Quick Guide for Property Taxes

Types of Property Taxes
Property taxes are the responsibility of homeowners and it certainly helps new homebuyers to know what taxes they have to pay to buy and own a property.

Here’s an easy guide on property taxes you can share with your clients:

Cukai Taksiran/Cukai Pintu (Property Assessment Tax)

This cukai is imposed on by a local council (Majlis Perbandaran) and based on the estimated gross annual rental value of the property and multiple by a set of rates (determine by the respective local council). The rates depend on the type of property – commercial property incurs a higher rate than residential property.

Revenue collected from this cukai is used to maintain and construct public infrastructure – e.g. roadworks, drain works, bulbs for street lamps etc.

Homeowners pay this tax in two instalment every year. Generally, residential property owners pay a rate of 4% of the estimated annual rental value while commercial property owners pay a rate of 10%.

Cukai Tanah (Quit Rent)

Property on freehold or leasehold land need to pay cukai tanah to the state’s land office before May 31, every year. This tax is about RM0.35 psf and RM0.325 psf in Kuala Lumpur and Petaling Jaya respectively.

For strata property, this is paid to the joint management body or the management corporation, who then submits it to the land office. However, there has been some controversy over this approach since not every property owner in a strata property will pay.

Starting June, the Selangor Land and Mine Department started charging quit rent to strata property owners instead of the building management. This new approach started in Shah Alam and will, hopefully, extend to other areas soon.

Taxes incurred when transacting property

Property agents are probably very familiar with the fairly costly stamp duty – imposed on the Sales and Purchase Agreement, Memorandum of Transfer and loan documents – and real property gains tax (RPGT).

RPGT is only imposed if property is sold within a certain number of years and only if profit is made. However, do remember that Malaysians are entitled to a RPGT tax exemption once a lifetime but only for ‘private residences.

The sale and purchase of commercial properties no longer incur the Goods and Services Tax (GST) since it was replaced by the Sales and Service Tax (SST).