deed of assignment stamp duty malaysia

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Stamp Duty in Malaysia: Rates, Exemptions & Penalties

Updated on : Sep 9th, 2024

18 min read

In Malaysia, stamp duty is a required tax on legal documents and instruments of transfer, serving to generate government revenue and regulate economic activities. It prevents fraud, supports public services, and helps control speculative behaviour in the property market by increasing transaction costs. 

This dual function reinforces legal integrity, stabilizes sectors like real estate, and contributes to the country's overall economic governance and development. Here is everything you need to know about Stamp Duty in Malaysia, including rates, exemptions and penalties.

What is Stamp Duty?

Stamp duty is a tax imposed on various legal, commercial, and financial documents, commonly called "instruments." These instruments can include agreements, contracts, deeds, licenses, and other written documents specified by law. 

Stamp duty aims to validate and formalize these documents and ensure they are legally recognized.   Failure to pay stamp duty or properly stamping documents within the required timeframe may result in legal consequences, such as penalties or invalidation of the document.

Stamp Duty Amount 

The amount of stamp duty payable typically varies depending on the nature of the instrument and, in some cases, the value of the transaction or property involved. There are generally two types of stamp duty:

• Ad Valorem Duty: This type of stamp duty is calculated as a percentage of the value of the transaction or property. The rate of duty may vary based on the nature of the instrument and the consideration involved.
• Fixed Duty: Fixed duty imposes a specific amount of stamp duty, irrespective of the value of the transaction or property. It is typically applied to certain types of instruments, such as agreements or licenses.

Types of Documents Subject to Stamp Duty

Stamp Duty is not imposed on the transactions themselves but rather on the documents that represent or record these transactions. Here are types of documents subject to Stamp Duty in Malaysia

• Sale and Purchase Agreements : These are agreements for the sale of immovable property, such as land and buildings.
• Transfer Documents : Documents that signify the transfer of ownership of property, such as grant of probate or letters of administration.
• Loan Agreements : Documents pertaining to the borrowing of money, where the terms and conditions of the loan are outlined.
• Mortgage and Security Documents : Instruments that create a security interest in property to secure a loan.
• Leases and Tenancies : Agreements for leasing or renting out property, both commercial and residential.
• Share Transfer Documents : Documents involved in the transfer of shares in Companies.
• Debentures : Instruments acknowledging or creating debt.
• Partnership Agreements : Documents that establish the terms of a partnership between individuals or entities.
• Memorandum of Understanding (MoU) : Non-binding documents that outline the intentions of parties to enter into a contract.
• Insurance Policies : Policies that are related to certain types of insurance coverage.
• Trust Deeds : Documents establishing a trust for managing assets for beneficiaries.
• Powers of Attorney : Legal documents authorizing one person to act on behalf of another.

Stamp Duty Rates

The rates of duty vary based on the nature of the instruments and the transaction values. Here's a consolidated overview of the stamp duty rates in Malaysia:

Stamp Duty on Sale and Purchase Agreements (SPA)

RM10 per agreement. This is paid for the document on a fixed amount basis. This is separately charged at a fixed amount other than the stamp duty on the Instrument of transfer.

Stamp Duty on Instruments of Transfer

This is calculated for a Memorandum of Transfer (MOT) or Deed of Assignment (DOA) as per the price/ consideration. It is calculated based on a tiered system:

For Foreign companies:  Stamp duty rate is 4%  

Stamp Duty on Service Agreements and Loan Agreements

A stamp duty of 0.5% is applicable on the value of services or loans. However, stamp duty may be remitted more than 0.1% for certain instruments.

Stamp Duty on Shares and Securities

Stamp duty payment and procedures in malaysia.

Stamp duty must be paid within 30 days from the date of execution of the property transaction. Stamp duty can be paid in 2 major ways

• STAMP Certificate:  An electronic stamp certificate, reflective of the duty paid, is issued when stamping applications are processed online via the LHDNM website ( https://stamps.hasil.gov.my ). 
• Compound Duty: Compound duty, combining ad valorem and fixed duty as prescribed by Section 9 of the Stamp Act 1949, is applicable to specific types of instruments, including:
• Policies of insurance
• Contract notes
• Memorandum of Association & Article of Association
• TNB Electric Supply form

Stamp Duty Exemptions and Special Cases

The government occasionally provides exemptions, reductions, or remissions on Stamp Duty for certain types of transactions or for specific groups of people.

Here are the major exemptions and remissions.

• First-time homebuyers purchasing homes valued at RM500,000 and below can enjoy a full stamp duty exemption until the end of 2025.
• Residential properties purchased between RM500,001 to RM1 million will receive a 75% stamp duty exemption only until 31st December 2023.
• Starting from 2024, first-time homebuyers purchasing homes above RM500,001 will not benefit from any stamp duty exemption.
• Effective 1 January 2024, foreigners (non-citizens and foreign-owned companies, excluding Malaysian permanent residents) will be subject to a flat rate stamp duty of 4% on property transfer instruments, as announced in Budget 2024.
• In Budget 2024, it was announced that a fixed stamp duty fee of RM10 will replace the previous variable rate for real estate transfer documents between loved ones.
• This change applies to cases where beneficiaries are relinquishing their rights to eligible beneficiaries following a will, Faraid, or the Distribution Act 1958.

Late Payment of Stamp Duty

An instrument can be stamped within 30 days of its execution in Malaysia or within 30 days after it arrives in Malaysia if executed outside the country. Failure to stamp within this timeframe incurs a penalty:

• RM25.00 or 5% of the deficient duty, whichever is higher, if stamped within 3 months after the deadline;
• RM50.00 or 10% of the deficient duty, whichever is higher, if stamped after 3 months but within six months after the deadline;
• RM100.00 or 20% of the deficient duty, whichever is higher, if stamped after six months from the deadline.

These penalty rates have been in effect since January 1, 2003.

Consequences of Non-Compliance with Stamp Duty Regulations

There are two major consequences of non-compliance with stamp duty.

• Validity of Unstamped Instruments : While unstamped instruments, such as contracts, may still be legally enforceable, but not necessarily valid in court proceedings.
• Effectiveness of Stamped Instruments : Certain instruments, particularly those involving transfers of tangible assets like real estate or shares, must be properly stamped to be legally effective. 

Understanding Stamp Duty in Malaysia is crucial for anyone involved in property or financial transactions. This legal obligation not only affects your financial planning but also ensures the validity of your documents. Failing to comply can lead to penalties, affecting your finances and legal standing.

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INTRODUCTION

Stamp duties are imposed on instruments and not transactions. An instrument is defined as any written document and in general,- stamp duty is levied on legal, commercial and financial instruments. The person liable to pay stamp duty is set out in the Third Schedule of Stamp Act 1949. The Assessment and Collection of Stamp Duties is sanctioned by statutory law now described as the Stamp Act 1949.

TYPES OF DUTY

1. Ad Valorem Duty

The rate of duty varies according to the nature of the instruments and the consideration stipulated in the instruments or the market value of the property. The imposition of ad valorem duty (that is, according to the value) is on:

• Instruments of transfer (implementing a sale or gift) of property including marketable securities (meaning loan stocks and shares of public companies listed on the Bursa Malaysia Berhad), shares of other companies and of non-tangible property (e.g. book debts, benefits to legal rights and goodwill).
• Instruments creating interests in property (e.g. Tenancies and Statutory Leases)
• Instruments of security for monies, including instruments creating contracts for payment of monies or obligation for payment of monies (generally described as `Bond`)
• Certain capital market instruments (e.g. Contract Notes)

2. Fixed Duty

Duty is imposed without any relation to the consideration paid or amount stated in the instrument. The imposition of fixed duty is on:

• A number of other legal, commercial, mercantile or capital market instruments (e.g. Power or Letter of Attorney, Articles of Association of a Company, Promissory Notes, Policy of Insurance etc); and
• A duplicate or a subsidiary or a collateral instrument when it can be shown that the original or principal or primary instrument has been duly stamped.

INSTRUMENTS LIABLE TO STAMP DUTY

Instruments liable to stamp duty are those listed in the First Schedule of the  Stamp Act 1949 .

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Stamp Duty Imposed For Transfer Of Properties In Malaysia

Stamp duty is one of the unavoidable costs in property purchase in Malaysia.

Under the Stamp Act, stamp duty is tax payable on the written documents during the sale and/or transfer of a real property. At least two documents will attract stamp duty in a conveyancing transaction:

i. the Sale and Purchase Agreement; and ii. the Memorandum of Transfer (if the individual title/strata title of the Property has been issued) or the Deed of Assignment by way of transfer (if the strata title of the Property has yet to be issued).

In a conveyancing transaction, the Purchaser has to pay ad-valorem stamp duty on the written instrument being the conveyance of sale, ie. the Memorandum of Transfer or the Deed of Assignment by way of Transfer and a nominal stamp duty at on every copy of the Sale and Purchase Agreement.

The ad-valorem stamp duty is variable cost payable on the Memorandum of Transfer or the Deed of Assignment by way of Transfer will be calculated based on either the purchase price of the Property or the market value of the Property, whichever is higher, whereas the nominal stamp duty are charged at a set price of RM10.00 on every copy of the document.

In a conveyancing transaction, the Memorandum of Transfer or the Deed of Assignment by way of Transfer has to be submitted to the Collector of Stamp Duty for assessment of such ad-valorem stamp duty payable. Take note that the amount of purchase price stated in the Memorandum of Transfer or the Deed of Assignment by way of Transfer by the parties is not binding on the Collector of Stamp Duty and they have discretion to call upon a valuation expert to obtain the market value of the Property.

From 1st July 2019 onwards, the calculation of the ad-valorem stamp duty of transfer pursuant to normal sub-sale Sale and Purchase Agreement is as follows:-

In cases where the transfer is done pursuant to Sale and Purchase Agreement entered into with a developer, two situations can arise:-

i. When the individual title is available at the time of entering into the Sale and Purchase Agreement, the stamp duty assessed will be based on the purchase price stated in the Memorandum of Transfer and Sale and Purchase Agreement OR the market value of the Property;

ii. When the individual title is not issued during the signing the Sale and Purchase Agreement, the Sale and Purchase Agreement and the Deed of Assignment will carry only the nominal stamp duty of RM10.00 on every copy of the documents. When the individual title is issued subsequently, the stamp duty assessed will be based on the market value of the Property on the date of the Sale and Purchase Agreement entered into with the developer and not the date of the Memorandum of Transfer which is drawn up substantially later.

In circumstances where the transfer is done pursuant to a Deed of Assignment which has already been duly stamped (because the Property was bought when the individual title was not issued), then the stamp duty payable on the transfer is a nominal sum of RM10.00 pursuant to section 11 of the Stamp Act subject to production of the original Deed of Assignment which has already been stamped. Upon issuance of individual title of the Property, an application has to be made for endorsement on the Memorandum of Transfer to evidence that an ad-valorem stamp duty has been paid on the Deed of Assignment prior to the issuance of the individual title.

Further, transfer of property pursuant to grant of probate or letters of administrators will carry a nominal duty of RM10.00.

Many transfers are made between families or close relatives for love and affection without any Sale and Purchase Agreement. Take note that the ad-valorem stamp duty for some transfers for love and affection between families can be exempted either fully or partially.

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What is ‘ Deed of Assingment’ (DOA) when buying a property?

What do you need to know about the deed of assignment, what is a deed of assignment, where does the deed of assignment come in when buying or selling a property.

• Assignor:  A person or company who will be transferring the rights they hold to the property, over to the assignee.
• Assignee:  The assignee, in this case, would be the property buyer.

Applying For A Home Loan

Bank loan execs share why home loan applications are rejected, is there a stamp duty for a deed of assignment.

• If the individual title is issued when entering into a SPA:  The stamp duty will be calculated based on the property purchase price (as stated in the Memorandum of Transfer and SPA), or the property’s market value.
• If the individual title is not issued when entering into a SPA:  Both the SPA and Deed of Assignment will bear a nominal stamp duty of RM10 on each copy of the documents. Once the individual title has been issued, the stamp duty will be assessed based on the property’s market value on the date of the SPA signing, not the date of the Memorandum of Transfer.

What Should I Look Out For In A Deed Of Assignment?

• If there’s more than one owner to the property purchased, the names of all owners must be mentioned in the document.
• Agreed price of the property, if applicable
• Size and description of the property
• Date of transaction
• Signatures of the parties

Sample Of A Deed Of Assignment

What’s The Difference Between A Deed Of Assignment And A Memorandum Of Transfer?

What’s the difference between a deed of assignment and a deed of mutual covenant, what’s the difference between a deed of assignment and a sale and purchase agreement, related post, what does first time homebuyer need to know, epf: employees’ 2021 contribution rate reduced to 9% from 11%, home ownership campaign (hoc), leave a reply cancel reply.

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5 legal issues to look out for when buying and selling a property in Malaysia

By  Richard Wee, Sarah Kambali , Darren Tan & Oh Jia Ling

Photo by rawpixel.com from Pexels

Purchasing or selling a property in Malaysia can be complicated with layers of administrative challenges. Embedded in these property transactions are statutory rules, legal practices and commercial documentation. For many first time property buyer, or even regular property investor; buying or selling a property is usually left in the hands of the property agent or the conveyancing lawyer to handle the transactions. The word conveyancing relates to a transfer of an asset from one to another, hence the description of lawyers involved in property transaction as “conveyancing lawyer”, or more formally “solicitor”.

In this article we attempt to address some basic legal issues which a property investor need to know when buying or selling a property.

1. The sale and purchase agreement

The Sale and Purchase Agreement (SPA) is a contract which embodies the relevant terms and conditions of the property transactions. Prior to the execution of the SPA, parties may execute a pre contract documents such as option to purchase (OTP). The OTP usually sets the basic terms towards the execution of the SPA. Nonetheless, at the end of the day, the SPA will always be the paramount agreement in the sell and purchase of the property.

The terms and conditions of the SPA normally include the details of the property, details of all parties involved, type of loan/financing and the time of delivery of the vacant possession of the property. The buyer/purchaser in the transaction must be aware of the due date of any outgoing payments. On the other hand, the seller/vendor must ensure delivery of the vacant possession of the property is within the agreed stipulated time as soon as the buyer/purchaser satisfied all the conditions.

Occasionally, parties may find themselves in a situation where they may have to terminate the Agreement prior to the completion of the deal. Can this be done? The SPA would normally include clauses to regulate the premature termination which may include some deposit being forfeited or penalty to be paid.

By Richard Wee & Darren Tan

2. The stamp duty under the Inland Revenue Board (IRB)

Under the Stamp Duty Act 1949, the buyer/purchaser has to pay the stamp duty if the transactions involve a real properties transfers. Effectively, the Stamp Duty is akin to a Property Tax. There are two types of Stamp Duty in Malaysia, namely ad valorem duty and fixed duty. The Stamp Duty for real properties transactions is ad valorem duty which the amount payable will vary depending on the type and value of the transactions.

How is the stamp duty calculated? Who computes the stamp duty? The calculation of the stamp duty for Memorandum of Transfer or any transfer of property follows the schedule in the Stamp Duty Act 1949 and can be summarized as follows:

With regards to the computation of the stamp duty, upon receipt of the application, IRB will refer to Valuation and Property Services Department which is the body which will evaluate the value of the property. From there, IRB will then impose the relevant stamp duty.

Nonetheless, the Stamp Duty (Remission) (No. 2) Order 2016, P.U. (A) 365 which came into force on 1 January 2017 provides some good news for the first house buyers. The said Order prescribes certain exemptions and/or discount of the stamp duty. Pursuant to the Order, the buyer/purchaser shall be remitted from the stamp duty chargeable on any instrument of transfer provided that:-

• The buyer/purchaser must be a Malaysian citizen;
• The value of the purchase price shall be RM500,000.00 or less;
• The property must be a residential property;
• The SPA must be dated in between 1.1.2017 and 31.12.2018; and
• The buyer/purchaser has never owned any residential property including a residential property which is obtained by way of inheritance or gift, which is held individually or jointly.

The amount remitted can be seen as follows:-

Occasionally, some transmissions of property is transferred on the basis of “love and affection”, usually is from a parent to child. The law acknowledges the emotional aspect of such a transfer and grant exemption/discount on the stamp duty. Below is the table to illustrate that:

What is RPGT? RPGT is referred to as Real Property Gains Tax. It is a ‘capital gains’ tax that the Malaysian government levies when a property is sold. Essentially, it is a tax charged on the capital gain a seller makes when the property is sold. This is laid down in s.3 of the Real Property Gains Tax Act 1976.

The RPGT is payable by the seller of the property and it is payable to the Inland Revenue Board (IRB) of Malaysia. If a property is sold in Malaysia at a profit, RPGT will apply, notwithstanding whether you are a Malaysian citizen or a foreign resident. The RPGT rate however differs depending whether you are a Malaysian citizen or a non-Malaysian citizen or a company.

The calculation of the RPGT is fairly simple. It is as follows:

As mentioned above, the RPGT rate differs if you are a citizen or non-citizen or a company. This is provided by the IRB starting from 2014:

However, there are several exemptions to the RPGT:

First, disposal made after 5 years from the date of acquisition of the property by person other than company, and other than non-citizen and non-permanent resident individual.

Second, transfer of asset by way of gift by a donor who is a citizen, where the donor and the acquirer are family.

Third, according to s.8 of the 1976 Act, a Malaysian citizen or permanent resident can enjoy a once-in-a-lifetime exemption on RPGT of the disposal of the property.

By Richard Wee & Oh Jia Ling

4. Land Charges

In property transactions, purchasers often seek financial assistance from the relevant financial institution, such as banks and financing companies. For purposes of this discussion, we will make reference of these financial institution as “the Bank”.

When the Bank provides the loan, as security for the loan of the property becomes the subject of the same. In Malaysia, this is called a “Charge”. The bank will have a Charge over your land under s.241 of the National Land Code Act 1965. This Act gives the Bank the power to Charge the property that you purchased under the loan and shall take effect upon registration as a security for the loan. You are then called the Chargor and the Bank, the Chargee.

Malaysia practices the Torrens System where there is no passing of the legal ownership of the land from the land owner or the borrower to the lender (Bank). The effect of a Charge is merely as a security and not a transfer of the land so charged.

Where there is a Charge, the Chargee will have a legal interest in the land. However, the Chargor retains ownership of the land. The Chargee will hold the original Land Title of the property and shall return the original Land Title once the loan has been fully repaid. Upon full repayment, the owner of the property would need to appoint a solicitor to deal with the Chargee to handle the discharge of charge for the property’s Land Title. Thereafter, the solicitors will forward a Land Title fully discharged and return to the owner of the property.

In some circumstances, the subdivided title specifically for the property that you wish to purchase is not issued yet. Most of the time, this is referred to as “no Land Title”. How then would you gain a Bank’s loan without a title? A contract which is called a “Deed of Assignment” will be executed between the Seller and the Buyer. This Deed of Assignment will then be retained by the Bank (if there is a loan) as a security on your property. Similarly, the Deed of Assignment will be returned to you once the loan has been fully settled.

In the event of an unlikely default of the loan repayment, there are a few routes the bank can take to recover the loan amount, including the interests and other costs. One of the action is to auction off your property. The Chargee can enforce its security by way of a sale of the land if the Chargor defaults. If the amount gained from the auction is sufficient to cover the loan and there is a surplus after the deduction of all the other costs, then the surplus will be returned to the Chargor. However, if the money gained from the sales of the property is insufficient to cover the loan amount, the Chargee may seek further legal action to recover the same.

There may be situations where “Consent” is required as the condition precedent. “Consent” here refers to the application for permission to proceed with the sale.

When is a Consent application needed in a property transaction? To answer this, we would need to check on a few items; which includes the description in a title of the property and/or the person receiving the property.

For the first situation, every property that has its own individual title or a strata title would have a description under the “Sekatan Kepentingan” or loosely translated as the “Restriction in Interest”. If the title of the property mentions the following, an application for consent to the state authority is required:-

Situation one:

“Tanah ini tidak boleh diberi, dipindahmilik, dipajak atau digadai tanpa persetujuan pihak Berkuasa Negeri.”

“This land is not to be transferred, mortgaged or Charged without the consent of the State.”

For situation one above, if such description is in your individual or strata title that you intend to purchase, you would need to get the seller/vendor/transferor/chargor to apply for the consent of state authority before any transfer and/or Charge be registered onto the property’s individual or strata title.

There are other situations whereby the restriction in interest also mentions that transfers to a non-Bumiputra or non-Malay is not allowed at all as the category of the land for the property is a Malay Reserve Land or Bumiputra Land. In such instances any application to the State Authority would be rejected if you are not a Malay or a Bumiputra, as the case may be.

As for the second situation, wherein the person or entity receiving the property is a foreigner; under the National Land Code 1965 (“the NLC”) and the National Land Code (Amendment) 2016, any foreign entity; whether individual or company, would be subjected to the application of foreigner consent from the State Authority.

Prior to the enforcement of National Land Code (Amendment) 2016, there was an exception of foreign entities to the application of consent in the purchase and/or transfer of property with a category of “industry”; but this was deleted in the latest amendments to the NLC.

Presently, with the amendments, all situations of transfer in favour of a foreign entity would require the consent from the State Authority. This would mean that if you are a foreigner, and you intend to purchase or receive a property out of “love and affection” or be appointed as the executor or beneficiary of a property, you would require to make the application for consent to transfer in your favour from the State Authority.

Other than these two kinds of consents, there are other scenarios where a consent application is needed but these types of consent application is not common. Nevertheless, it is best that you refer with your solicitors as to whether an application of consent is needed. The other types of consent that may be required is a consent to obtain low cost property or consent application from the Economic Planning Unit, which was formerly known as the Foreign Investment Committee (“EPU”).

A property that is categorized as a “low cost” housing development requires an application of consent to the relevant authority for any transfer. This kind of property is not transferable to a foreign entity. This is clearly stated in the EPU Guidelines published as of 1st March 2014 (“EPU March 2014 Guideline). As for the application of consent from the EPU, this is clearly outlined in the EPU March 2014 Guideline. In the same EPU March 2014 Guidelines also mentions properties of which that are exempted from any application from the EPU. It would be best that you check this EPU March 2014 Guidelines to ensure that you are well informed of your situation when purchasing or acquiring a property; especially if you are a foreign entity.

Next question you may ask, how long would it take to obtain these consent application? This would depend on the timing the board of the State Authority holds their meeting. As there are plenty of applications for consent to transfer and/or Charge of a property submitted by the public, your application can be reviewed by the board within one month from the submission of the application or three months thereafter or more; depending on the current situation of the state reviewing your application.

Generally, a purchase of property may take maximum of three months to complete the transaction from the date of the sale and purchase agreement. However, in cases where application for consent is required, the timeline of three months will only commence upon receipt of consent from the relevant authorities. The application of consent from the relevant authority, in practice, shall be a condition precedent to the completion of the transaction.

These are merely some issues which usually arises in property conveyancing. Other relevant issues may include foreign investment, conversion of the status of the land (for example, from “residential” to “agriculture”) and many others. Even loans have its own challenges with regards to documentation and legal process. Of course, all these can be daunting, but with the relevant help and assistance, the transaction will proceed accordingly.

By Sarah Kambali

[Richard Wee, Sarah Kambali, Darren Tan & Jia Ling are members of the Real Property Practice Group of MahWengKwai & Associates]

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STAMP DUTY FOR TRANSFER OF PROPERTIES IN MALAYSIA

Pursuant to Stamp Act 1949, as amended by the Finance Act 2018 which came into effect from 01.01.2019, the rate of stamp duty payable for transfer of properties in Malaysia is calculated as follows, whether with monetary consideration (i.e. by way of sale and purchase) or without monetary consideration (i.e. by way of gift or love and affection).

Stamp Duty Exemptions

Be that as it may, the government has made the following orders for stamp duty exemptions or remissions:-

• Stamp Duty (Remission) (No. 2) Order 2019 (P.U. (A) 369) Remission of 50% of stamp duty chargeable on any instrument of transfer of immovable property between parents and child.
• Stamp Duty (Exemption) (No. 10) Order 2007 (P.U. (A) 420) Full exemption of stamp duty chargeable on any instrument of transfer of immovable property between spouses.
• Stamp Duty (Exemption) Order 2021 (P.U.(A) 53/2021) Full exemption of stamp duty chargeable on all instrument of transfer for the purchase of first residential homes valued up to RM500,000. The exemptions are applicable for sale and purchase agreements (SPAs) executed between 1 January 2021 and 31 December 2025.

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Stamp duty and legal fees calculation for SPA when buying a house in Malaysia

Despite what many people think, the cost involved when buying a house is not limited to the 10% down payment. Find out the 7 other costs homebuyers need to consider when owning a house including stamp duty fees, legal fees for the SPA and loan agreement as well as property valuation fees.

Hunting for a dream home is an experience that a first-time home buyer is not likely to forget. However, you might overlook certain critical elements in calculating the total expenditure of acquiring your home as many buyers are likely to focus only on the biggest expenditure involved – the property’s 10% down payment or deposit. You might be further enticed by promotions, discounts and rebates by developers. 

However, there are other important costs in the home purchasing process that you need to factor in, especially towards the end of the transaction. These are variable, third-party fees that are often referred to as closing costs. Ignore them and you may risk financial setbacks and disappointment in realising your dreams of owning a home.

Below are a few significant closing costs that you need to include in your property budget planning: 

1. Stamp duty fees

An unavoidable cost in real estate purchases, stamp duty is the tax placed on your property documents during the sale or transfer of the property – as  specified under the First Schedule of Stamp Duty Act 1949 . The sale or transfer of properties in Malaysia which are chargeable with stamp duty must be stamped within 30 days from the date of the execution (property transaction). The tax includes:

• stamp duty on the Sale and Purchase Agreements (SPA) of your property – this costs only RM10
• stamp duty on the instruments of transfer –  Memorandum of Transfer (MOT) or  Deed of Assignment (DOA) .  The stamp duty is calculated based on a tiered system as shown in the table below.
• stamp duty on your  loan agreement  – a flat rate of 0.5% of the total loan. 

Latest stamp duty fees on the MOT or DOA 

How is stamp duty calculated in malaysia.

For instance, when purchasing a property which costs  RM750,000 , you will have to pay a total of:

{(First RM100,000 X 1%) + (Next RM400,000 X 2%) + (Remaining RM250,000 X 3%) } + 0.5% of loan amount (90% of RM750,000) + RM10 for stamp duty on SPA = {RM1,000 + RM8,000 + RM7,500} + 0.5% X (RM675,000) + RM10 = RM16,500 + RM3,375 + RM10 =RM19,885

Payment of stamp duty for MOT

The Memorandum of Transfer or MOT has to be signed by a new property owner (strata or individual ownership) to transfer ownership of the property from the developer or old owner, for secondary or subsale properties. For an MOT to be valid, the document must be stamped and adjudicated at the Inland Revenue Board and stamp duty paid accordingly. This stamp duty will usually be paid by a law firm appointed by the homebuyer.

Payment of stamp duty can be now done online on the LHDN official website through the  Stamp Assessment And Payment System or STAMPS .

Stamp Duty Exemptions in 202 4

1) stamp duty exemption for first time homebuyers.

During the recent tabling of Budget 2024, the government announced that it first-homebuyers who purchase residential properties worth between  RM500,001 to RM 1 million  will enjoy a  75% stamp duty exemption up to 31 December 2023.  This stamp duty holiday was increased from the 50% exemption announced in July 2022, under the Keluarga Malaysia Home Ownership Initiative or i-MILIKI.

Besides that, it was announced in end of 2020 that a  full stamp duty exemption will be given to both instruments of transfer and loan agreement for the purchase of a first home worth not more than RM500,000  – the home can either be a new-launch or a subsale property:

To receive this exemption, the following criteria must be met:

• This exemption will be for a SPA that is completed between 1 January 2021 to 31 December 2025.
• It is only applicable to residential properties, excluding SOHO/SOFO/SOVO types, as well as  serviced residences  built for commercial use.
• First-time homebuyers must be Malaysian citizens.
• The buyer must not already own a residential property; if he/she has inherited a property or was given one (no matter if it’s an individual or joint ownership), then he/she is no longer eligible.
• The exemption is given at 2 stages of transfer, i.e. from the property developer to a qualifying financial institution/bank, and from the bank to the Malaysian citizen.

2) Stamp duty exemption for property transfer between family members

For the  transfer of property by way of love and affection  between parents and children, grandparents and grandchildren – Stamp duty on the instruments of transfer of property will be  fully exempted, limited to the first RM1 million  of the property’s value.

The remaining balance of the property’s value is subject to the existing stamp duty tier and a 50% remission is provided on the stamp duty imposed. This exemption applies for instruments of transfers executed from 1 April 2023 and is only applicable for Malaysian citizens.

3) Stamp duty exemption on abandoned housing projects

A stamp duty exemption also applies to instruments executed by a rescuing contractor or property developer on or after 1 January 2013 but not later than 31 December 2025. This is described as a contractor or a developer who is appointed or approved by the Minister of Housing and Local Government to carry on rehabilitation works for an abandoned project.

The instruments are loan agreements approved by the approved financier and instruments of transfer for the purpose of transferring a revived residential property in relation to the abandoned project.  

2.   Legal fees

Unless you have a legal background and possess some of the required expertise and knowledge, you are most likely to engage in legal assistance for your real estate purchase. Your appointed solicitor will prepare all the necessary documents and contracts to facilitate the transfer of the property.

The legal fees for preparation of the  Sale and Purchase Agreemen t are calculated as a percentage of the purchase price, varying from 0.25% up to 1% depending on the value of the homes.

How are legal fees calculated in Malaysia?

The legal fee rates in Malaysia are as below:

Say for instance you are purchasing a residential property which costs RM750,000, you will have to pay a total of:

(First RM500,000 X 1%) + (Next RM250,000 X 0.8%)  = RM5,000 + RM2,000  = RM7,000 

Note that some developers may absorb the legal fees but you will always need to pay the stamp duty yourself as a buyer. Find out  what a lawyer can do for you when buying a house in Malaysia .

 3. Real Property Gains Tax (RPGT)

Beyond owning your own residential property, a first-time homebuyer should also look ahead to the possibility of eventually selling the property in the future.

This might be for a number of reasons – you might want to upgrade, leave the area for a new job, find a home better suited to your preference or just sell it to profit from capital growth when the market is booming. Regardless, disposing your home to a new buyer will entail paying real property gains tax (RPGT). RPGT is a form of Capital Gains Tax in Malaysia levied by the Inland Revenue (LHDN) and is chargeable upon profit made from the sale of your land or real property.

Having some knowledge of RPGT could help you sell your property at the right time and save you a lot of money! 

RPGT exemption in 2022  and 2023

Under the recent Budget 2022, Finance Minister Tengku Zafrul announced that the government will no longer impose Real Property Gains Tax or RPGT for residential property disposals by individuals comprising  Malaysian citizens and permanent residents  starting from the sixth year. This means that the RPGT rate for property disposals in the 6th year and subsequent years of property ownership is to be reduced to 0%, effective from 1 Jan 2022.

RPGT rates effective from January 1, 2022

Those who dispose of their home after less than 3 years will be still charged 30% RPGT; 20% in year 4 and 15% in year 5. 

Bear in mind that there are other RPGT exemptions for the following conditions:

• An exemption of 10% of profits or RM10,000 per transaction for Malaysian citizens and permanent residents (whichever is higher) for these 2 scenarios:

1.  If an asset is transferred as a gift by a donor who is a Malaysian citizen and the acquirers are either husband and wife, parent and children or grandparents and grandchildren. This exemption is not applicable for transfers between siblings. 2.  Once-in-a-lifetime exemption on the chargeable gain on disposal of 1 private residence by a Malaysian citizen or Permanent Resident (PR).

• Homeowners who own low or medium-cost  housing priced below RM200,000 are exempted  from RPGT when disposing of their property.

4. Property agent fees

If you engage property or real estate agents, especially in securing residential property in the secondary market, their fees will be an additional cost on top of the price you pay for your home. Although most buyers nowadays are aware of this, there are some who do not factor agent fees into the total cost. This could be a setback, especially if you are on a tight budget.

The  maximum fee chargeable on services provided by agents  on the sale of any land and building is  normally 3% , although many brokers and agents charge less than that on a case-to-case basis.

As a buyer, make sure that you negotiate and confirm your estate agent fees before officially engaging them to represent you in any property transactions. This will help when calculating your total cost in advance.

5. Property v aluation fees

Unless you’re paying for the property in cash, you’re likely to be looking for a housing loan from banks to fund the purchase. Financial institutions will usually require a valuation of the property before approving the loan amount, and most banks will charge a fee for these valuations.

How are valuation fees calculated?

Similar to the legal fees, the valuation fee for real estate is usually borne by the buyer and is calculated as a percentage of the purchase price.

For first RM100,000.00 =0.25% Next residue up to RM2 million = 0.2% Next residue up to RM7 million = 0.167% Next residue up to RM15 million = 0.125% Next residue up to RM50 million = 0.10%

Factors which determine your property valuation

Understanding the factors which make a property more (or less) valuable will help to assist purchasing/investment decisions. Usually, a residential property’s valuation is impacted by the following:

The value of a property is generally higher the nearer it is to the city centre.  On the flip side, if the home is within the vicinity of something undesirable such as a cemetery, power stations or a waste disposal area – that could bring down the property’s value.

Accessibility and amenities

The value of a property is generally increased if it is near major highways, public transit nodes such as the MRT and LRT, and conveniences such as clinics and private hospitals, educational institutions, banks and shopping malls, as well as  international or private schools .

Maintenance and renovations

This would apply for subsale properties – Valuers will take into account maintenance and renovation works done which enhance the livability and aesthetic value of the property.

Quality of construction

A building that is made of high-quality materials might hold together longer before having any issues, thus these will be valued higher. Homes that were constructed over a decade ago can still fetch a premium price due to the quality of the building materials, workmanship and structural design.

MORE:  Is buying a home near the MRT3 circle line a smart move?

6. Home insurance 

Most banks will require buyers to purchase insurance on their homes as part of the housing loan package to protect the value of the property. The common option includes:

Mortgage Reducing Term Assurance (MRTA)

MRTA is the most popular and economical option for property loan borrowers and is usually packaged as an option when applying for a home loan at a bank. It is a single premium group term life insurance that pays your outstanding home loan in event of your death or total permanent disability (TPD).

The costs of MRTA are dependent on the age of the borrower (usually the older the borrower, the higher the MRTA) and the total mortgage on the property (usually estimated at 3% to 5% of the total mortgage).

Mortgage Level Term Assurance (MLTA)

MLTA offers repayment of your outstanding home loan as well as a guaranteed cash value back at the end of the scheme. This cash benefit will help keep your family afloat in the event of your death or total permanent disability (TPD). Unlike the MRTA, anyone can be a beneficiary for an MLTA, the policy-holder can nominate any family member to receive the pay-out should something happen to him or her.

An MLTA’s sum assured remains constant or level throughout the policy’s tenure period. The most important thing about this mortgage insurance is that the insurance proceeds are credit-proof and will not be frozen.

Term Life insurance

This is the oldest and most common life insurance which offers your family (beneficiary) a lump sum payment (sum assured) in event of your death or TDP during your policy tenure (similar to MLTA).

However, the premium structure is akin to the MRTA but is more flexible as you and your loved ones will be protected as long as you pay the premium and it can be terminated at any point in time. Policy-holders can also extend the coverage by adding critical illness into the condition in return for a slightly higher premium.

READ:   MLTA vs MRTA: Which mortgage life insurance to pick

7. Home renovations

For example, after you have completed the purchase of the house, you might want to change wall colours, doors, floorings, windows, fences, roofing, rooms and other elements of the house to suit your preferences. These could easily add up to your total costs, depending on whether the renovations involved are major or minor.

Here’s a tip: Most experts recommend not spending more than 10% of your home value on renovations. Check out our simple guide on  how much does a home renovation cost in Malaysia?

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• the price paid for the property or its market value, whichever is the higher. This is provided for under the First Schedule to the Stamp Act, 1949.
• The material date of valuation is the date of execution of the Sale and Purchase Agreement, otherwise it is the date of the execution of the instrument of transfer/assignment.

(c) Adjudication fees on transfer : RM10.00 (d) Search fees : RM30.00 (Selangor) (e) Lodgement of Private Caveat : RM80.00 (Selangor) (f) Lodgement Withdraw of Private caveat : RM60.00 (Selangor) (g) Lodgement Withdraw of Lien-holders caveat : RM80.00 (Selangor).

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2024/2025 Malaysian Tax Booklet

Basis of taxation.

Stamp duty is chargeable on instruments and not on transactions.

An unstamped or insufficiently stamped instrument is not admissible as evidence in a court of law, nor will it be acted upon by a public officer.

Assessment and payment of stamp duty can be made electronically via the Stamp Assessment and Payment System.

Self-assessment stamp duty system is proposed to be implemented in phases based on the types of instruments or agreements.

Rates of duty

The rates of duty vary according to the nature of the instruments and transacted values. Generally, transfer of properties can give rise to significant stamp duty:

a. Properties (other than shares, stock or marketable securities)

1. Other than foreign companies, non-citizens and non-permanent residents

2. Foreign companies, non-citizens and non-permanent residents

Flat rate stamp duty of RM4 per RM100 or part thereof (w.e.f 1 January 2024)

b. Non-listed shares, stock or marketable securities

RM3 for every RM1,000 or any fraction thereof based on consideration or value, whichever is greater. The Stamp Office generally adopts one of the 2 methods for valuation of unlisted ordinary shares for purposes of stamp duty:

-    net tangible assets; or -    sale consideration.

c. Shares or stock listed on Bursa Malaysia

RM1.50 for every RM1,000 or any fraction thereof based on the transaction value.  However, stamp duty in excess of 0.1% is remitted for instruments of contract notes executed on or before 13 July 2023 until 12 July 2028, with maximum stamp duty payable of RM1,000 per contract note.

d. Listed marketable securities

RM1 for every RM1,000 or any fraction thereof based on the transaction value, with maximum stamp duty payable of RM200 per contract note.

e. Service Agreements and Loan Agreements

Stamp duty of 0.5% on the value of the services / loans. However, stamp duty may be remitted in excess of 0.1% for the following instruments:

1.   Service agreement

2.   Loan agreement / loan instrument

Malaysian Ringgit loan agreements generally attract stamp duty at 0.5% However, a reduced stamp duty liability of 0.1% is available for Malaysian Ringgit loan agreements or instruments without security and repayable on demand or in single bullet repayment.

The stamp duty on foreign currency loan agreements would be the same as Malaysian Ringgit loan agreements which is 0.5%

The stamp duty on loan or financing agreement based on Shariah principles, other than hire purchase executed from 1 January 2025 would be at a flat rate of RM10.

Instruments executed in Malaysia which are chargeable with duty must be stamped within 30 days from the date of execution. When the instruments are executed outside Malaysia, they must be stamped within 30 days after they have first been received in Malaysia.

The penalty imposed for late stamping varies based on the period of delay. The maximum penalty is RM100 or 20% of the deficient duty, whichever is higher.

Relief / Exemption / Remission from stamp duty

Examples of the exemptions, remissions or reliefs of stamp duty available are as follows:

1.  Merger and acquisition

Relief on the transfer of the undertakings or shares under a scheme of reconstruction or amalgamation of companies (conditions apply).

• Relief on the transfer of property (excludes transfer of business) or shares between associated companies , where either company owns 90% or more of the other company, or where a third company owns 90% or more of both associated companies (conditions apply).

2.   Financing instrument

• Stamp duty exemption on loan / financing agreements executed from 1 January 2022 to 31 December 2026 between MSMEs and investors for funds raised on a peer-to-peer platform registered and recognised by the Securities Commission (SC). 
• Stamp duty exemption on instrument of agreement for a loan or financing in relation to a Micro Financing Scheme for an amount up to RM50,000 (increased to RM100,000 for loan or financing agreement executed from 1 January 2025)  (approved by the National Small and Medium Enterprise Development Council) between a  MSMEs and a participating bank or financial institution.
• Stamp duty exemption on all loan or financing instruments in relation to the Professional Service Fund for an amount up to RM50,000 between a borrower and Bank Simpanan Nasional.
• Stamp duty exemption on all instruments of an Asset Sale Agreement & Asset Lease Agreement executed between a customer and a financier made under Syariah law principles for renewing any Islamic overdraft/revolving financing facility , provided the instrument for existing facility is duly stamped.
• Stamp duty on any instruments of an Asset Lease Agreement executed between a customer and a financier made under the Syariah principles for rescheduling or restructuring any existing Islamic financing facility is remitted to the extent of the duty that would be payable on the balance of the principal amount of the existing Islamic financing facility, provided the instrument for existing Islamic financing facility has been duly stamped.
• Stamp duty exemption on all instruments relating to the purchase of property by any financier for the purpose of leaseback under the principles of Syariah or any instrument by which the financier shall assume the contractual obligations of a customer under a principal sale and purchase agreement.
• Stamp duty exemption on loan or financing agreements executed from 1 July 2021 to 31 December 2024 in relation to restructuring or rescheduling of business loans due to the inability of the borrower to comply with existing repayment schedule consequent to deteriorating financial conditions.
• Stamp duty exemption on loan or financing instruments executed from 1 January 2025 to 31 December 2026 by MSMEs and investors through Initial Exchange Offering platforms registered with SC.

3.   Instrument of transfer

• Remission of 50% of stamp duty chargeable on the instrument of transfer of immovable property operating as voluntary disposition between parent(s) and child and vice versa, executed before 1 April 2023 and   provided that the recipient(s) is a Malaysian citizen. 
• Stamp duty exemption on the instrument of transfer of property (executed from 1 April 2023) by way of love and affection between parents and children, grandparents and grandchildren, limited to the first RM1 million of the property’s value, provided the recipients are Malaysian citizens. The balance of the property’s value is given 50% remission on the ad valorem stamp duty imposed. 
• Exemption for instruments of transfer of immovable property operating as voluntary disposition between husband and wife.
• Stamp duty exemption on all instruments of transfer of land, business, asset and share in relation to the conversion of a conventional partnership or a private company to be a limited liability partnership .
• RM10 fixed duty for instrument of transfer of any property by way of release or renunciation by a beneficiary of a deceased estate to another beneficiary entitled under the same estate.

4.  Purchase of first residential property

• Stamp duty exemption on the instrument of transfer and loan agreement for purchase of first residential property through the Malaysian Home Ownership Initiative (i-Miliki) under the Home Ownership Programme 2022/2023.

Note 1: Purchaser or co-purchasers are Malaysian citizens

5.  Abandoned housing projects

•  Stamp duty exemption on instruments executed by a rescuing contractor or a developer approved by the Minister of Housing and Local Government to carry on rehabilitation works for an abandoned project . The instruments are loan agreements approved by the approved financier and instruments of transfer for the purpose of transferring revived residential property in relation to the abandoned project which are executed by 31 December 2025.
• Stamp duty exemption on instruments executed by an original purchaser , whose name is stated in the Sale and Purchase Agreement in relation to an abandoned project , or his beneficiary. The instruments are loan agreements approved by the approved financier and instruments of transfer which are executed by 31 December 2025.

6.   Capital market

• Stamp duty exemption on specified instruments for the purpose of a securitisation transaction.
• Stamp duty exemption on all instruments relating to the issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase debentures or Islamic securities approved by the SC and the transfer of such debentures or Islamic securities.
• Stamp duty in excess of RM200 is remitted for instruments of contract notes relating to the sale of shares, stocks or marketable securities  in companies incorporated in Malaysia or elsewhere between a local broker and an authorised nominee on behalf of a foreign broker.
• Stamp duty exemption on contract notes for sale and purchase transaction of structured warrant or exchange-traded fund approved by the SC, executed by 31 December 2025.

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