After you buy: renting, tax, and getting out
The rules for buying get studied. The rules for holding and selling get skipped — and that is the part that decides what you actually walk away with.
Three things up front: rental income is taxed at a flat 30%, a foreigner’s real property gains tax never reaches 0%, and the legality of short-term letting is genuinely unsettled in the courts.
Rental income: 30% for non-residents
A non-resident individual’s Malaysian rental income is taxed at a flat 30%, with no personal reliefs.
The charge is under section 6(1)(a) of the Income Tax Act 1967 at the Part I Schedule 1 rate.
Correcting a citation error that is repeated almost everywhere: it is not Part II. Part II applies only to non-resident interest and royalty income and to public entertainers.
History: 26% for years of assessment 2010–2014, 25% from 2015, 28% from 2016, 30% from YA 2020.
Source: LHDN, Individu Tidak Bermastautin, page updated 26 May 2026.
“Resident” is about days, not nationality
Section 7 of the Income Tax Act sets four tests; meeting any one makes you tax resident. Citizenship is irrelevant — the section says so in terms.
- 7(1)(a): 182 days or more in Malaysia in the basis year.
- 7(1)(b): fewer than 182 days, but linked to a period of 182 or more days in the immediately preceding or following year. Temporary absences count: service abroad, ill health, and social visits abroad not exceeding 14 days.
- 7(1)(c): 90 days or more, plus resident or 90+ days in three of the four preceding years.
- 7(1)(d): resident for the following year and the three preceding years.
What this means for MM2H holders in particular: stay 182 days a year and you are tax resident, taxed on the graduated scale rather than at a flat 30%. MM2H itself only requires 90 days — which lands you squarely between the two.
Source: LHDN, Taraf Mastautin, page updated 10 August 2026.
What you can and cannot deduct
| Deductible | Not deductible (the Revenue calls these “initial expenses”) |
|---|---|
| Assessment and quit rent Loan interest Fire insurance premium Rent collection fees and legal costs of enforcing collection Cost of renewing a tenancy or changing tenant Ordinary repairs |
For the first tenant: advertising, the legal cost of preparing the tenancy agreement, stamp duty, and agent commission Put another way: what you spend letting the property for the first time is not deductible; every letting after that is. This trips a lot of people up. |
Vacant periods: if the property was previously let and remains ready to let, expenses during a temporary vacancy are fully deductible.
One classification that changes the outcome: rental is normally a non-business source under section 4(d). Where “maintenance services or support services are comprehensively and actively provided”, it can be a business source under section 4(a) — and only 4(a) allows capital allowances and the set-off of losses. Worth settling with your tax agent.
Source: Public Ruling 12/2018 (PDF), third edition, published 19 December 2018.
Filing, and the withholding that does not exist
- Form M (Individu Bukan Pemastautin). For 2026: 30 April if not carrying on a business, 30 June if you are. e-Filing has been mandatory since YA 2023, with 15 days’ additional time.
- There is no withholding tax on rent. Immovable property rent does not appear on the Revenue’s withholding list — the only “rent” entry is section 109B at 10%, and that is for movable property. Neither your tenant nor your agent has any duty to withhold; the 30% is self-assessed by you.
One piece of good news from 2026: the tenancy stamp duty exemption threshold rose from RM300 to RM3,000 a month (Finance Act 2025, section 29(a), in force 1 January 2026). Most residential tenancies are now exempt.
Real property gains tax: the column that never reaches zero
| Holding period | Part I: citizens and PRs | Part II: Malaysian companies | Part III: foreigners |
|---|---|---|---|
| Within 2 years | 30% | 30% | 30% |
| 3rd year | 30% | 30% | 30% |
| 4th year | 20% | 20% | 30% |
| 5th year | 15% | 15% | 30% |
| 6th year and after | 0% | 10% | 10% |
Read the last column against the first. A Malaysian citizen selling after five years pays nothing. A foreigner pays 10% no matter how long they hold — there is no year at which it reaches zero.
Note the fourth and fifth years too: citizens are down to 20% and 15% while a foreigner is still at 30%.
RPGT does not care whether you are tax resident — the legislation says “whether resident in Malaysia or not”.
Source: LHDN, Kadar Cukai Keuntungan Harta Tanah, page updated 23 June 2026. Part III covers non-citizen non-PR individuals, their executors, and companies not incorporated in Malaysia. Permanent residents sit in Part I.
Money is held back when you sell
The buyer — in practice the buyer’s solicitor — must retain part of the price and remit it directly to the Revenue:
| Disposer | Retention | Provision |
|---|---|---|
| Part I (citizens, PRs) | 3% | Section 21B(1)(b) |
| Part II (Malaysian companies, within 3 years) | 5% | Section 21B(1a)(b) |
| Part III (foreigners) | 7% | Section 21B(1b)(b), express in statute from 1 January 2026 |
Worked example: a foreigner disposing at RM1,500,000 has RM105,000 withheld. That money is not held in the solicitor’s client account — it goes to the Revenue, and comes back only after assessment, if at all.
A third option was added in 2026: if the disposer’s section 13(9) notification reaches the buyer before remittance, the buyer may instead retain the tax deemed assessed under section 14(1) — usually less than 7%. It has to be actioned; the default is 7%.
Forms, all within 60 days of disposal: CKHT 1A for the disposer, CKHT 2A for the acquirer, CKHT 3 to claim non-chargeability or exemption. A buyer who remits late faces a 10% increase.
Source: LHDN, Pegangan dan Remitan Wang oleh Pemeroleh, page updated 25 May 2026.
Exemptions: one probably available, one definitely not
- Schedule 4 paragraph 2 — probably available. An exemption of “RM10,000 or 10% of the chargeable gain, whichever is higher”, for individuals only (not companies). The Revenue’s page states no citizenship condition, so on its face a foreign individual qualifies. Have your tax agent confirm it — I read the Revenue’s explanatory page, not the statute.
- The section 8 once-in-a-lifetime private residence exemption — foreigners are expressly excluded. The Revenue’s wording: only Malaysian citizens or permanent residents are eligible.
Short-term letting: the courts have not settled it
Can a management corporation ban short-term letting? Two appellate decisions point different ways, and both remain good law.
What to do about it in practice: do not ask the agent whether Airbnb is allowed, and do not rely on the house handbook or the sale agreement.
Ask for the additional by-laws filed with the Commissioner of Buildings under section 70(6), which the Act requires to be filed within 30 days of any change. After Wawasan Raya, a “residential use only” house rule, a deed of mutual covenant clause, or a general section 59 power are not enough.
One more: if the building is still run by a JMB rather than a management corporation, section 32(3) limits its by-law power to common property — not the inside of your parcel.
Local authorities differ sharply
| Where | Position | Detail |
|---|---|---|
| Penang | The first state in Malaysia with dedicated short-term rental by-laws | The 2026 by-laws came into force 1 August 2026, with enforcement from 1 November 2026. All strata residential in the island city council area is barred; serviced apartments, SOHO and shophouses may operate subject to management rules. Administration fee RM50; annual licence from RM1,000 for up to three rooms, plus RM200 per extra room capped at two; plus RM1,800 per unit annually. Penalty: fine up to RM2,000, imprisonment up to one year, or both. |
| Kuala Lumpur | Permitted and regulated, not banned | No ban and no dedicated licensing regime on the city council site. A 2020 standard operating procedure and a COBKL circular exist but are behind a login, so their contents are unverified here. |
| Johor | No state or city council short-term rental regulation could be found | Legality turns entirely on the strata by-law layer — which means the two decisions above. As at 27 August 2025 the budget hotel association was still asking the federal government for a framework. |
| Selangor | Proposed, not finalised | A 180-nights-a-year cap with planning permission required above it was proposed, but was still under review as at 9 January 2026. Separately, a “Lestari Charge” tourist fee of RM2–RM7 per night took effect 1 January 2026. |
Also unverified: whether Penang’s 2026 by-laws carry forward the earlier guideline’s requirement that the owner must be a Malaysian citizen. If they do, foreign owners cannot operate short-term lets in Penang at all — the single most consequential open question on this page.
Tourism tax: RM10 per room per night (P.U.(A) 423, in operation 15 December 2025). Malaysian nationals and PRs are exempt, and operators of premises with four rooms or fewer are exempt from registering and collecting.
Rental yield: the gap between the headline and what reaches you
What a salesperson quotes is almost always the gross yield: annual rent divided by price. The arithmetic is not wrong, but it leaves out everything that costs money — and for a foreign buyer the omitted part is unusually large.
A real example first: where one 4.72% came from
This site’s page on Country Garden Danga Bay records the following: EdgeProp displayed a rental yield of 4.72% for that development — but the figure was derived from asking rents, and the platform attached its own caveat, “may not be representative”.
The same platform could compute a sale median (RM688 psf, from actual transactions) but could not compute a median leased rental.
“No median leased rental” is itself information. It usually means too few lettings actually completed to form one.
So the first question to ask about any yield figure is: is it built on asking rents or transacted ones? The two can differ widely, and asking rents always look better.
Then the supply side: Johor’s unsold stock
| Measure | Figure | Source |
|---|---|---|
| Johor unsold completed residential units | About 3,293 | NAPIC Q3 2025, as reported |
| Johor unsold serviced apartments | About 9,018 the largest of any Malaysian state |
NAPIC Q3 2025, as reported |
| National serviced-apartment overhang, same quarter | About 17,892 | NAPIC Q3 2025, as reported |
| Where Johor’s unsold stock sits | About 60% in the RM500,001–RM1,000,000 band | NAPIC Q3 2025, as reported |
| National unsold completed residential | 14,201 units worth RM2.77 billion 43.3% of the national overhang |
NAPIC Q1 2026, reported by The Star, July 2026 |
Read the last two rows together. Johor holds roughly 9,018 unsold serviced apartments, more than any other state — and about 60% of that unsold stock sits in the RM500,001 to RM1,000,000 band, immediately below the RM1,000,000 floor a foreigner has to clear in Johor.
Which means that having bought at the floor, your tenant and your eventual buyer are both looking at a large supply of cheaper, already-built, empty units. That does not make the purchase wrong. It does put a ceiling on the rent you can ask and on what you will get on resale.
Worked through: what a 3.6% gross yield actually leaves
Every input below is an assumption, not market data. The only real things here are the arithmetic and the tax rate. Substitute your own figures.
| Item | Per year | Note |
|---|---|---|
| Purchase price | RM 1,000,000 | Assumed: the Johor foreign-buyer floor |
| Monthly rent | RM 3,000 | Assumed |
| Gross yield | 3.6% | RM36,000 ÷ RM1,000,000 — this is the number you get quoted |
| Rent actually received (one month vacant) | RM 33,000 | Assumed: one vacant month a year |
| Assessment | − RM 1,200 | Assumed |
| Quit rent | − RM 300 | Assumed |
| Fire insurance | − RM 400 | Assumed |
| Agency commission on re-letting | − RM 3,000 | Assumed: one month. Note the commission for the first tenant is not deductible under the Revenue’s ruling |
| Maintenance charge + sinking fund | − RM 4,200 | Assumed: RM0.35 psf × 1,000 sq ft × 12. Deductibility unconfirmed |
| Non-resident income tax at 30% | − RM 8,430 | On RM28,100, treating the maintenance charge as not deductible |
| Cash left | RM 15,470 | |
| Actual net yield | about 1.55% | 3.6% becomes 1.55%. Rather less than half. |
If the maintenance charge and sinking fund do turn out to be deductible, the taxable figure falls to RM23,900, the tax to RM7,170, and the cash left rises to RM16,730 — a net yield of about 1.67%. Both outcomes are a long way from 3.6%.
Two things this calculation leaves out:
1. Loan interest. If the purchase is financed, interest is deductible but the repayments eat the cash flow directly — in many cases the early years are negative.
2. Real property gains tax on exit. A foreigner pays a minimum of 10%, and 30% within the first five years. The above covers the holding period only.
And a status point: 30% is the non-resident rate. Spend 182 days a year in Malaysia and you are tax resident, taxed on the graduated scale, and the outcome improves substantially. MM2H requires only 90 days — which lands you between the two.
The EdgeProp example above is the reason: a yield built on asking rents can sit a long way from what actually transacts, and on many developments the transacted rental data is too thin to form a median at all. I have no access to a reliable transacted-rental dataset, so I do not publish a market yield.
What can be done for a specific development is to check how many units in that building are currently listed for rent, how long they have been listed, and whether any lettings have actually transacted. Those three I can look up for you.
Who you can sell to — correcting a persistent claim
“A property bought by a foreigner can only ever be sold to another foreigner” has no basis in the National Land Code.
Section 433B(1) catches only dealings in favour of a non-citizen or foreign company. Nothing in Part 33A restricts a non-citizen disposing to a citizen. The words “quota” and “foreign pool” appear in the Code exactly zero times.
Equally, the Code imposes no minimum holding period. The only 30-day period in Part 33A is the levy deadline in section 433G.
Three things do constrain your exit, though:
- Selling to another foreigner re-triggers consent. The state floor is applied at the consent stage, so the price threshold effectively bites a second time. That is a structural inference; I could not find it written as an express rule in any official document, and specifically not for Johor.
- Your buyer pays 8% stamp duty. From 2026 your next foreign buyer’s cost is double what it was in 2025, and that shows up in what they will offer.
- The MM2H ten-year bar. “Selling of the residence is not allowed for 10 years”, the only exception being an upgrade. Breach means the pass is revoked.
One further point that has nothing to do with nationality but gets missed: many individual titles carry their own restriction in interest requiring state consent for any transfer, whoever the buyer is. How to read a title is in section 2.
Getting money out of Malaysia
There is no ceiling. FEP Notice 4, Part E, paragraph 8: a non-resident is allowed to repatriate funds from Malaysia, including any income earned or proceeds from divestment of a ringgit asset, subject to only two conditions —
1. the repatriation is made in foreign currency (you cannot simply wire ringgit out); and
2. the ringgit conversion goes through Part B of Notice 1 — a licensed onshore bank or appointed overseas office.
“Ringgit asset” is expressly defined to include “any property in Malaysia” — so both rental income and sale proceeds are freely repatriable.
What the bank will want: under the minimum due diligence guide, Appendix A item 6, the documents for “ringgit asset, including any income and profit due” are the sale and purchase agreement, receipt for purchase or sale, tenancy or rental agreement, and dividend payment notice. The same guide says each bank sets its own documentary requirements — there is no single national checklist.
Correcting a widely circulated figure: the “RM50,000 repatriation threshold” does not exist in the current FEP Notices.
The actual de-minimis for verification is RM10,000 per transaction (minimum due diligence guide, paragraph 10(a)). Separately, MM2H participants are listed as exempted External Account holders and sit outside the verification requirement altogether.
The “ROSS form” mentioned on some sites does not exist in the current notices either. The real systems are ROMS and RENTAS, and they are bank-side reporting systems, not forms you complete.
Carrying cash: foreign currency notes are unrestricted in amount; ringgit notes are capped at the equivalent of USD10,000. Either currency above USD10,000 equivalent must be declared to Customs.
Source: BNM FEP Notice 4 (in operation from 1 October 2025) · BNM Minimum Due Diligence Guide for Notice 4 (PDF) (updated 1 November 2025)
What this page cannot do
Everything above is the general rule. General rules do not decide your unit. Tenure, state, price and developer have to be read together before there is an answer, and all four have to be checked one at a time.
One more thing worth saying plainly: I am not a lawyer and I am not a tax adviser. This section collects the official material, dates it and cites it so you know which questions to ask. Before you sign anything, have your own solicitor confirm it against your contract.
If you want a specific development checked, WhatsApp me or send an email.
Louis Koh · 11 years in Malaysian property
Ask a specific question
If you would rather not use WhatsApp, use this. I answer them myself. Only your name and one contact method are required.