If you sell a property in Malaysia for a profit, the government takes a cut. This tax is known as the Real Property Gains Tax (RPGT). It was introduced to curb property speculation, ensuring that housing remains affordable for genuine buyers.
Whether you are "flipping" a house or selling your family home to upgrade, understanding RPGT is essential to calculate your actual net profit.
What is RPGT?
RPGT is a tax charged on the profit (gain) derived from the disposal of real property. The rate depends on:
- Who you are (Citizen, Permanent Resident, Foreigner, or Company).
- How long you have owned the property (Retention period).
RPGT Rates Table (Effective 2025)
| Retention Period (Years) | Malaysian Citizens & PRs | Foreigners & Non-Citizens | Companies |
|---|---|---|---|
| Within 1 Year | 30% | 30% | 30% |
| Within 2 Years | 30% | 30% | 30% |
| Within 3 Years | 30% | 30% | 30% |
| Within 4 Years | 20% | 30% | 20% |
| Within 5 Years | 15% | 30% | 15% |
| More than 5 Years (6th Year onwards) | 0% | 10% | 10% |
> Note: For Malaysian citizens, if you sell after the 5th year, you pay 0% RPGT. This is a significant incentive for long-term holding.
How is RPGT Calculated?
RPGT is calculated on the Chargeable Gain, not the total selling price.
Formula:
Chargeable Gain = Disposal Price - Acquisition Price - Allowable Expenses
- Acquisition Price: The price you bought it for.
- Disposal Price: The price you are selling it for.
- Allowable Expenses: Fees like legal fees, stamp duty, estate agent commission, and renovation costs (enhancements).
Example Calculation:
- Bought in 2020: RM500,000
- Sold in 2023 (3 years ownership): RM700,000
- Gross Profit: RM200,000
- RPGT Rate: 30% (Sold within 3 years)
- Tax Payable: RM200,000 x 30% = RM60,000
Exemptions
There are ways to legally avoid or reduce RPGT:
- Once-in-a-Lifetime Exemption: Malaysian citizens can apply for a one-time exemption for the disposal of a private residence.
- Family Transfer: Transfer of property between family members (Parent ↔ Child, Husband ↔ Wife, Grandparent ↔ Grandchild) by way of love and affection is 100% exempt.
- Low-Cost Housing: Disposal of low-cost, low-medium cost, and affordable housing priced below RM200,000 is exempt.
Conclusion
RPGT can take a significant chunk out of your profits if you sell too soon. Ideally, for Malaysians, holding a property for more than 5 years is the best strategy to maximize returns tax-free.
