Being a property owner comes with responsibilities, and paying your land taxes is not one you can afford to neglect. Owners of qualifying property are legally liable to pay land taxes in the form of quit rent, parcel rent and assessment rate under the law. Failing to do so can result in severe consequences.
But don’t panic! We have a complete guide about these land taxes, how much they are and how you can pay them.
What is Quit Rent?
Quit rent is the annual land tax imposed on owners of any landed property, be it freehold or leasehold land. Respective state governments’ land offices assess the property, then charge the quit rent on owners. Quit rent is also known as cukai tanah.
How do people charge quit rent? Well, simply by multiplying the property’s size in square feet by a rental rate. For example, if the rate is at RM0.035 per square foot and your property size is 2700 square foot, then RM0.035 X 2700. Your quit rent would be RM94.50.
Please note that this is a simplified example as your actual quit rent might have different rates, depending on the state. Therefore, it is vital to find out what the specific rate is at your land office.
Does quit rent apply to stratified properties too?
Quit rent did apply to stratified properties such as apartments and condominiums until very recently. A master quit rent was charged to the Joint Management Body (JMB) which then divided it amongst the parcel owners and billed them individually with their maintenance fee.
For instance, if an apartment comprises 20 parcel units of the same size of 4500 square foot with a RM0.05 per square foot rate, the total quit rent would be RM225. After dividing it between the 20 parcel units, it would then be RM11.25.
However, the system imposed a new land tax in 2018 for strata properties, known as the parcel rent.
What is Parcel Rent?
The land office directly charges the parcel rent owners to pay for the building’s total square footage. If we continue with the previous example, it would mean that each strata property owner has to pay RM225, the full quit rent.
The reason for this change was to help ease the transfer and sale of strata property ownership. Under the previous system, owners would face difficulty selling or transferring their property ownership if the land office shows that other parcel owners did not pay their quit rents. Under the current system, parcel owners can quickly sell or transfer their property without complications from defaulters. This change came as a shock to many displeased parcel owners, despite how helpful this change was.
Penang implemented the new parcel rent system in 2019 while, Kuala Lumpur followed suit in 2020.
What are Assessment Rates?
To develop and maintain local infrastructure and services, local councils will charge and collect local land tax, which we refer to as assessment rates. For example:
- Collecting municipal garbage and recyclables
- Maintaining the streetlights
- Maintaining the cleanliness of public parks
Assessment rates are also known as cukai taksiran or cukai pintu.
All property owners, including residential and commercial, are liable to pay assessment rates. As long as you own a property, you must pay the assessment rates regardless of its occupancy.
However, you can apply for a refund and remission rate from your local authority if your property is unoccupied. However, you must notify the local authorities within seven days from the vacancy date or else the remission rates will apply.
Keep in mind that some states offer assessment rates exemptions for low and middle-cost housing. Check with your local authority to see if you qualify for these exemptions.
You can calculate assessment rates based on the estimated annual rental value of your property. The annual rental value depends on your property’s type and size, meaning a low-cost apartment charges less than a landed semi-detached house.
For example, the monthly rent of your landed double-storey semi-detached house is RM 5500. Hence, the annual rental would be RM66000.
The annual rental value of residential property in Malaysia is an estimate of 2 – 7%. For our example, let’s say the rate is 4% and so, 4% X RM66000 gives you RM2640. You would then owe the local council RM2640 annually. However, they collect assessment rates twice a year, so each payment would be RM1320.
The payment deadline can vary by state, but it is generally on the last day of February, and the last day of August. However, you do have the choice to make the full payment in advance before February; this helps avoid any possible penalties.
You can pay for your quit rent, parcel rent, and assessment rates at the post office or your local land office. For your convenience, you can pay through e-banking as well.
If you fail to pay your land tax, you will first receive a notice of payment, then a notice of arrears then a financial penalty. If you fail to pay your taxes again as well as the penalty fee, an arrest warrant can be issued. The local authorities then can seize any loose items from the property and auction the property.
Tenants should take extreme caution in making sure your landlord has paid for all the land taxes to avoid your belongings becoming liable for seizure in the event they are unpaid for.
If you are a property owner, then let Rumah-i helps you avoid any potential penalties. With our rental management service, we can help you manage your property and even research your potential tenants. Download our Rumah-i Partner app for more efficient listing and managing. Feel free to contact us for any enquiries.