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 In Malaysia, property owners are required to pay two types of property taxes: Assessment Tax and Quit Rent. These taxes are imposed by the local authorities and state governments and are essential for the upkeep of public infrastructure and services.

1. Assessment Tax (Cukai Pintu)

The Assessment Tax is an annual tax levied by the local councils (Pihak Berkuasa Tempatan, PBT) based on the estimated annual rental value of the property, regardless of whether it is rented out or owner-occupied.

How It’s Calculated: The tax is typically calculated as a percentage of the annual rental value of the property, which is an estimate of how much rental income the property could generate if leased. The percentage rates can vary depending on the local council and the type of property, such as residential, commercial, or industrial.

For example, residential properties may have rates ranging between 4% to 10%, while commercial properties may have higher rates ranging between 6% to 12% of the estimated rental value.

Payment Frequency: Assessment Tax is usually paid biannually (twice a year) in some areas, or annually in others, depending on the local council. Property owners will receive a bill from the local council, specifying the amount owed and the due date.

Penalties for Late Payment: If the tax is not paid by the due date, the local council may impose fines or interest for late payment. Continuous failure to pay may lead to legal action, including the property being seized by the local authorities.

2. Quit Rent (Cukai Tanah)

The Quit Rent is an annual land tax imposed by the state government on property owners, based on the size of the land that the property occupies. It is mainly applicable to landed properties, such as houses, bungalows, and commercial buildings.

How It’s Calculated: Quit Rent is typically calculated based on the size of the land, measured in square meters or acres, and the rate per square foot or square meter as determined by the state government. This rate may vary from state to state. Generally, it’s a nominal fee, often ranging from RM0.50 to RM2 per square meter.

Payment Frequency: Quit Rent is paid annually to the state government. Property owners receive a bill indicating the due amount and payment deadline. The payment is usually straightforward, and can be done via bank transfer or at the state land office.

Penalties for Late Payment: Similar to Assessment Tax, failure to pay Quit Rent on time can result in penalties, including fines or additional interest charges. Persistent non-payment could result in the state government issuing a notice of seizure against the property.

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3. Real Property Gains Tax (RPGT)

In addition to annual property taxes, Real Property Gains Tax (RPGT) is a tax imposed on the profit made from selling a property. RPGT applies to both Malaysian citizens and foreigners but varies depending on the duration of property ownership and whether the seller is a local or a foreigner.

Rates for Malaysian Citizens:

Within 3 years: 30%

4th year: 20%

5th year: 15%

More than 5 years: 0%

Rates for Foreigners:

Within 5 years: 30%

More than 5 years: 10%

 

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4. Other Local Levies

In some regions, property owners may also be subject to additional levies, such as Service Charges for properties in stratified developments like condominiums or apartments. These charges cover the maintenance of common areas, security, and other shared facilities.

Conclusion:

In Malaysia, property tax obligations for homeowners include Assessment Tax, calculated based on the property’s annual rental value, and Quit Rent, a land tax based on the size of the land. These taxes ensure local councils and state governments have the funds needed to maintain infrastructure and provide services. It's important for property owners to pay these taxes on time to avoid penalties. Additionally, homeowners should be aware of Real Property Gains Tax (RPGT) when selling a property, as it impacts profits from the sale.

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