Malaysia Relaxes Proposed Property Tax

by Mary Swire, Tax-News.com, Hong Kong

29 December 2009

Malaysia’s Prime Minister, Datuk Seri Najib Tun Razak, has announced a relaxation in the terms of the real property capital gains tax, to include only properties sold within five years of purchase.

The new property tax was introduced in the country’s 2010 budget, and will be effective from January 1, 2010.

A 5% fixed rate tax was introduced on capital gains from all disposals of real property in Malaysia, with an exemption of MYR10,000 (USD2,900) or 10% of the gains, whichever is the higher, given to individuals. Intra-family transfers and once-in-a-lifetime sales of residential property by a Malaysian citizen will also be exempt from the tax.

However, with worries in the property industry that the tax did not differentiate sufficiently between speculators and longer-term homeowners, and that it would also have an unsought effect on foreign investment in the sector, the government has now decided that the tax will not be levied on properties sold more than five years after their purchase.

The Prime Minister disclosed that the change to the terms of the tax is expected to entail a loss of MYR200m (USD59.2m) in revenue foregone.

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