Malaysia Property

Capital Gains Tax

The Malaysian government recently launched a new initiative, "Malaysia: My Second Home"; to attract an international holiday home crowd. The carrot is a capital gains tax regime that levies a 5% tax if the property is held for five years (but 30% if the property is sold before).

Capital gains tax is charged in Malaysia at the following rates:

HOLDING PERIOD	TAX RATE
Up to 2 years	30%
2 years – 3 years	20%
3 years – 4 years	15%
4 years – 5 years	5%
Over 5 years	nil

Note: citizens and permanent residents are entitled to an exemption of RM5,000 (US$1,364) or 10% of the gain, whichever is higher.

When you sell your property you will be legally obliged to fill in the real property gains tax form [CKHT1] and every buyer must also fill in a similar form [CKHT2]. Your form must be submitted to the Inland Revenue Board within 30 days from the date of the signing of the agreement.

Stamp Duty
Every transfer of property in Malaysia attracts stamp duty. The stamp duty is based on the value of the property and is paid by the purchaser:

Value of Property	Stamp Duty

First RM100,000	1%
Next RM400,000	2%
Above RM500,000	3%

Inheritance Tax

There is no inheritance tax charged in Malaysia.

Other Taxes

There is no VAT in Malaysia, but a Government Sales Tax (GST) of 5% is charged on hotel and restaurant bills and on professional bills such as lawyers’ bills.

You could become a Malaysian taxpayer if income is obtained from rental earnings in Malaysia, however, there are many allowances which greatly reduce such tax liability. Development tax is currently payable at the rate of 4% on net income from business or property rental sources but the government plans to abolish this tax in stages. Possessions imported for personal use when retiring to Malaysia, with very few exceptions, are exempt from tax.

Once a retiree has been out of the UK for the prescribed period, offshore investments become free of UK tax and are not taxed by the Malaysian tax authority. In fact, several people have calculated that their living expenses within Malaysia are far less then their tax savings making it, in effect, almost cost free to live here.