renovations cannot be claimed.
• Forgetting to include agent commission on purchase: This is an allowable addition to the acquisition price and reduces your chargeable gain.
• Not filing the private residence exemption: The exemption is not automatic — if not claimed, RPGT will be assessed.
• Assuming Year 6 = 0% for companies: It is 10%, not 0%.

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For Agents

RPGT directly affects your seller client's net proceeds and their timeline decision. A seller on Year 5 considering whether to sell now or wait six months into Year 6 should be walked through this calculation — the difference between 15% and 0% on a large gain is material.

You are not a tax advisor, and you should not give specific tax advice. But knowing the framework, flagging the key exemptions, and recommending your client consult a tax agent or LHDN is part of professional service.

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Published on PropPlace.my — Malaysia's co-broking property marketplace for industrial, commercial, and land transactions.

Related RPGT guides

For the full tax framework, start with the RPGT Malaysia guide. You may also need the broader property costs and taxes guide when estimating net sale proceeds.