Stamp Duty in Malaysia: All You Need to Know

by | i-Stories, Property Trend, Rental Trend

When evaluating all necessitated costs in real estate transactions, it’s vital not to omit stamp duty in Malaysia. After all, purchasing a property is not something to take lightly.

But not to worry; this guide explains what stamp duty in Malaysia is all about. And if you’re a first-time homebuyer, you might want to hear this!

What is Stamp Duty Malaysia?

Stamp duty is a government tax on legal documents that serve as proof of property transfers. For clarity, stamp duties are imposed on these instruments of transfer and not the transactions.

History books would tell you that governments and regulators established this tax form to raise funding for projects beneficial to the country and its subjects. Back then, they used physical stamps on transfer documents to prove its legality and payment of tax liability.

Stamp duty still exists in Malaysia today, notably divided into two categories:

  • Fixed Duties — The charged fees are at a set price, including stamps for individual policies and copies.
  • Ad Valorem Duties — The costs vary depending on the transaction value that legal documents represent. These taxes involve the value of a property transfer or loan agreement.

Ultimately, stamp duty could be applicable at a fixed tier for the instrument (Fixed Duties) and on a variable cost depending on the loan agreement’s value (Ad Valorem).

Rates of Stamp Duty in Malaysia

Rates of Stamp Duty in Malaysia

Stamp duties are based on specific tiers with different percentages for each level of payment. For properties, the tiers are as follows:

Property PricePercentage
On the first RM100,0001%
From RM100,001 to RM500,0002%
From RM500,001 to RM1 million3%
Exceeding RM1 million4%

In short, homebuyers would be taxed RM1 per RM100 on the first RM100,000, which totals RM1,000. On the subsequent RM400,000, the fee would be as much as RM8,000.

If you’re feeling a little confused, here’s a simple example. Let’s say a property is valued at RM500,000. It is then liable for charges across the first two tiers — 1% on RM100,000 and 2% on RM400,000 of value:

  • RM1,000 stamp duty charge on the first RM100,000 (1% of RM100,000)
  • RM8,000 stamp duty charge one the next RM400,000 (2% of RM400,000)
  • RM1,000 + RM8,000 = RM9,000 in total

All these numbers can be headache-inducing, but thankfully, Google has numerous stamp duty calculators available at your service!

Stamp Duty on Loan Agreements/Instruments

In Malaysia, loan agreements also have a stamp duty of 0.5% — another critical factor to consider in a property purchase.

Now, let’s say you take out a 90% loan for your hypothetical property worth RM500,000. The loan would be RM450,000, and the other 10% covers the down payment that you typically need to pay yourself. You would then be liable for stamp duty of RM2,250 (0.5% of RM450,000).

So, to sum up, your calculation for the total stamp duty on both the instrument of transfer and loan agreement would look like this:

[(RM100,000 x 1%) + (RM400,000 x 2%)] + (RM450,000 x 0.5%)

= RM9,000 + RM2,250

= RM11,250

The good news is that a lower tax of 0.1% is available for people who borrow deals without security. These loans can be repayable on-demand or in one down payment. However, stamp duty for foreign currency loan agreements is capped at RM2,000.

Remember to pay on time as there is a penalty for late stamping. The fine depends on the delay period, but the maximum would be RM100 or 20% of the deficient stamp tax.

Stamp Duty Exemptions in Malaysia

Since 2021, first-time homebuyers have been exempted from specific stamp duty fees! For properties worth under RM500,000, first-time buyers can enjoy total stamp duty exemption on both the instrument of transfer and loan agreement.

According to the Federal Government Gazette, you are eligible for stamp duty exemption if:

  • The exemption is for the Sales and Purchase Agreement to be completed between 1 January 2021 to 31 December 2025.
  • It is a residential property, excluding SOHO, SOVO, and SOFO properties and other serviced residences.
  • You are a Malaysian citizen.
  • You do not already own a property, even if it was inherited or given to you via individual or joint ownership.

On the other hand, you are also eligible for remission of 50% of the tax when transferring immovable properties operating as voluntary disposition between parents and children, or vice versa. Recipients must be Malaysian citizens as well.

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