With effect from 1 January 2018, section 21B of the Real Property Gains Tax Act 1976 has been amended in respect of ‘foreign sellers’.
A ‘foreign seller’ is an individual who neither (i) a Malaysian citizen nor (ii) a permanent resident of Malaysia.
When purchasing Malaysian property from a foreign seller, the buyer shall retain the lesser of:
- the whole of that money (if the consideration is paid partly in money); or
- a sum not exceeding 7% (previously only 3%) of the total consideration.
As before, it is the buyer who must remit such retained amount to the Inland Revenue Board of Malaysia (“IRB”) within 60 days of the date of disposal, whether or not the amount is actually retained from the seller. It is the buyer who will be penalized for failing to do so.
Therefore, the Retention Sum rates can be summarised as follows:
| Seller’s Status | Buyer to Retain |
| Non-Malaysian Citizen or Non-Permanent Resident | 7% |
| Malaysian Citizen or Malaysian Permanent Resident | 3% |
How does this impact foreign sellers of property?
Cashflow. The time taken for the IRB to first issue the RPGT assessment notice and eventually effect the RPGT refund, if any, typically takes up to a year or longer.
Thus, the significant jump in the Retention Sum rate from 3% to 7% will mean that foreign sellers of property may have to wait up to 1 year or more to receive the 7% (or whatever balance after RPGT has been deducted) to be refunded to them from the IRB.
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