Quit rent is an annual land tax imposed on private properties in Malaysia while parcel rent is its equivalent for stratified properties – both are payable to the state authority. Meanwhile, assessment tax (Cukai Taksiran) is collected by local authorities to finance the construction & maintenance of public infrastructure.
Managing your household finances is a big part of becoming an independent homeowner. One important cost many new property owners tend to neglect is the land taxes that must be paid to the local authorities each year. Often too late that they find to their dismay, that they have to pay a form of penalty down the road.
In Malaysia, land taxes come in the form of the quit rent, parcel rent and assessment rates. If this sounds unfamiliar to you, don’t sweat it, as we will explain the ins and outs of these three charges.
What is quit rent and who has to pay for it?
Quit rent or as it is commonly known as Cukai Tanah, is the land tax imposed on owners of qualifying properties by the respective state governments. The state government’s Land Office or Pejabat Tanah Dan Galian (PTG) would assess and evaluate the land on which the property is upon, and bill the owners annually. You will need to pay your quit rent each year for as long as the property is under your ownership.
How is quit rent calculated?
The quit rent is calculated by multiplying the size of an owned property in sq ft or sq mtrs by a specified rental rate. For example, if the specified rate is RM0.035 per square foot and your property is 2,000 sq ft, your quit rent would be RM70 (RM0.0035 X 2,000)
Do take note that the quit rent would not necessarily be the same for all properties of the same size as each state might have different rates and therefore, it’s important to check with your local land office on what the specific rate is.
Now, the above explanation works well for landed properties but what about stratified properties such as condominiums, apartments and townhouses, etc? How would the quit rent for those types of properties be calculated?
Traditionally, the quit rent for stratified properties are charged as a master quit rent to the Joint Management Bodies (JMB), who would then divide it amongst the parcel owners and bill it to them individually together with their maintenance charges.
For example, if an apartment block consists of 20 parcel units and is situated on top of a 4,000 sq ft plot of land, the quit rent of RM200 (at the rate of RM0.05 per square foot) would be divided amongst the parcel units and each owner would only need to pay RM10 as quit rent, annually.
However, this system was changed on 1 June 2018 in Selangor, when the state created a new land tax to replace the quit rent for strata properties, called the parcel rent or Cukai Petak.
What is parcel rent and who has to pay it?
The parcel rent is governed by the Strata Management Act (SMA) 2013 and the Strata Titles Act (STA) 1985 and applies to developments which land it was built on has been split into parcels.
Unlike the previous billing system where parcel owners would be billed the divided portion of their quit rent in their maintenance charges; under the parcel rent – each parcel owner would be billed the entire square footage of the building. Furthermore, the billing and collection of payment of the parcel rent would be handled by the Land Office or PTG.
What is a parcel rent bill in Malaysia?
Therefore, using the previous example above, this means that each parcel owner would have to pay the full quit rent of RM200 to the Land Office annually. Understandably, this came as a shock to many strata property owners as their parcel rent skyrocketed so suddenly after the conversion – the RM10 paid previously is 20 times less than the current amount!
If you are wondering where you can pay your quit rent in Selangor, PTG Selangor has recently introduced an online payment method at ehasil.selangor.gov.my.
But why was Quit Rent converted to parcel rent for strata properties?
The change from the old system to the parcel rent was to ease the transfer of ownership of strata properties. Previously, owners who wanted to sell or transfer the ownership of their property would face great difficulties in doing so if the Land Office records show that the other parcel owners had not paid their quit rent.
Under the new parcel rent system, the Land Office is able to individually monitor the defaulters and this would not complicate the process of any owners who wished to sell or transfer their property.
Following this, Penang has also implemented the parcel rent system in 2019 and Kuala Lumpur followed suit in January 2020.
What are property assessment rates and who has to pay for it?
The second of the land taxes is the assessment rates or better known as Cukai Taksiran or Cukai Pintu. This is the local land tax collected by the local councils to pay for developing and maintaining the local infrastructure and services. Examples include:
- Erecting and maintaining the street lamps
- Cleaning and maintaining the public parks
- Collecting municipal rubbish
- Construction and maintenance of public infrastructure, etc.
Assessment rates are payable by all residential and commercial property owners. As long as you own a property, you have to pay the assessment rates regardless of whether it is occupied or not. The same rule applies to quit rent and parcel rent. In short, you cannot run from paying your land taxes!
Having said that, you may apply for a refund and remission rates from your local authority if your property is unoccupied. The application must be made within 7 days from the date of vacancy, otherwise, the local authority would take the effective date of vacancy as the date that the application was made.
It is also worth noting that some states offer assessment rates exemptions for low and mid-cost housing, so do check if you qualify for said exemption.
How is assessment tax calculated in Malaysia?
Assessment rates are calculated based on the estimated annual rental value of your property with the general rate being around 2-7% of that estimated value. This value also depends on the size and type of property. Simply put, this means that a small, low-cost flat would be charged less than a large bungalow.
Say for instance, the estimated monthly rental of your single storey house is RM4,000. Therefore, the estimated annual rental would be RM4,000 x 12 = RM48,000.
Taking the rate of 4% (the rate for landed property) from your estimated annual rental, and you would owe the local council RM1,920 annually. As assessment rates are collected in two separate payments during the year, you would pay RM960 every 6 months.
Now, let’s say you also own a low-cost apartment and the estimated monthly rental is RM1,500. Therefore, your estimated annual rental would be RM1,500 x 12 = RM18,000.
Using the rate of 2% (for low-cost apartments), you would owe the local council RM360 annually or RM180 per half-year.
Please refer to the DBKL website for the assessment rates for Kuala Lumpur.
Generally, payments for the assessment rates would fall on the last day of February (for the first half of the year) and the last day of August (for the second half of the year, although do note that some states may vary their payment terms. If you’re the type of person who prefers to make all your payments in advance, you can make the full year’s payment before the end of February to avoid any penalties.
The payments for the quit rent, parcel rent and assessment rates may be made through e-banking or over the counter at any post office or your local land office/land councils.
What if you default on your land tax payments?
Under the law, you are compelled to pay your quit rent, parcel rent and assessment rates. If you delay in making timely payments, a notice of arrears would be sent to you, notifying you of the payments due, as well as the financial penalty imposed.
If you still neglect to make payment after the notice has been issued, the state and local council have the authority to issue a warrant of arrest against you as well as to impose a fine for the issuance of the warrant of arrest.
Once the warrant of arrest has been issued, the authorities may:
- Seize any removable items from the premises
- Take a court action
- Auction the property or land
Tenants should also be aware that the property could be seized if their landlord fails to pay their land taxes. As such, it is prudent that you check with your landlord that they have paid all their land taxes to avoid such a situation.
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