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In this article:

• What is Stamp Duty?
• Benefits of the Stamp Duty Exemption
• Eligibility Criteria for Stamp Duty Exemption
• Stamp Duty on Loan Agreements in Malaysia
• What is Stamp Duty on Loan Agreements?
• Stamp Duty Rates for Loan Agreements
• Example Calculation of Stamp Duty on Property Purchase and Loan Agreements
• Stamp Duty Exemption for First-Time Homebuyers
• Flat Rate Stamp Duty for Foreigners
• Stamp Duty Exemptions for Transfers Between Loved Ones

Stamp Duty Exemption for First-Time Homebuyers Until 2025: A Complete Guide

If you are a first-time homebuyer in Malaysia, now is the perfect time to take the leap into property ownership. The Malaysian government has extended the stamp duty exemption for first-time homebuyers until 2025, providing significant financial relief and making homeownership more accessible. This article delves into what this exemption entails, its benefits, eligibility criteria, and how you can take advantage of this incentive.

What is Stamp Duty?

Stamp duty is a tax imposed on legal documents related to the purchase of a property. In Malaysia, it is calculated based on the property's value and can be a significant cost for homebuyers. The stamp duty typically applies to two aspects:

• Stamp Duty on Sale and Purchase Agreement (SPA): Charged on the purchase price of the property.
• Stamp Duty on Loan Agreement: Charged on the loan amount secured for purchasing the property.

Stamp Duty Rates

Property Price	Stamp Duty (% of Property Price)
First RM 100,000	1%
From RM 100,001 – RM 500,000	2%
From RM 500,001 – RM 1,000,000	3%
Above RM 1,000,000 onwards	4%

Under the Home Ownership Campaign (HOC) and subsequent initiatives, the government offers a full or partial stamp duty exemption to first-time homebuyers, aimed at encouraging homeownership and supporting the real estate market. This exemption is valid for residential properties purchased between now until end of 2025.

Benefits of the Stamp Duty Exemption

• Cost Savings: The exemption can save buyers thousands of ringgit, reducing the upfront costs of purchasing a home.
• Easier Entry into Property Market: With reduced costs, first-time homebuyers can focus their finances on down payments or renovations.
• Boost to Real Estate Market: Encourages more transactions, benefiting buyers and sellers alike.

Eligibility Criteria for Stamp Duty Exemption

To qualify for the stamp duty exemption, you must meet the following criteria:

• First-Time Homebuyer: You should not have owned any property previously.
• Residential Property: The exemption applies only to residential properties, including terrace houses, apartments, and condominiums.
• Price Range: The property’s value should be below RM500,000. For properties priced between RM500,001 and RM1,000,000, a partial exemption may apply.
• Purchase Period: The Sale and Purchase Agreement must be signed between January 1, 2023, and December 31, 2025.
• Malaysian Citizen: This incentive is exclusively for Malaysian citizens.

Stamp Duty on Loan Agreements in Malaysia

In Malaysia, stamp duty is applicable not only on the Sale and Purchase Agreement (SPA) for properties but also on loan agreements associated with property financing. Understanding how stamp duty is calculated on loan agreements is crucial for homebuyers as it affects the overall cost of acquiring a property.

What is Stamp Duty on Loan Agreements?

Stamp duty on loan agreements is a legal tax imposed by the government on documents executed in connection with financial transactions, specifically loan agreements. In Malaysia, this tax is administered by the Inland Revenue Board of Malaysia (LHDN) and applies to loans that are secured for the purpose of purchasing property, such as residential homes, commercial buildings, and land.

Stamp Duty Rates for Loan Agreements

The stamp duty on loan agreements is calculated as follows:

• 0.5% of the loan amount for loans up to RM1,000,000.
• For loans exceeding RM1,000,000, the stamp duty rate is generally 0.5% on the first RM1,000,000, plus an additional 0.5% on the excess amount.

Example Calculation of Stamp Duty on Property Purchase and Loan Agreements

Example how to calculate stamp duty on a property purchase and the loan agreement:

Property Details

• Property Value: RM750,000
• Down Payment: 10% (RM75,000)
• Loan Amount: 90% of the property price (RM675,000)

Step 1: Calculate Stamp Duty for the Instrument of Transfer

The stamp duty for the transfer of property is calculated based on the property value using the applicable rates:

First RM100,000:

RM100,000 × 1% = RM1,000

Next RM400,000 (from RM100,001 to RM500,000):

RM400,000 × 2% = RM8,000

Remaining RM250,000 (from RM500,001 to RM750,000):

RM250,000 × 3% = RM7,500

Total Stamp Duty for Transfer:

Total for Transfer = RM1,000 + RM8,000 + RM7,500 = RM16,500

Step 2: Calculate Stamp Duty on the Loan Agreement

The stamp duty on the loan agreement is calculated at a flat rate of 0.5% applied to the total loan amount:

Loan Amount: RM675,000

Stamp Duty on Loan= 0.5% × RM675,000

= RM3,375

Step 3: Total Stamp Duty Calculation

Now, combine the total stamp duty for the property transfer and the loan agreement:

Total Stamp Duty = Stamp Duty for Transfer + Stamp Duty on Loan

Total Stamp Duty = RM16,500 + RM3,375 = RM19,875

This shows property purchase priced at RM750,000, the total stamp duty, which includes both the instrument of transfer and the loan agreement, amounts to RM19,875.

REMARK:

If the buyer qualifies as a first-time homebuyer or meets other criteria for exemptions, this total may be reduced. It’s important to stay updated on any applicable exemptions or changes in stamp duty regulations to effectively manage the financial implications of property purchases. Always consider seeking advice from financial or legal professionals to navigate the complexities of stamp duty effectively.

Stamp Duty Exemptions and Special Cases

The Malaysian government occasionally offers exemptions, reductions, or remissions on stamp duty to encourage certain types of transactions or to support specific groups of individuals. Below are the major exemptions and remissions currently available:

1. Stamp Duty Exemption for First-Time Homebuyers

• First-time homebuyers purchasing residential properties valued at RM500,000 or below can enjoy a full stamp duty exemption. This incentive is available until the end of 2025, making it easier for new buyers to enter the property market.
• For properties valued between RM500,001 and RM1 million, first-time homebuyers are eligible for a 75% stamp duty exemption. However, this exemption is only valid until December 31, 2023. After this date, no exemptions will be available for homes exceeding RM500,000.
• Starting in 2024, first-time homebuyers purchasing properties priced above RM500,001 will not benefit from any stamp duty exemptions, marking a significant change in the incentives for higher-value properties.

2. Flat Rate Stamp Duty for Foreigners

Effective January 1, 2024, foreigners (non-citizens and foreign-owned companies, excluding Malaysian permanent residents) will be subject to a flat stamp duty rate of 4% on property transfer instruments. This change was announced in Budget 2024 and aims to streamline the stamp duty process for foreign property buyers while ensuring a consistent tax structure.

3. Stamp Duty Exemptions for Transfers Between Loved Ones

In Budget 2024, a significant change was announced regarding the transfer of real estate between loved ones. A fixed stamp duty fee of RM10 will now apply, replacing the previous variable rate. This exemption applies to situations where beneficiaries relinquish their rights to properties following a will, in accordance with Faraid (Islamic inheritance law), or the Distribution Act 1958.

The stamp duty exemption for first-time homebuyers is a golden opportunity to save on property costs and invest in your dream home. With the incentive in place until 2025, there’s no better time to start your property journey.

Property Genie to find your perfect home and take full advantage of this financial relief.

 

Other Article:

• Standardised Base Rate (SBR): How It Impacts Your Loans
  
• DSR Calculation: How to Calculate Debt Service Ratio (DSR) in Malaysia
• Understanding Property Taxes in Malaysia for Foreign Homeowners