What a Foreigner Pays to Sell Malaysian Property — 30% for Five Years, and It Never Reaches Zero
A non-citizen who is not a Malaysian permanent resident pays 30% RPGT on a disposal in years one to five, and 10% from year six onward. There is no drop to zero — that relief belongs to citizens and permanent residents.
The reason sits in the structure of the statute. The 1 January 2022 abolition of RPGT after five years amended only Part I of Schedule 5 of the Real Property Gains Tax Act, which covers citizens and permanent residents. Non-citizens who are not PRs fall under Part III, which was left untouched. So for you, RPGT is a permanent exit cost — it just steps down from 30% to 10% at year six.
On top of that, the buyer's solicitor must retain 7% of the disposal price as your RPGT retention. That is not the tax itself, it is cash flow — but it means you walk away from completion with materially less than the contract price, pending assessment.
Same property, different seller
A Malaysian company gets a better RPGT ladder — but do not decide on that alone
A company incorporated in Malaysia runs a different ladder: 30% within three years, 20% in year four, 15% in year five, 10% from year six. Against a foreign individual, the difference concentrates in years four and five — the same gain attracts 30% for the individual and 20% or 15% for the local company. If your likely holding period lands around four to five years, that gap is substantial.
The retention differs too: a Malaysian-incorporated company disposing within three years has 5% retained; most other cases 3%. The 7% applies to non-citizen non-PR individuals, executors of such estates, and companies not incorporated in Malaysia.
But the company route is not a cure-all. Three things first:
- It does not help with thresholds or consent. The federal guideline defines "foreign interest" to include a Malaysian company more than 50% foreign-held — so the RM1 million floor, State Authority consent and the four prohibitions all still apply.
- It has carrying costs. A foreign-owned local company needs at least RM250,000 paid-up capital, plus annual company secretarial, audit and tax filing.
- The exit is taxed under a different regime. From 1 January 2024, disposals of Real Property Company (RPC) shares by companies, LLPs, co-operatives and trust bodies fall under Capital Gains Tax rather than RPGT — 10% on the net gain (or 2% of gross disposal price for assets acquired before 1 January 2024). Disposals of RPC shares by individuals stay within RPGT.
One definitional trap worth knowing: "foreign company" under the Stamp Act is not the same as "foreign company" under the National Land Code. A Malaysian-incorporated company is not a foreign company for Stamp Act item 32 purposes (so the SPV route may sit outside the 8% entry duty), but section 433A of the National Land Code does capture a Malaysian company with 50% or more foreign-held voting shares. That divergence is a genuine trap and needs a tax adviser on your actual structure — we are not going to resolve it for you on a web page.
Even if you are willing to pay 30%, some rules stop the sale outright:
- Melaka: residential and commercial property cannot be transferred or leased for five years from the date the Form 14A transfer is registered, with a 60-month registrar's caveat on the title. If you bought to rent out, that clause ends the plan.
- Penang: a foreigner may only sell commercial and industrial property three years after the date of the SPA.
- MM2H: whichever tier, the residence you bought after approval may not be sold for 10 years — the only exit is upgrading. See the MM2H guide.
So "I'll sell in a few years" is an assumption to verify before you buy, not after. Someone buying in Melaka planning to cash out in three years does not have a tax problem — they have an impossibility.
Five things to settle before you sell
- Confirm exactly when your holding period startedIt runs from the acquisition date to the disposal date. Crossing the line between year five and year six is the difference between 30% and 10% — usually a six-figure difference.
- Check whether that state lets you sell yetMelaka five years, Penang three years for commercial and industrial, MM2H ten years. Accurate tax maths does not help if the clock has not run.
- Treat the 7% retention as a cash-flow problemThe buyer's solicitor must retain 7% of the price. What actually reaches you on completion is that much lighter, and any refund follows the assessment. Plan your onward commitments on the net figure.
- Assemble your deductible costsAcquisition cost, improvements, legal fees and agency commission all bear on the chargeable gain. Keep the receipts — done properly this saves real money. Which specific items qualify should be confirmed by your tax adviser on your facts.
- If a company holds it, establish whether RPGT or CGT appliesFrom 2024, disposals of RPC shares by companies fall under Capital Gains Tax. Whether you are selling the property itself or the shares changes the regime entirely — ask before you structure, not after you sell.
Frequently asked questions
What is the RPGT rate for foreigners selling property in Malaysia?
For a non-citizen who is not a Malaysian permanent resident: 30% on disposals in years one to five, and 10% from year six onward. Unlike citizens and permanent residents, it never falls to zero.
Why do locals pay nothing after five years but foreigners still pay?
Because the relief that took effect on 1 January 2022 amended only Part I of Schedule 5 of the Real Property Gains Tax Act — the part covering citizens and permanent residents. Non-citizens who are not PRs, executors of such estates, and companies not incorporated in Malaysia fall under Part III, which was not amended. So for a foreign owner, RPGT is a permanent exit cost.
What is the 7% withheld on completion?
It is the RPGT retention sum. Where the disposer is a non-citizen non-PR, the executor of such an estate, or a company not incorporated in Malaysia, the acquirer — in practice the buyer's solicitor — must retain 7% of the acquisition price and remit it to the tax authority. It is not the final tax, just money held back pending assessment. But it materially reduces the cash you receive on completion day.
Does holding through a Malaysian company reduce RPGT?
In years four and five, yes. A Malaysian-incorporated company runs the 30% / 20% / 15% / 10% ladder while a foreign individual pays a flat 30% for the first five years, and the retention drops from 7% to 5% (disposal within three years) or 3%. But the company route does not relieve the RM1 million floor, State Authority consent or the four prohibitions, and it carries paid-up capital and annual compliance costs. More importantly, from 2024 disposals of Real Property Company shares by companies fall under Capital Gains Tax rather than RPGT. This needs a tax adviser on your actual facts — it is not settled by "a company is cheaper".
Is there inheritance or estate tax in Malaysia?
No. The Estate Duty Enactment 1941 and the other estate duty enactments, including those of Sabah and Sarawak, were repealed with effect from 1 November 1991 by sections 45 to 46 of the Finance Act 1992. No death, estate or inheritance tax has been introduced since. That said, transferring the property to heirs still has its own process — and a non-citizen inheriting still requires State Authority consent.
Can I sell whenever I want?
Not necessarily. Beyond tax, some states and schemes impose a minimum holding period: Melaka bars transfer or lease of residential and commercial property for five years from registration of the transfer; Penang requires three years from the SPA date before a foreigner may sell commercial or industrial property; and an MM2H participant's home may not be sold for 10 years. Check your exit timeline against these before you buy.