RPGT for Foreigners Selling Property in Malaysia (2026 Rates)

Foreigners pay the highest RPGT rates in Malaysia and miss out on the most valuable exemptions. They cannot claim the once-in-a-lifetime private residence exemption and they never reach a 0% rate. This is the single biggest cost most foreign investors underestimate when they model their Malaysian property returns. They calculate entry costs meticulously — stamp duty, legal fees, down payment. Then they project rental yield and capital appreciation over 5-10 years. And they forget that when they sell, the Malaysian government takes 10-30% of their profit with no once-in-a-lifetime relief and no path to a 0% rate. (Foreign individuals do qualify for the automatic RM10,000 or 10% exemption on each disposal — see below.)

If you are a foreigner who owns or is considering Malaysian property, this guide covers exactly what you will pay on exit, how the calculation works, what exemptions you do not get, and how to structure your hold period to minimize the damage.

RPGT Rate Table: Foreigners vs Citizens vs Companies

Real Property Gains Tax is charged on the chargeable gain — the profit — when you dispose of real property in Malaysia. The rates depend on two things: how long you held the property, and what category of taxpayer you are (LHDN — RPGT Rates; Schedule 5, RPGTA 1976).

Read the foreigner column carefully. For the first 5 years, the rate is a flat 30% — no taper, no reduction, no relief. In year 4, citizens drop to 20% and companies to 20%. Foreigners stay at 30%. In year 5, citizens drop to 15%. Foreigners stay at 30%.

The first meaningful relief for foreigners comes only in year 6, when the rate drops from 30% to 10%. That is not a gradual taper. It is a cliff.

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The Critical Difference: Citizens Get Zero. Foreigners Never Do.

This is the structural disadvantage that defines foreign property ownership in Malaysia. After year 5:

• Malaysian citizens and PRs pay 0% RPGT. Zero. Nothing. They can sell a property that has appreciated RM 1M and keep every ringgit of the gain.
• Companies pay 10%. A permanent floor with no time-based escape.
• Foreigners pay 10%. Also a permanent floor. No matter how long you hold — 6 years, 10 years, 20 years — you always pay 10% of the chargeable gain.

On a RM 500,000 gain, a citizen pays RM 0 after year 5. A foreigner pays RM 50,000. That is not a rounding error. That is the difference between a profitable exit and a mediocre one.

There is no mechanism for foreigners to reach 0% RPGT. Not through longer holding periods. Not through incorporation. Not through any visa programme including MM2H. The 10% floor is permanent under Part III, Schedule 5 of the Real Property Gains Tax Act 1976 (LHDN — RPGT Rates).

Limited Exemptions for Foreigners

Malaysian citizens and permanent residents have access to exemptions that can significantly reduce or eliminate their RPGT liability. Foreigners miss out on the most valuable one — the once-in-a-lifetime private residence exemption. However, foreign individuals do qualify for the automatic RM10,000/10% exemption.

Once-in-a-Lifetime Exemption

Malaysian citizens and PRs can claim a once-in-a-lifetime full exemption from RPGT on the disposal of a private residence. This can be used on any one property, regardless of the gain amount. A citizen selling a home with RM 2M in gains can use this exemption and pay zero RPGT.

Foreigners: not eligible. This exemption is explicitly restricted to Malaysian citizens and permanent residents under the RPGT Act.

RM 10,000 or 10% Automatic Exemption

For disposals not covered by the once-in-a-lifetime exemption, an automatic exemption of RM 10,000 or 10% of the chargeable gain, whichever is greater, applies to every disposal by an individual. This is provided under Paragraph 2, Schedule 4 of the RPGTA 1976 (LHDN — Exemption).

On a RM 200,000 chargeable gain, an individual can exempt RM 20,000 (10% of RM 200K, which is greater than RM 10K) and pay RPGT only on the remaining RM 180,000.

Foreigners: eligible. The LHDN website states this exemption is "available to individual only" — it applies to all natural persons regardless of citizenship. Companies, LLPs, and trusts do not qualify. This means foreign individuals do get a partial reduction on every disposal.

The exemption gap is still punishing. A citizen with a RM 400K gain in year 6 pays RM 0 (0% rate). A foreigner with the same gain pays RM 36,000 (10% on RM 360K after the RM 40K automatic exemption). The once-in-a-lifetime exemption and the 0% rate after year 5 — both unavailable to foreigners — account for most of this gap.

The 7% Retention Mechanism

When a foreigner sells property in Malaysia, the buyer (or the buyer's lawyer) must retain 7% of the total purchase price and remit it directly to LHDN (Lembaga Hasil Dalam Negeri / Inland Revenue Board) under Section 21B of the RPGTA 1976 (LHDN — Procedures for Submission of RPGT Form). This retention is submitted as a RPGT deposit within 60 days of the disposal date.

For comparison: when a Malaysian citizen sells, the retention is only 3%.

How it works in practice:

The retention is not a tax — it is a deposit. After LHDN assesses your actual RPGT liability:

• If actual RPGT < retention amount: LHDN refunds the difference. Typical refund processing time: 3-6 months.
• If actual RPGT > retention amount: You must top up the difference within the assessment period.
• If you sell at a loss (no chargeable gain): LHDN refunds the full retention amount, but you must still file the CKHT forms.

The 7% retention means RM 140,000 of your sale proceeds on a RM 2M disposal are immediately locked up with LHDN for months. This affects your cash flow timing on exit and must be factored into any reinvestment planning.

Worked Example: The Full RPGT Calculation

Scenario: A Singaporean investor bought a KL condo in January 2020 for RM 1,500,000 and is selling in March 2026 for RM 2,000,000. The disposal falls in year 6 (more than 5 years after acquisition).

Step 1: Determine the disposal period

Acquisition date: January 2020. Disposal date: March 2026. Time held: 6 years and 2 months. This falls in the "Year 6 and beyond" bracket. Foreigner RPGT rate: 10%.

Step 2: Calculate chargeable gain

Step 3: Apply exemptions

Foreigner exemptions available: RM 10,000 or 10% automatic exemption (Paragraph 2, Schedule 4, RPGTA 1976).

No once-in-a-lifetime exemption. But the automatic RM 10K/10% exemption applies to all individuals.

10% of RM 381,000 = RM 38,100 (greater than RM 10,000). Exempt amount: RM 38,100.

Taxable chargeable gain: RM 381,000 - RM 38,100 = RM 342,900.

If this seller were a Malaysian citizen in year 6: RPGT rate = 0%. Tax = RM 0.

Step 4: Calculate RPGT

RPGT = RM 342,900 x 10% = RM 34,290

Step 5: Retention and settlement

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The seller pays RM 34,290 in RPGT and waits 3-6 months to recover the RM 105,710 over-retention from LHDN. In the meantime, that RM 105,710 is cash you cannot access.

What this means in return terms: The RM 34,290 RPGT represents roughly 7 months of rental income on this property (assuming RM 5,000/month rent). A citizen would pay nothing. The foreigner surrenders 7 months of accumulated rental income to RPGT on a year-6 exit.

What If You Sell Within 5 Years?

The pain intensifies dramatically. Using the same property (bought RM 1.5M, sold RM 2M) but sold in year 4 instead:

*All individual amounts reflect the 10% automatic exemption (RM 38,100 on RM 381K gain) applied before tax calculation. The exemption applies to all individuals including foreigners.

At year 4, both foreigner and citizen pay on the same net gain (RM 342,900 after 10% exemption) but the foreigner pays 30% (RM 102,870) while the citizen pays 20% (RM 68,580). The gap is RM 34,290.

At year 6, the foreigner pays RM 34,290. The citizen pays RM 0. The gap is the entire RM 34,290.

The holding period decision is not marginal for foreigners. The difference between selling in year 5 (RM 102,870 RPGT) and year 6 (RM 34,290 RPGT) is RM 68,580. That is over 13 months of rental income saved by waiting 12 months. There is no other decision in Malaysian property investing with a better return-per-month-of-patience for foreign owners.

Can You Avoid RPGT by Holding Through a Company?

Short answer: no. Companies incorporated in Malaysia also pay RPGT. The rates:

The year 6+ rate for companies is 10% — identical to the foreigner individual rate. You do not gain any RPGT advantage by holding property through a Malaysian company.

You do, however, gain additional costs:

• Company incorporation and annual compliance costs (company secretary, audited accounts, annual returns)
• Corporate tax on rental income at 24% (vs 30% flat for non-resident individuals — actually lower for the company, but with more compliance burden)
• Deemed disposal provisions — if you transfer shares in the company rather than selling the property directly, and the company qualifies as a Real Property Company (75%+ of tangible assets are Malaysian real property), the share transfer is still subject to RPGT

The company route is sometimes used for other reasons — limited liability, estate planning, multi-property portfolio management. But RPGT avoidance is not a valid reason. The rate is the same.

Holding Through an Offshore Structure

Some foreign investors ask about holding Malaysian property through a BVI, Labuan, or other offshore company. The RPGT Act applies to:

• Any person (individual or company) disposing of real property in Malaysia
• Any person disposing of shares in a Real Property Company

An offshore company holding Malaysian property directly is still subject to RPGT on disposal. A multi-layered structure where an offshore company holds shares in a Malaysian company that holds the property is also caught — if the Malaysian company is a Real Property Company, the share disposal triggers RPGT.

There is no structural workaround to eliminate RPGT for foreigners. The Act is drafted broadly enough to capture direct and indirect disposals.

RPGT Filing Requirements

Regardless of whether you have a gain or loss, both buyer and seller must file RPGT returns with LHDN.

Forms:

(LHDN — RPGT Forms)

Deadline: Within 60 days of the date of disposal (typically the SPA completion date). From 1 January 2025, the Self-Assessment System (STS) for RPGT applies — the disposer computes the gain and RPGT payable in the return form, with payment due within 90 days of disposal (LHDN — RPGT).

Penalty for late filing: A 10% penalty on the RPGT amount (or a minimum fine) for filing beyond 60 days. For non-resident foreigners who may not be physically in Malaysia at the time of sale, your Malaysian lawyer typically handles the filing — but confirm this is included in their scope of work.

Strategy: Building RPGT Into Your Investment Model

RPGT is not a surprise. The rates are published, the calculation is straightforward, and there are no grey areas. It should be a line item in your investment model from day one.

How to model it:

1. Assume a disposal year. If you plan to hold for 8 years, use the year 6+ rate of 10%.

2. Estimate your capital gain. Malaysian residential property in KL appreciates at approximately 3-5% per annum in good locations. On an RM 1.5M purchase, 4% annual appreciation over 8 years gives a disposal price of approximately RM 2.05M — a gain of RM 550K before costs.

3. Deduct allowable costs. Stamp duty, legal fees, agent commissions on both purchase and sale. Assume RM 100K-150K in total deductible costs.

4. Apply the foreigner rate. On a RM 400K chargeable gain at 10%, RPGT is RM 40,000.

5. Calculate impact on IRR. That RM 40,000 reduces your total return. If your property generated 5.5% gross yield annually, the RPGT on exit knocks approximately 0.3-0.5% off your annualized IRR over an 8-year hold. Not catastrophic, but not negligible.

The formula to internalize:

Net Exit Proceeds = Sale Price - Outstanding Loan - Agent Commission - Legal Fees - RPGT

For foreigners, RPGT is always in that formula. For citizens selling after year 5, it drops out entirely.

A property that shows 8% gross yield may only deliver 5-6% annualized return after factoring in non-resident rental tax, RPGT on exit, and currency exposure. Run the full model, not just the gross yield.

Key Takeaways

1. Foreigners pay 30% RPGT for the first 5 years. No taper. No reduction from year to year. A flat 30% regardless of whether you sell in month 6 or month 60.

2. The floor is 10%. Permanently. From year 6 onward, foreigners pay 10%. Citizens pay 0%. This gap never closes.

3. No once-in-a-lifetime relief. Foreign individuals do get the automatic RM 10K/10% exemption on each disposal, but cannot claim the once-in-a-lifetime private residence exemption.

4. 7% buyer retention. Your buyer withholds 7% of the sale price and sends it to LHDN. You wait months for any overpayment refund.

5. Holding through a company does not help. Company rate from year 6 is also 10%. You add compliance costs without reducing RPGT.

6. Hold for 6+ years minimum. The year 5 to year 6 transition saves you 20 percentage points of RPGT. No other timing decision in Malaysian property has this magnitude of impact.

Sources

• LHDN — RPGT Rates (Schedule 5, RPGTA 1976)
• LHDN — RPGT Exemptions (Schedule 4, RPGTA 1976)
• LHDN — Procedures for Submission of RPGT Form (Section 21B retention)
• LHDN — RPGT Forms (CKHT 1A, 2A, 3)
• LHDN — RPGT (Self-Assessment System from 1 January 2025)
• Real Property Gains Tax Act 1976

For the complete RPGT guide covering all taxpayer categories, calculation methodology, and allowable deductions, see our RPGT Malaysia guide. For the broader picture of foreign property ownership rules, see our foreigner property guide and our guide on buying without MM2H. For rental income tax treatment, see our rental income tax guide.

Use our RPGT calculator to model your specific scenario with exact numbers.