What is stamp duty? Stamp duty is basically a tax on legal documents payable to the Inland Revenue Board (IRB). Any form of transaction such as mortgage or property purchase are subjected to a stamp duty and this amount varies depending on the price paid for the property. In essence, the greater the price of the property, the higher the stamp duty charges will be.

Many first-time homebuyers often neglect or forget to factor in stamp duty into their budget which can add up to quite a hefty sum of money, causing them a lot of problems when the time to pay.

There are generally two different category of Stamp Duty that a purchaser can be liable for, which are Fixed Duties and Ad Valorem Duties. ‘Fixed duties’ are fixed charges usually approximately RM10 per unit of stamped document, while ‘ad valorem duties’ are calculated based on a tiered system with regards to the purchased price of the property. The ad valorem duties rate is as shown in the table above (as of 27 November).

Stamp duty rates in Malaysia

Value of the purchased price 2018 Rates 2019 Rates
RM0 – RM100,000 1% 1%
RM100,001 – RM500,000 2% 2%
RM500,001 – RM1,000,000 3% 3%
RM1,000,001 and above 3% 4%

Stamp Duty on Memorandum of Transfer

One of the most common instruments for stamp duty would be stamp duty on the Memorandum of Transfer (MoT). MoT is a legal document used to transfer the title of the property to the purchaser’s name.

In Malaysia, if you are purchasing from the primary market, i.e. from developers, there are instances when the stamp duty is subsidised by the developer. However, for secondary property, the buyer will have to bear the cost of the stamp duty.

In the recent 2019 budget, the Malaysian government has decided to increase the stamp duty to 4% for property valued above RM1,000,000. In fact, this increment was actually proposed in the 2018 Budget however it was not implemented in 2018.

However, to encourage more first-time home owners, Budget 2019 has announced that the stamp duty is waived on the first RM300,000 for houses priced up to RM1 mil, which translates into a savings of RM5,000.

Besides the property transfer document, there is also stamp duty payable on the loan agreement if you are to obtain financing from a bank. The Budget 2019 also provided stamp duty waiver on the loan agreement of up to RM300,000 for first-time home buyers on residential properties priced up to RM500,000, providing a further savings of up to RM1,500.

Comparison of Property Tax

Before we start complaining about how this increment of tax will result in more financial difficulty for the population, let us take a quick look at our neighbour country, Singapore.

Similar to Malaysia, Singapore imposes a tiered buyer’s stamp duty – 1% on the first SGD180,000, 2% of the next SGD180,000, 3% for the following SGD640,000 and 4% for the remaining amount.

In addition to the buyer stamp duty, there is also an “Additional Buyers Stamp Duty” which can range anywhere from 5% to a whopping 20%, depending if you are a citizen, Permanent residence or foreigner! Thus, just the tax on purchasing properties in Singapore can cost up to additional 30%. The Lion City also “seller’s stamp duty” on property sales which could be up to 16% for residential property!

Similarly, for Australia, Vietnam and Philippines, besides the already high GST or VAT in those countries, there are hidden cost in property taxes that will need to be considered. So, do your homework well when investing in overseas properties.

Now taking a step back, the recent increase of stamp duty from 3% to 4% are only applicable for properties above RM1 mil. Looking at Malaysia today, with the news we have been receiving from the Ministry of Finance on the financial status of the country, it is expected for some increment of percentage for stamp duty.  However, this increase only affects a certain segment of the market and will make no difference at all for buyers of property below RM1 mil.

Chan Ai Cheng is General Manager of SK Brothers Realty (M) Sdn Bhd, a company in the business of real estate since 1979 in Malaysia.