Owning a property, as we all know, is an expensive affair. Other than the upfront purchase costs, loan repayments and utility bills, you will also need to be prepared to fork out money to pay for property taxes every year!

Not too sure about the property taxes that we are speaking of? Or just simply want to find out how much these annual property taxes will cost you so you can better estimate your budget?

Then sit back, relax and read on – below is everything you need to know about the few main kinds of property taxes here in Malaysia!

• Quit Rent (Cukai Tanah)
• Parcel Rent (Cukai Petak)
• Property Assessment Tax (Cukai Taksiran/ Cukai Pintu)
• Income Tax For Rental Income
• What Will Happen If I Do Not Pay Up?

1. QUIT RENT (CUKAI TANAH)

This is the land tax imposed by your state government for all private properties (with individual title) you own in Malaysia on a yearly basis. Rates will differ from state to state, depending on the size and type of property that you own.

This tax applies to all landed property you own, which includes both leasehold and freehold properties. The property owner is usually required to pay this before the end of May every year to your state land office.

For stratified properties like condominiums, apartments, townhouses and gated communities (with individual strata title) in states other than Selangor, Kuala Lumpur, Melaka and Penang, the quit rent will be charged to the Joint Management Body. This tax payment would then be divided and billed to individual property owners together with the maintenance fee.

The Joint Management Body will be responsible to pay the Quit Rent for the entire development or housing area, and the Joint Management Body will need to accumulate enough fund from fellow owners before remitting the payment for the Quit Rent.

Quite often, the Joint Management Body was not able to accumulate or collect enough fund from fellow owners which resulted in late payment or sometime default on part of the Joint Management Body.

Any property transactions dealing with the land office, a copy of the latest duly paid Quit Rent ust be produced to the land office, failing which the land office may refuse to allow the registration of the transaction.

Since the last 4 years some of the state governments have introduced the parcel rent (cukai petak) to lessen the burden ofthe Joint Management Body.

How to calculate:
There is a set rate charged for every square foot of your property, which will vary for every state, area and property category (residence/ commercial). To find out your state and area’s rate, you should call up your local land office.

Quit Rent = Size of Property x Rental Rate

For residential properties, this usually amounts to less than RM100 every year.

2. PARCEL RENT (CUKAI PETAK)

Practically this is quit rent but imposed on individual unit of strata properties in Selangor, Kuala Lumpur, Melaka and Penang.

Under this land tax, property owners will pay based on the size of their unit (‘ main parcel’) and any accessory parcels tied to it, like the size of parking bays owned directly to the land office. This will be billed directly to the owner and not to the joint management body.

Under the previous quit rent system, the land office is not able to monitor individual parcel owners, and often property owners would face great hardship while selling their property due to other unit owners defaulting on their quit rent. This new parcel rent tax system is introduced to make life easier for everyone, including the joint management body who will not have to bear the burden of quit rent collection and late penalties.

How to calculate:
Again, there is a set rate charged for every square foot of your property and accessory parcel (eg: parking lots) that will vary for every state, area and category (residence/ commercial).

Parcel rent = [Size of Unit + Size of Accessory Parcel] x Rental Rate

3. PROPERTY ASSESSMENT TAX (CUKAI TAKSIRAN/ CUKAI PINTU)

This form of property tax is paid to your local council (Majlis Perbandaran/Daerah/Bandaraya), as the local council’s revenue to fund and finance development and upkeep of public infrastructure, as well as cleaning services and other upgrading works in the neighbourhood and city. This includes your local rubbish collection, maintenance of street lights, parks and drains, as well as road works!

This property tax applies to all type of properties including residential and commercial properties, whether unoccupied or not. The billing from the local council is issued twice a year usually in February and August, but you can also opt to pay the full amount for the entire year before the end of February.

In some states, owners whose properties are vacant can apply for exemption from paying assessment.

How to calculate:
This tax is calculated based on a set percentage rate of the estimated annual rental value of your property. Tax rates will vary for different local councils as well as the size and type of property, but generally, it should range between 2 – 7%.

Property Assessment Tax = Annual Property Rental Value x Fixed Percentage Rate Set By Local Council

4. INCOME TAX FOR RENTAL INCOME

This may not be an official property tax, but if you are a landlord (or planning to be!) you should be aware that your rental income is taxable – everything should be declared in your income tax. This ranges between 0 – 28% for Malaysian citizens and permanent residents.

This is stated in Section 4 of the Income Tax Act 1967, which says:

Subject to this Act, the income upon which tax is chargeable under this Act is income in respect of— (d) rents, royalties or premiums;

Do consult your accountant and tax agent on how to submit your annual income tax declaration.

WHAT WILL HAPPEN IF I DO NOT PAY UP?

It is against the law to not pay for any of these land taxes. And honestly, there is no excuse – you can pay these land taxes at your local post office OR online on either Pos Online or your preferred online banking platform!

Failing to do so, you will first receive a notice of payment, and a notice of arrears if payment is still not made. If you still do not pay, a financial penalty will be imposed on you.

Still refusing to pay? An arrest warrant will be issued against you, and an extra 10% charge will be imposed upon you. Authorities are also given the right to confiscate your belongings, take away items and auction your property.

For failing to declare or misrepresenting your rental income in your income tax, you run the risk of getting fined between RM1,000 to RM20,000, be jailed for a maximum of three years, or both. That is not all – you may be required to pay three times the unpaid tax amount!

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The statement and information in the articles are the opinion of the writer and meant only as a guide. Any property purchase, rental or lease involve many legal issues and other complication depending on the individual facts and circumstances. Readers and Users are strongly advised to seek professional advise including from qualified and competent lawyers, bankers and/or real estate agent to verify the information and the statement before embarking on any purchase, rent or lease of any property. To the fullest extent permitted by law, we exclude and disclaim liability for any losses and damages of whatever nature and howsoever cause and arising including without limitation, any direct, indirect, general, special, punitive, incidental or consequential.