Stamp duty is an important consideration in all real estate transactions. In any property purchase or transfer, it’s vital to properly assess all costs involved.
That’s not always an easy task, however, so here’s a handy guide from us on what stamp duty is all about.
What Is Stamp Duty Malaysia?
Stamp duty is essentially a fee on legal documents such as the instrument of transfer and loan agreement when you purchase a house. Stamp duty can be complicated, but never fear, we’re here to help you understand it better!
First of all, you need to know that it’s divided into two categories:
Fixed Duties are charged at a set price and include stamps for individual policies or copies.
Ad Valorem Duties 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.
What this means is, stamp duty is applicable at a fixed tier for the instrument of transfer (Fixed Duties) AND on a variable cost, depending on the value of the loan agreement (Ad Valorem Duties).
Stamp Duty Malaysia on Instrument of Transfer
Stamp duty is a tax based on specific tiers, with its percentage for each level. The tiers are as follows:
First RM100,000 of the property price
From RM100,001 to RM500,000
From RM500,001 to RM1 million
Everything above RM1 million
The above rates took effect in 2019 and are still valid for 2024.
Stay with us! Now, what does that mean in practice? Let’s explore a simplified example. A property valued at RM500,000 today would be liable for charges across the first two tiers that we mentioned above.
Stamp duty would be charged according to 1% on RM100,000 of value and 2% on RM400,000 of value. So what will the stamp duty be?
RM1,000 stamp duty owed on the first RM100,000 value (1% x RM100,000)
RM8,000 stamp duty owed on the next RM400,000 value (2% x RM400,000)
Thus, RM1,000 + RM8,000 = RM9,000 stamp duty owed in total
If that all sounds complicated, don’t worry, a quick Google Search for a stamp duty calculator will lead you right to a nifty tool to do the number crunching for you!
Stamp duty for a Sale and Purchase Agreement (SPA) is often mistaken for stamp duty for an Instrument of Transfer. The stamp duty for the SPA is only RM10 per copy, while the stamp duty for the Memorandum of Transfer (MOT) and Deed of Assignment (DOA) is calculated according to a fee structure of 1% to 4%.
Stamp Duty Malaysia on a Loan Agreement
It’s also important to factor in the stamp duty owed for any loan agreement that may be entered into as part of a property purchase.
As an important legal document, the loan agreement is also liable for stamp duty. Stamp duty on a loan agreement is a flat 0.5% rate, applied to the full value of the loan.
So, for a property priced at RM500,000, you would typically apply for a 90% loan (RM450,000) – as 10% of the property price will be for the down payment, which you would need to fork out yourself.
A 100% loan is possible, but uncommon for most people.
Thus, if you take out a loan of RM450,000 to cover your hypothetical property purchase above, you’re liable for a stamp duty of RM2,250 on that loan (0.5% x RM450,000).
Let’s go through this step-by-step. For your hypothetical property worth RM500,000, this is how you calculate your total stamp duty for the instrument of transfer AND loan agreement:
Stamp duty for instrument of transfer + Stamp duty on loan agreement = Total stamp duty to be paid
[(First RM100,000 x 1%) + (Next RM400,000 x 2%)] + 0.5% of loan amount (RM450,000)
= (RM1,000 + RM8,000) + (0.5% x RM450,000)
= RM9,000 + RM2,250
Remember this stamp duty calculation as we’ll explain below how the stamp duty exemptions come into play 😉
First-time homebuyers who purchase a home valued at RM500,000 and below can enjoy a full stamp duty exemption until the end of 2025.
While residential properties purchased worth between RM500,001 to RM1 million will get a 75% stamp duty exemption only up until 31st December 2023.
In other words, first time home buyers who purchase a home above RM500,001 will not enjoy any stamp duty exemption from 2024 onwards.
As announced in Budget 2024, for foreigners (non-citizens and foreign-owned companies, excluding Malaysian permanent residents), a flat rate stamp duty of 4% will be imposed on the instrument of transfer of property, effective 1 January 2024.
Stamp Duty Exemptions for Transfers between Loved Ones
As announced in Budget 2024, a fixed stamp duty fee of RM10 will be introduced to replace the previous variable rate for real estate transfer documents between loved ones. This change will apply to cases where beneficiaries are relinquishing their rights to eligible beneficiaries following a will, Faraid, or the Distribution Act 1958.
Disclaimer: The information is provided for general information only. PropertyGuru International (Malaysia) Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.
Everything You Should Know About Stamp Duty in Malaysia
Stamp duty is essentially a fee on legal documents such as the instrument of transfer and loan agreement when you purchase a house.
First-time homebuyers who purchase a home valued at RM500,000 and below can enjoy full stamp duty exemption until the end of 2025. As announced in Budget 2024, a fixed stamp duty fee of RM10 will be introduced to replace the previous variable rate for real estate transfer documents between loved ones.
Stamp duty is a tax based on specific tiers, with its own percentage for each level from 1 -4% based on the value of a property transfer or loan agreement. A flat rate stamp duty of 4% will be imposed on the instrument of transfer of property involving foreigners, effective 1 January 2024.