Stamp Duty and Real Property Gains Tax (“RPGT”)

Everyone’s biggest dream in life would be buying their own house right? Are you a first-time buyer looking for your own property? Did you know about Stamp Duty and Real Property Gain Tax?

Stamp Duty basically mean where tax were applied on legal documents. It is an essential fee on legal documents such as the instruments of transfer and loan agreement when you wanted to purchase a house. It can be complicated but no worries, if you are using our service. We will help with this! On the other side, In this article we will still explain to you about these two things.

Stamp Duty were divided into two categories:

FIXED DUTIES

This are charged at a set price, and include stamps for individual policies or copies.

AD VALOREM DUTIES

This are variable costs based on the value of a transaction that legal documents represent. These include taxes such as those based on the value of a property transfer or loan agreement

This means that stamp duty were applicable at a fixed rate for the instrument of transfer (Fixed Duties) and also applicable on a variable cost, depends on the value of the loan agreement (Ad Valorem Duties)

Budget 2021 Stamp Duty Exemption For First-Time Buyers

By the effect of Covid-19 Pandemic that leads to Movement Control Order (MCO) to be done by the government in Malaysia. The economy does suffered a major blow as result. It has been announced that some changes will be made for stamp duty in Malaysia which first-time buyers will now be exempted from certain stamp duty charges.

two notable mentions of a stamp duty exemption that were made will go under the reintroduced Home Ownership Campaign (HOC), taking effect from June 2020:

1. Instruments of transfer and loan agreement for the purchase of residential homes priced between RM300,000 to RM2.5 million will enjoy a stamp duty exemption. This is subject to a minimum 10% discount by the developer, and an exemption on the instrument of transfer is limited to the first RM1 million of the property price.
2. A full stamp duty exemption is given on loan agreement effective for Sales and Purchase Agreements (SPA) signed between 1 June 2020 to 31 May 2021.

Stamp Duty (Exemption) (No. 3) Order 2020 & Stamp Duty (Exemption) (No. 4) Order 2020

A stamp duty exemption will be given for the purchase of residential property that were priced more than RM300,000 but not more than RM2.5 million. (subject to a discount of at least 10% provided by the developer except for a residential property which is subject to controlled pricing) under the Home Ownership Campaign 2020/2021 in respect of the following instruments:

• Loan agreements
  • full exemption
• Instruments of transfer
  • exemption limited to the first RM1 million of the house price and 3% stamp duty on the price exceeding RM1 million.

The sale and purchase agreement (“SPA”) for the purchase of the residential property has to be between an individual who is a Malaysian citizen or co-purchasers who are Malaysian citizens and a registered property developer. The SPA must be executed on or after 1 June 2020 but not later than 31 May 2021.

Next, is the REAL PROPERTY GAIN TAX

Real property gains tax (RPGT) means that it is a significant source of revenue for the government of Malaysia and of great importance to the country’s national development. Knowledge of the Real Property Gains Tax (RPGT) Act of Malaysia is essential to all who are either interested in investing in Malaysia or who are planning to enter the country’s burgeoning real estate market. Hence, Real Property Gains Tax (Exemption) Order 2020 has been made.

An RPGT exemption is given on the chargeable gain on the disposal of a residential property by an individual who is a Malaysian citizen on or after 1 June 2020 but not later than 31 December 2021, subject to meeting specified conditions. The exemption is limited to the disposal of 3 units of residential property for each disposer.

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