RPGT When Selling Inherited Land: How It Is Calculated

Many heirs decide to sell inherited land once the estate has been distributed, especially when there are many heirs and no one can work the land. The usual question: is Real Property Gains Tax (RPGT, or CKHT in Malay) payable, and how is it calculated?

This guide explains RPGT basics as set out by LHDN: how the acquisition date and price of inherited land are determined, rates by holding period, exemptions, the forms and the money retained by the buyer, a worked example, and how selling, keeping the land or a JV compare in timing. General information only, not tax, legal or financial advice. Tax law changes; check your case with LHDN or a licensed tax adviser.

What RPGT is

RPGT is charged under the Real Property Gains Tax Act 1976 (RPGTA 1976) on gains from the disposal of chargeable assets in Malaysia. LHDN lists examples: houses, commercial buildings, farms and vacant land. “Dispose” includes selling, transferring or assigning.

One key point for heirs: receiving inherited land is not subject to RPGT. According to LHDN, when a deceased person’s property devolves on the executor or heirs, the disposal price is deemed equal to the acquisition price (paragraph 3(1)(a) of Schedule 2 of the RPGTA 1976), so there is no gain or loss. RPGT is only computed when an heir later disposes of the land.

Acquisition date and price of inherited land

RPGT is the disposal price less the acquisition price, and the rate depends on how long you held the land. So the two things that matter most are the acquisition date and the acquisition price. For inherited property, LHDN sets out:

The paragraph 4(1) amounts are compensation or insurance money received for damage to or depreciation of the asset, and forfeited deposits. For most inherited land there are none.

Two practical consequences:

• Market value must be evidenced. Keep a valuation report or other proof of value on the relevant date. A higher acquisition price means a lower chargeable gain.
• The date sets the rate. The period runs from the acquisition date to the disposal date. The actual date in your case (for example the date a distribution order was registered) should be confirmed with LHDN or a licensed tax adviser.

For a sale under a written agreement, the disposal date is the date of the agreement, not the date of transfer or the date the money is received (RPGT Guidelines, section 5.1).

RPGT rates for individual citizens

Rates for companies (Part II) and non-citizens (Part III) are different. For example, for non-citizens the rate is 30% for the first five years and 10% from the sixth year.

Exemptions and allowable expenses

• Individual exemption (paragraph 2 of Schedule 4): RM10,000 or 10% of the chargeable gain, whichever is greater. If you dispose of only part of your share, the RM10,000 is prorated.
• Private residence (section 8): a once-in-a-lifetime exemption for citizens or permanent residents. It is for a residence, not vacant land. The election is made through CKHT 3 in e-CKHT and cannot be withdrawn.
• Gifts within the family: a gift of real property is treated as a disposal at market value, but where the giver and recipient are husband and wife, parent and child, or grandparent and grandchild, and the giver is a Malaysian citizen, the giver is deemed to make no gain and no loss (from 1 January 2017). The recipient may take over the giver’s acquisition price if the gift is made within five years of the giver’s acquisition.
• Allowable expenses: incidental costs of disposal such as lawyer’s, valuer’s and agent’s fees, and advertising, are deducted from the disposal price. Costs of enhancing or preserving the land’s value can also count. Keep the receipts.

Worked example

If the land is co-owned by several heirs, each heir usually deals with their own share. Ask a tax adviser how each share is reported and computed.

Forms, the 60-day deadline and retained money

1. Sign the agreement The agreement date is the disposal date, and the buyer's acquisition date.
2. Disposer files CKHT 1A Within 60 days of the disposal date. From 1 January 2025, RPGT forms must be filed online through e-CKHT on MyTax; paper forms are not accepted. You need a Tax Identification Number (TIN).
3. Self-assessment From 1 January 2025, RPGT is under self-assessment: the form filed is deemed a notice of assessment.
4. Acquirer files CKHT 2A and retains money The buyer retains 3% of the consideration (7% if the disposer is neither a citizen nor a permanent resident) and remits it within 60 days. If they fail to, a 10% increase is imposed on the buyer.
5. CKHT 3 if not chargeable For example, land held more than five years by an individual. CKHT 3 is filed with CKHT 1A, and a copy is given to the buyer so they do not need to remit the retention.

Sell now, keep, or JV?

RPGT is only one factor. In terms of timing:

A JV may have its own tax treatment, including when a disposal is deemed to happen and at what value. We do not draw tax conclusions for any JV structure. Get advice from an independent licensed tax adviser before signing any agreement. A general comparison of the options is in JV, sell, lease or build yourself, and how a JV works is explained in land JV with a developer. Matters such as the payment schedule and who bears which costs can be included in the agreement.

Before selling inherited land

• Make sure the estate distribution is complete and the heirs' names are registered. See faraid and inherited land and how to apply for small estate distribution.
• If there are many heirs who don't agree, read how heirs reach agreement and divide the land.
• Get proof of the transfer date and the market value on that date.
• Keep receipts for allowable costs.
• Estimate RPGT for several possible sale dates with a tax adviser.
• Check for other problems on the land, such as caveats or quit rent arrears; see land issues.

Next steps

If you are weighing whether to sell or develop inherited land in Selangor, read the landowners page, our JV process and why RumahHQ. RumahHQ Development Sdn Bhd can prepare a free preliminary feasibility report on your land’s potential. For tax questions, consult LHDN or a licensed tax adviser.