When selling a property in Malaysia, part of the sale price may need to be withheld by the buyer and paid directly to the Inland Revenue Board of Malaysia (LHDN) to cover the seller’s Real Property Gains Tax (RPGT). This is the withholding and remittance arrangement under Section 21B of the Real Property Gains Tax Act 1976.
If the seller is an individual who is neither a Malaysian citizen nor a Malaysian permanent resident (PR), the withholding rate that generally applies is 7%.
This amount affects how much of the sale price the seller actually receives at the time, but 7% is the withholding rate, not the final RPGT rate.
The Buyer Is Responsible for Withholding, and the Money Goes Toward the Seller’s Tax
Section 21B places responsibility for withholding and remitting this amount on the buyer. In practice, an appointed lawyer can help handle this, but both parties should still confirm that the filing, payment and receipt have actually been completed.
This arrangement is not limited to foreign sellers; different categories of seller have different withholding rates. This article focuses on the general case of an individual seller who is neither a citizen nor a PR.
How Is the 7% Calculated?
Where no other applicable arrangement is used, the withholding amount is the lower of the following two figures:
- 7% of the total consideration for the disposal
- The total money consideration involved in the transaction
For example, if a property is sold for RM1,000,000 paid entirely in cash, the withholding amount under the general calculation would be RM70,000.
If a transaction involves both money and non-money consideration, the total money consideration needs to be compared against the amount calculated under the 7% rate above.
“Money consideration” here does not mean just the deposit the buyer has paid so far, and it does not mean physical cash. A seller should not treat the amount already received as the cap for this calculation simply because only part of the sale price has been paid at that point.
The 60-Day Deadline Cannot Be Counted From Completion
The buyer generally has to complete the withholding remittance within 60 days of the tax disposal date. From the buyer’s side, the official self-assessment guidance also counts from the acquisition date; in the same transaction, the buyer’s acquisition date and the seller’s disposal date are, in principle, the same date.
This date is not necessarily the day the keys are handed over or the day the final payment is collected in full. For a transaction with a written sale and purchase agreement, the date is generally taken as the agreement date; where special conditions apply, this should be confirmed with the handling lawyer.
Because of this, the remittance funds and deadline should be arranged as soon as the agreement is signed. It should not be assumed that payment can be deferred just because completion has not yet taken place.
From the 2026 Assessment Year, a Lower Deemed Assessment Amount Can Be Used
For disposals from the 2026 assessment year onward, LHDN has added an option: if the seller notifies the buyer of their deemed assessment tax amount before the buyer makes the withholding remittance, the buyer can include that amount in the comparison and withhold the lower figure.
For the category of seller covered in this article, the comparison is between:
- The total money consideration
- 7% of the total consideration for the disposal
- The deemed assessment tax amount, where the notification conditions are met
For example, in the same RM1,000,000 all-cash transaction, if the seller’s deemed assessment tax amount is RM25,000 and the required notification is completed before the withholding remittance, the buyer can withhold RM25,000 instead.
This is not something that can be reduced by a verbal estimate. If the buyer has not received the notification before making the remittance, this lower-amount option cannot be used retroactively. A seller who wants to use this arrangement should prepare the tax calculation, filing and notification documents early.
After Self-Assessment, the Buyer’s Withholding Does Not Replace the Seller’s Filing
Disposals from January 1, 2025 onward fall under the RPGT self-assessment system. The seller has to calculate the chargeable gain and the tax due; the filed return is treated as the notice of assessment, and generally payment no longer has to wait for a separate notice from LHDN.
The general timeline is as follows:
| Matter | Responsible Party | Deadline |
|---|---|---|
| Submit the seller’s RPGT filing | Seller | Within 60 days of the disposal date |
| Section 21B withholding remittance | Buyer | Within 60 days of the acquisition/disposal date |
| Pay the RPGT due or the balance in full | Seller | Within 90 days of the disposal date |
Filing is done through the e-CKHT system on MyTax. When the buyer remits the withheld amount, the corresponding payment reference number from the e-CKHT 2A acknowledgment slip should be used, and the payment record should be kept.
The 90-day deadline is counted from the disposal date, not from 90 days after the filing is submitted.
What Happens With a Shortfall or a Refund After the Withholding Is Paid?
The amount the buyer withholds is applied against the seller’s RPGT:
- If the withheld amount is less than the tax due, the seller has to pay the difference.
- If the withheld amount is more than the tax due, the excess is refunded through LHDN’s procedure.
For example, if RM70,000 has been withheld but the RPGT due is RM90,000, the seller still has to pay the remaining RM20,000. If the tax due is instead RM25,000, there is a RM45,000 difference to be refunded through the procedure.
A refund should not be treated as funds that are immediately available to use. When planning to pay off a loan, buy another property, or remit funds after a sale, the amount that may temporarily sit in a tax account should be factored in.
Frequently Asked Questions
The buyer has already withheld 7%. Do I still need to file taxes?
Yes, the filing still has to be done as required. The buyer’s withholding obligation and the seller’s filing obligation are separate, and the amount withheld may not be enough to cover the full RPGT due.
I estimate the actual tax will be small. Can I just ask the buyer to withhold less?
No, this cannot be based on an estimate or an agreement between the parties alone. The lower-amount option available from the 2026 assessment year requires the seller to notify the buyer of the deemed assessment tax amount before the withholding remittance, following the required comparison.
The buyer hasn’t paid the full price yet. Can the withholding remittance wait until after completion?
No, it cannot simply be deferred because completion has not happened yet. The deadline should be calculated from the statutory tax dates, and the funds should be arranged with the handling lawyer in advance.
Disclaimer
This article explains the general arrangement for a property sale by an individual who is neither a citizen nor a Malaysian permanent resident. Where exemptions, non-chargeable disposals or other special transactions are involved, the withholding and remittance requirements need to be checked separately; actual filing and payment should follow the transaction documents and LHDN’s current rules.
Have a question about this guide? Leave a comment below, or ask Zagdim directly.
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