Commercial property โ shops, offices, industrial units, and purpose-built commercial properties โ is subject to RPGT in Malaysia under the same rate schedule as residential property. However, there are key differences in available exemptions and deductions that commercial property investors must understand.
RPGT Rates for Commercial Property Malaysia
The same RPGT rate schedule applies to commercial property as residential property for Malaysian citizens: 30% within 3 years, 20% in year 4, 15% in year 5, and 0% after 5 years. Companies pay 10% permanently.
Key Difference: No Once-in-Lifetime Exemption
The once-in-lifetime residential exemption applies only to residential property โ it cannot be used for shops, offices, or industrial units. Commercial property investors must rely on the 5-year hold strategy or the standard 10% automatic exemption.
Allowable Deductions for Commercial Property
Commercial property sellers can deduct: Legal fees and stamp duty at acquisition, capital expenditure on improvements (partitioning, renovation, HVAC systems โ with receipts), real estate agency fees at disposal, and loan interest if the property was a rental investment. Note: Operating expenses and maintenance are NOT capital deductions for RPGT purposes.
RPGT vs Income Tax for Commercial Property
If LHDN determines that property transactions constitute a business (frequent buying and selling), profits may be assessed as income tax (up to 24%) rather than RPGT. Keep your investment transactions clearly documented as long-term capital investments, not trading activity.