A Checklist of Taxes & Expenses for Foreigners Purchasing Malaysian Properties
1) Stamp duty for the Memorandum of Transfer “MOT” (one-off payment payable upon completion): The MOT is a legal document used to transfer the property’s ownership from the seller to the new owner. Its stamp duty rate is calculated on a tiered basis:
Here is a sample MOT stamp duty calculation for a RM1.5M property:
(First RM100,000 X 1%) + (Next RM400,000 X 2%) + (The following amount up to RM1M X 3%) + (Balance amount greater than RM1M x 4%)
= (RM100,000 x 1%) + (RM400,000 x 2%) + (RM500,000 x 3%) + (RM500,000 x 4%)
= RM1000 + RM8000 + RM15,000 + RM20,000
Or an even simpler way to calculate the MOT fee
a) RM24,000.- on the first RM1M of the purchase price
b) Plus 4% on the balance amount exceeding RM1,000,000
2) Real Property Gains Tax: This tax is payable when selling your property in the future
- Should you sell the property after 5 years from the date of purchasing*, capital gain tax is payable on 10% of the profit.
- Should you sell the property within 5 years from purchasing*, capital gain tax is payable on 30% of the profit.
*Note: the date of purchasing = date of signing the Sale & Purchase Agreement
Other One-off Expenses
3) Loan Agreement Legal Fee & Stamp Duty: This stamp duty is applicable for those who choose to obtain a mortgage loan. The loan agreement stamp duty is equivalent to 0.5% of the total loan.
4) Sale & Purchase Agreement Legal Fee Disbursement: For firsthand properties, the legal fee disbursement is subject to the price quoted by the developer’s legal representative.
5) Maintenance Fee (including sinking fund): This is the building management fee payable on a monthly basis for maintenance, repairs and upgrades. The sinking fund is a pooled payment between owners to be utilised for future large scale building repairs or upkeep – it is typically included in the maintenance fee.
6) Quit Rent: This is a form of land tax collected by the state government’s Land Office. The exact amount is based on the state government’s assessment.
7) Assessment Rates: This is also a land tax collected by local councils to develop and maintain infrastructure and services, such as road lighting, cleaning, and collecting of municipal wastes. The exact amount will be confirmed by the local council after the Certificate of Completion and Compliance (building completion) is released. The amount depends on the properties’ annual rent value which varies according to the size of the unit. The payment will be billed twice a year.
8) Fire Insurance: Under the Strata Titles Act, it is compulsory for the building management office to purchase fire insurance for the whole building. As an individual unit owner, you are required to pay the building management office his or her respective premium portion.
9) Rental Income Tax: Tax imposed on the profit you make on leasing out your property. For non-Malaysians, a flat rate rental income tax of 28% is charged. Rental income is valued on a net basis such that the net rental income can be reduced by deducting expenses. Expenses include Assessment Tax, Quit Rent, interest on home loan, fire insurance premium, expenses incurred on rent collection, expenses incurred on rent renewal, and expenses on repairs and property maintenance.
When purchasing firsthand properties, the developer will typically absorb the following fees as part of their sales package (subject to the developer’s sales package for a particular development):
1) Sale & Purchase Agreement (SPA) legal fees & loan legal fees: For firsthand properties, the legal fee disbursement subject to the price quoted by the developer’s legal representative
2) State Levy: For foreigner’s purchasing properties in Penang, 3% of the property price is payable within 30 days from the date of the State Consent Letter issued by the state authority.
3) State Consent Fee: Under the National Land Code 1965 (“Code”), a person may sell or dispose of his property to a foreign national only after the State Consent has been obtained. If a foreign national wishes to purchase a residential property in Malaysia, he must therefore make an application to the State Authority to obtain the State Consent before he completes the transaction. If this is not complied with, the sale or disposal can be rendered null and void.