Part 2: Buying and Selling a House in Malaysia

In this article, we will discuss the general overview of the additional costs that every homebuyer must prepare and expect before they set their foot on buying a property in Malaysia. These costs are payable to the government body and, of course, to the lawyer for their services, from preparing the Sale and Purchase Agreement and loan documents until the selling and buying transaction is completed.

Part 1 of Buying & Selling a House in Malaysia covers Eligibility, Title, Financing and Documentation/Procedures.

Stamp Duty

The Stamp Act 1949 provides that stamp duty is payable on the instrument of transfer based on the higher of the purchase price of the property or its market value, per the following scale:

Effective from January 1st, 2021, the Malaysian government granted a total exemption of stamp duty for first-time home buyers with the following conditions:

• Property must not exceed RM500,000
• The Sale and Purchase Agreement must be signed between 01/01/2022 and 31/12/2025
• The buyer has never bought or acquired any property through any means in the past
• For this exemption, the property must either be a house or a condominium or an apartment or a flat and bought with the intention of it to be a “dwelling house.”

Real Property Gains Tax (“RPGT)

The Real Property Gains Tax Act 1976 provides that both vendor and purchaser must complete and file Form CKHT 1A and Form CKHT 2A, respectively. Section 218 of the RPGT Act also requires the purchaser to retain a sum of 3% of the total purchase price and pay it to the Director General of the Inland Revenue Board within 60 days from the date of the SPA or the date of the state authority’s consent (if applicable).

Where the Vendor is not a Malaysian citizen or a permanent resident (“PR”) of Malaysia, the sum to be retained is 7% of the total purchase price. Such a sum is typically retained from the deposit sum.

There are certain exemptions from RPGT available to a vendor. If an exemption applies, the vendor must sign the relevant forms for such exemption and provide a copy to the purchaser, who will then not retain any money from the purchase price for payment of the RPGT.

The applicable RPGT rates calculated on taxable gains from the disposal are set out in the following table.

Some specific exemptions are noted below:

1. Once in a lifetime exemption of gains from the disposal of 1 private residence by an individual who is a Malaysian citizen or PR
2. Gains from the disposal of a property after the 5th year of its acquisition, at a consideration of not more than RM200,000 by a Malaysian citizen or PR are exempted
3. Property that is transferred within the family, either between a husband and a wife, parent and a child or grandparent and grandchild, is exempted from RPGT

*Rates of RPGT and its exemption have undergone several changes since its introduction, and the above information is updated as of 25 September 2022. Further details and latest updates can always be referred to Inland Revenue Board.

Legal Fees

Almost all property transaction involves a lawyer’s services; hence legal fees will be imposed for each transaction. The vendor and purchaser will appoint a lawyer to handle the sale or purchase of a house and prepare the financing documents.

Handling the sale or purchase of a house

The Solicitor’s Remuneration Order 2005 sets out the scale fees, i.e. the fee of a solicitor acting for a purchaser or a vendor in a sale and purchase transaction. The fee is the same, regardless of whom the solicitor is acting for. The scale fees are based on the higher of the purchase price or the market value as adjudicated by the stamp office, as listed below:

For each sale and purchase of the house, the solicitor can only charge either the vendor or the purchaser the scale fee based on the above sale but cannot charge both of them. This is because the solicitor can only act for one of the parties in the same transaction to avoid a potential conflict of interest.

Having said that, if the vendor is not represented by a solicitor in the transaction, the vendor’s solicitor may (unless there is a potential conflict of interest) assist them in the process of redeeming the house from their bank or other financial institution, to apply for the consent from the state authority and to prepare and submit their real property gains tax return. The solicitor may charge the vendor accordingly for those services.

Preparing financing documents

The Solicitor’s Remuneration Order 2005 sets out the scale fees to be charged by the solicitors for work preparing financing documents. The fees are based on the financing sum on the following scale:

With the information provided in this article, every homebuyer can roughly budget their expenses before deciding to own or sell a property.