Transfer of Property before Renouncing Malaysian Citizenship
Article 23 of the Federal Constitution enshrines the right for any citizen of over the age of 21 to renounce their citizenship when obtaining the citizenship of another country. Unsurprisingly, this has not been uncommon in recent years, yet issues of taxation are often overlooked by property-owners post-renunciation of their citizenship. As such, this article aims to highlight the differing standards in in stamp duty and Real Property Gains Tax (RPGT) applicable to Malaysian citizens and foreigners. It emphasises that acting early will enable you to avoid higher stamp duties and RPGT rates for future property transfers.
RPGT Rate of Tax for Foreigners
The RPGT is a tax levied by the Inland Revenue Board (IRB) on the profit derived from the disposal of property, payable by the seller or transferor. In other words, the tax is calculated according to the difference between the disposal price and acquisition price.
Part III of Schedule 5 in the RPGT Act 1976 outlines the differing treatment between Malaysian citizens/permanent residents and foreigners:
Category of Disposal | Rate of Tax for Malaysian Citizen/PR | Rate of Tax for Foreigners |
Within 3 Years | 30% | 30% |
In the 4th Year | 20% | 30% |
In the 5th Year | 15% | 30% |
In the 6th Year or thereafter | 0% | 10% |
Therefore, it is evident that if a property was disposed of after the renunciation of Malaysian citizenship, any desire to transfer or sell the property in the future will be subject to significantly higher rates of RPGT.
This remains applicable to transfers of property as a gift, as paragraph 12 of Schedule 2 in the RPGT Act classifies gratuitous transfers as ‘disposals’, whereby the ‘sale price’ will be equated to the market value of the asset. This means that the RPGT cannot be circumvented by virtue of transfers for no consideration.
Nevertheless, the RPGT Act creates exemptions for gifts between husband and wife, parent and child, or grandparent and grandchild, in which case the donor would be considered to have received no gain and no loss, thus essentially being exempted from the RPGT. However, it must be noted that this only applies if the donor is a Malaysian citizen.
If one were to renounce their Malaysian citizenship before transferring the property, even if the recipient falls under any one of the categories above, the RPGT rates noted in the table above apply.
Stamp Duty Rate for Foreigners
Similarly, foreigners are subjected to a higher rate of stamp duty, even if the transfer were to family members.
Stamp duty is a tax levied on legal documents and instruments of transfer. Under the Finance (No.2) Act 2023 (Act 851), amendments to the Stamp Act 1949 were made to introduce new rates for foreigners during a transfer of property. For non-Malaysian citizens/permanent residents, item 32(aa) states that a 4% stamp duty will be attached to the market value of the property.
This stands in stark contrast to the usual rate applicable to Malaysian citizens:
Value of Property | Stamp Duty |
First RM100,000 | 1% |
Any amount in excess of RM100,000, not exceeding RM500,000 | 2% |
Any amount in excess of RM500,000, not exceeding RM1,000,000 | 3% |
Any amount in excess of RM1,000,000 | 4% |
Furthermore, when ownership is transferred between family members, the Stamp Duty (Exemption)(No.3) Order 3 [P.U.(A) 178] creates exceptions on stamp duty for all instruments of transfer.[1] This is not applicable if either the donor or the recipient is not a citizen of Malaysia.
As such, foreigners who do not pre-emptively transfer their property to their family members will be subject to a flat rate of 4% for stamp duty, disregarding the value of the property or their relationship with the recipient.
Transferring Property BEFORE Renunciation of Citizenship
Therefore, this article recommends that anyone considering renouncing their Malaysian citizenship should first transfer property ownership to their immediate family members, while they are still legally classified as Malaysian citizens. This ensures eligibility for tax exemptions and preferential rates that are strictly limited to citizens — including Real Property Gains Tax (RPGT) and stamp duty exemptions for family transfers. By doing so, you maximise the available tax benefits under Malaysian law and avoid being treated as a foreigner for tax purposes, which carries significantly higher costs and fewer reliefs, all whilst ensuring that your property remains in safe and trusted hands.
Need Help?
If you’re thinking of transferring property before renouncing your Malaysian citizenship, speak to a trusted conveyancing lawyer or tax advisor. At Ng Law Firm, we assist clients with property transfers, RPGT and stamp duty planning, and conveyancing for Malaysians and foreigners alike. Contact us to schedule a consultation.
Disclaimer: This article is for informative and educative purposes only and shall not be relied upon to constitute legal or professional advice. Ng Law Firm shall not hold any form of liability wheresoever and in whatsoever circumstances including but not limited to due to the amendment of legal provisions in the event any person uses the article’s information. Should you need any help and legal advice, you may reach out to Ng Law Firm at +601154304970 or +6046024970. You may also email your enquiry to penang@nglaw.com.my.
[1] For a more detailed breakdown, read our article titled ‘Gifting a property: Property transfer for FREE through gesture of love and affection’.
