If you are planning to sell property in Malaysia, one key issue to consider is
Real Property Gains Tax (RPGT) — a tax imposed on the profit made from the sale of property.
Understanding how RPGT works can help you plan your exit strategy, avoid unexpected costs,
and potentially reduce your tax exposure.
What Is RPGT?
RPGT is a tax charged on the profit (gain) made when disposing of real property in Malaysia.
It applies to the sale or disposal of:
- Residential property
- Commercial property
- Vacant land
The tax is governed by the Real Property Gains Tax Act 1976 and administered by the
Inland Revenue Board (LHDN).
Importantly, RPGT is not calculated on the full sale price. Instead, it is imposed only on
the net gain after deducting the original purchase price and certain allowable expenses.
How Is the Gain Calculated?
The basic calculation for RPGT is:
Sale Price
− Purchase Price
− Allowable Costs
= Taxable Gain
Allowable costs may include:
- Legal fees
- Stamp duty
- Real estate agent commissions
- Renovation or capital improvement costs
- Valuation fees
Maintaining proper documentation is essential in order to claim these deductions and minimise the
taxable gain.
Current RPGT Rates (2026)
The tax rate depends primarily on how long the property has been held before disposal.
For Malaysian Citizens and Permanent Residents
| Holding Period | RPGT Rate |
|---|---|
| Sell within 3 years | 30% |
| 4th year | 20% |
| 5th year | 15% |
| 6th year onwards | 0% |
This means that individuals who are Malaysian citizens or permanent residents will not pay RPGT if the
property is disposed of after the sixth year of ownership.
For Companies
Companies remain subject to RPGT even after the sixth year, generally at a rate of 10%.
For Foreign Owners
Foreign individuals and foreign companies are generally subject to the following rates:
| Holding Period | RPGT Rate |
|---|---|
| Within 5 years | 30% |
| 6th year onwards | 10% |
Retention Sum – What Sellers Must Expect
When a property is sold, the buyer is legally required to retain part of the purchase price and
remit it to LHDN within 60 days of the transaction.
This retention amount is:
- 3% for Malaysian individuals
- 7% for foreign individuals
- 5% for companies
This retention is not necessarily the final tax payable. It functions as an advance payment
towards RPGT, and any excess may be refunded after LHDN completes its assessment.
Common Exemptions
Several exemptions and reliefs may apply depending on the circumstances of the transaction.
Common examples include:
- Once-in-a-lifetime exemption for disposal of a private residence
- Transfers between spouses
- Transfers between parents and children
- Certain gifts or corporate restructuring exercises
Each exemption is subject to technical requirements and must be carefully documented.
Practical Planning Tips
Before selling property, it is worth considering several factors that may affect the tax payable:
- How long you have held the property
- Whether the private residence exemption has already been used
- The timing of the sale relative to holding period thresholds
- Availability of supporting documents for renovation or improvement costs
Seeking advice early can significantly affect the net proceeds from your property disposal.
Final Thoughts
Real Property Gains Tax is relatively straightforward in principle but can become technical in practice.
Small details — such as the documentation of renovation costs or the correct classification of the
disposer — can materially impact the tax payable.
If you are planning to sell property or restructure property assets in Malaysia, obtaining proper legal
advice beforehand can help ensure compliance and optimise your financial outcome.