Real Property Gains Tax (RPGT) in Malaysia: Complete Guide for Sellers

Real Property Gains Tax (RPGT) is a tax on the profit you make when you dispose of a property in Malaysia. It is levied on the chargeable gain — the difference between your disposal price and your acquisition price, after deducting allowable costs. Understanding RPGT before you sell can significantly affect your net proceeds.

Who Pays RPGT?

RPGT applies to:

• Malaysian citizens and permanent residents
• Non-citizens and foreign companies
• Companies incorporated in Malaysia

The applicable rate depends on the seller's residency status and how long the property has been held.

RPGT Rates (current reference)

For Malaysian citizens and permanent residents:

| Holding Period | RPGT Rate | |---|---| | Disposal within 3 years | 30% | | In the 4th year | 20% | | In the 5th year | 15% | | 6th year and beyond | 0% |

For companies incorporated in Malaysia, the current LHDN schedule is 30% for disposals within 3 years, 20% in the 4th year, 15% in the 5th year, and 10% from the 6th year onward.

For non-citizens and foreign companies, RPGT applies at higher rates across all holding periods, including 10% from the 6th year onward. Non-citizens and companies should obtain professional tax advice before transacting.

Note: RPGT rates have been subject to government amendments. Verify the current schedule with the Inland Revenue Board (LHDN) or a licensed tax advisor before signing.

What Is a Chargeable Gain?

Chargeable gain = Disposal price − Acquisition price − Allowable deductions

Allowable deductions include:

• Legal fees paid on purchase and sale
• Stamp duty on purchase
• Real estate agent commission
• Renovation costs that enhance the property (not repairs)
• Incidental disposal costs

Keep all receipts from the date of purchase. Without documentation, you cannot claim deductions, and LHDN will assess on the gross margin.

Exemptions

Several exemptions can reduce or eliminate your RPGT liability:

One-time residential exemption: A Malaysian citizen or permanent resident may claim an exemption on gains from the disposal of one private residential property once in a lifetime.

Low-cost housing: Gains from the disposal of low-cost and low-medium-cost housing may be exempt.

Transfers between family members: Transfers by way of gift to a spouse, parent, or child (excluding in-law) may attract reduced or zero RPGT in certain circumstances.

Compulsory acquisition: Properties disposed of under a government compulsory acquisition notice are exempt.

Practical Implications for Sellers

If you are selling within 5 years, factor RPGT into your negotiating position. For example, if your chargeable gain is RM100,000 and you are in your third year, RPGT liability is RM30,000. This reduces your effective net proceeds.

Sellers sometimes try to build RPGT costs into the asking price — but buyers will factor this into their offer. The most efficient approach is to time your disposal for year 6 or beyond where possible, or ensure you have documented all allowable deductions to reduce the chargeable gain.

How to File

RPGT is declared via Form CKHT submitted to LHDN. Key points:

• The seller must submit within 60 days of disposal (signing the SPA)
• The buyer is obligated to retain 3% of the disposal price and remit to LHDN on the seller's behalf
• The 3% retention is an advance against potential RPGT liability; any excess is refunded

Engage a tax advisor or licensed accountant if the transaction is complex.

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