Selling Malaysian property as a foreigner: the five-year line, the 7%, the wire home.

What tax does a foreign seller pay on a Malaysian sale?

Real property gains tax: 30% on a disposal within five years after the date of acquisition, and 10% in the sixth year or later. That is Schedule 5 Part III of the Real Property Gains Tax Act 1976, which covers a disposer who is not a citizen and not a permanent resident.

Part III also covers an executor of such a person's estate and a company not incorporated in Malaysia. Schedule 5 has been in this form since 1 January 2022, when the Finance Act 2021 amendment took effect. The Bar Council states the same two figures to conveyancing solicitors, so the numbers are corroborated.

Note the acquisition date, not the completion date, is what the five years run from. Get it off the title, not off a memory.

How does the five-year line compare with a citizen's?

It is two years longer and it never ends in nil. Schedule 5 Part I, which covers individual citizens and permanent residents, runs 30% within three years, 20% in the fourth year, 15% in the fifth and nil in the sixth year or later. Part III holds 30% for five full years and then steps to 10% permanently.

Part II, for a company incorporated in Malaysia, a trustee of a trust or a registered body of persons, runs 30%, 20%, 15% and then 10% from the sixth year. So the 10% floor is shared with Malaysian companies. The nil rate is the one thing a foreign individual seller does not reach.

The practical consequence is a holding-period decision, not a rate to argue with: the difference between year five and year six is the difference between 30% and 10% of the gain.

What is the 7% retention and the sixty-day deadline?

Section 21B(1A)(b) of the Real Property Gains Tax Act: where the seller falls in Part III, the acquirer shall retain the whole of the money or a sum not exceeding seven per cent of the consideration, whichever is the less, and must pay that amount to the Director General within sixty days of the disposal.

The statute measures the 7% against the total value of the consideration, and the acquirer must pay it over whether or not it was actually retained. Failure to pay increases the amount by 10% as a debt due to the Government, so the buyer's solicitor will hold it. For contrast, the ordinary retention under section 21B(1) is up to 3%, and 5% for a Part II disposer selling within three years.

Treat the 7% as a prepayment against the gains tax, not as the final tax. It is charged on the consideration, not on the gain, so it can be more or less than what you actually owe.

Are there restrictions on when a foreigner can sell in Malaysia?

In some states, yes, and separately from the tax. Melaka's published rules state that residential and commercial property cannot be transferred or leased within five years of registration of the Form 14A transfer, with a registrar's caveat lodged for 60 months. Penang allows a foreigner to sell commercial and industrial property only three years after the agreement date.

• Perak does not permit residential subsale to a foreign buyer at all, so a foreign owner there is selling into a domestic buyer pool, not a foreign one.
• Selangor does not permit landed individual titles to a foreign buyer, which has the same effect on who your next buyer can be.
• Malaysia My Second Home participants face a programme condition rather than a state one: the official guide states that selling the residence is not allowed for 10 years, unless it is to upgrade the residence by purchasing one of higher value, and that failure to comply with any term results in the pass being revoked.

All state rows are stated as at October 2024 per Bar Council Malaysia Circular 444/2024, and the Bar Council advises confirming with the relevant state authority. The floors and the conditions, state by state: Malaysia minimum purchase price by state.

How does the transfer itself work when a foreigner sells?

By Form 14A, and title passes to the buyer on registration, not on payment of the price (section 215(2) of the National Land Code). If your buyer is also a foreign buyer, their acquisition needs the prior written approval of the State Authority, with any levy paid within thirty days of the notice of approval or the approval lapses.

Two mechanical traps for a seller who is not a citizen.

• Power of attorney. A deed or instrument executed by a non-citizen or foreign company under a power of attorney, in respect of alienated land, is void and, if an instrument of dealing, incapable of registration, unless approval was not required (section 433F(1)). Settle that before you sign anything remotely.
• The dealing fails without consent. A disposal or dealing in contravention of section 433B is null and void, and where a disposal falls outside the section 433B(1) categories the approval duty sits on the disposing party, with a fine of not less than RM100,000 for a contravention.

Can a foreigner take the sale money out of Malaysia?

Yes. Bank Negara Malaysia's FAQ on Notice 3 states that a non-resident is free to repatriate divestment proceeds, profits, dividends or any income arising from investments in Malaysia, provided it is foreign currency. There is no approval gate on taking sale proceeds out. The exit friction is the tax and the retention.

The account side is also open. A non-resident is free to open a ringgit account in Malaysia, known as an external account, can use it to pay for goods and services or to buy ringgit assets, and there is no restriction on repatriating funds in it once converted into foreign currency. A non-resident can also buy ringgit against foreign currency from an appointed overseas office of a licensed onshore Malaysian bank.

The money-in side, and the borrowing position, are on the buying pages: Malaysia property buying costs.

Header photo: xiquinhosilva, CC BY 2.0, via Wikimedia Commons. All credits: image credits.