Selling & Property Gains Tax
Selling an inherited property
Selling an inherited property triggers unique capital gains tax rules under the Real Property Gains Tax Act 1976. Understanding the market-value stepped-up acquisition price under Schedule 2 Paragraph 19(3A) contrasts sharply with lifetime gifts.
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Best for
Risk level
Buyer action
| Best for | Heirs selling a property they inherited |
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| Risk level | High |
| Buyer action | Send Lewis the property, photographs of the problem with their dates, and what you have already put in writing, and he will tell you what to do next. |
Get the estate papers out first
This post works through inheriting on death and receiving a gift during a lifetime produce opposite tax outcomes in the same family What you can be taxed on when you sell an inherited property depends on figures fixed in someone else's paperwork, often years before you had anything to do with it.
The statutory charging mechanism under the Real Property Gains Tax Act 1976
Real Property Gains Tax in Malaysia is imposed under the Real Property Gains Tax Act 1976 (Act 169) upon chargeable gains arising from the disposal of chargeable real property assets. The statutory computation of a chargeable gain represents the mathematical difference between the disposal consideration received and the legally recognized acquisition price. For ordinary commercial acquisitions, the acquisition price reflects the actual purchase price paid under historical contracts. However, when property devolves upon heirs through the death of a family member, the statute prescribes specialized deemed acquisition rules that fundamentally alter the baseline financial calculation.
Schedule 2 Paragraph 19(3A): market value acquisition price upon estate transfer
The definitive statutory provision governing inherited assets is Schedule 2 Paragraph 19(3A) of Act 169. Under this provision, where an asset of a deceased person is transferred to a legatee by his executor, or by the trustee of a trust created under his will, the legatee is deemed to acquire the asset at the market value as at the date of transfer of ownership to the legatee (less any sums received or forfeited under subsubparagraph 4(1)(a), (b), or (c), and subject to subparagraph 4(3)). Paragraph 19(1) similarly governs gifts of assets on death. Rather than forcing the legatee to inherit the deceased's original historical purchase price, the legislation legally steps up the legatee's acquisition price to the prevailing market valuation on the exact date of title transfer.
The stark family contrast: lifetime gift versus inheritance upon death
This statutory mechanism creates a profound, counterintuitive contrast within the exact same family circle. Under Schedule 2 Paragraph 12(2), if a property owner executes a lifetime gift to a spouse, child, or grandchild on the basis of natural love and affection, the transaction is treated as a disposal at no gain no loss, and the recipient takes the donor's original historical acquisition price. The accumulated taxable capital gain is thus deferred squarely onto the recipient's shoulders. Conversely, if that identical property is inherited following the owner's death under Schedule 2 Paragraph 19(3A), the legatee receives a stepped-up market-value acquisition price as at the date of transfer. The entire capital gain that accrued across the deceased's lifetime effectively falls away for tax calculation purposes. This contrast is presented strictly as a factual statutory comparison; it must not be construed as estate planning advice.
Statutory disposal filing deadlines under Section 13(1)
When an heir subsequently decides to dispose of the inherited property on the secondary market, strict statutory tax compliance timelines are triggered. Under Section 13(1) of Act 169, the disposer must submit a formal RPGT return (Borang CKHT) to the Director General of the Inland Revenue Board (LHDN) within sixty (60) days of the date of disposal, or within such further period as the Director General may allow upon formal written application. Failure to file within the statutory sixty-day window exposes the disposing heir to civil penalties and administrative enforcement under the Act.
Purchaser withholding and remittance obligations under Section 21B(1)
Conveyancing solicitors executing the disposal of an inherited property must ensure statutory withholding compliance under Section 21B(1) of Act 169. Under this provision, the acquirer is legally mandated to withhold and remit to the Director General the whole of the money or a sum not exceeding three per cent (3%) of the total purchase consideration, whichever is less. This three per cent retention functions as an interim tax withholding credited against the disposer's eventual statutory assessment. Heirs must engage an accredited tax agent or consult LHDN directly to ascertain their verified net tax position before distributing estate proceeds.
Check this against your own case
Get the estate documents out before you agree a price. What you can be taxed on depends on figures fixed years ago in someone else's paperwork, and those figures are not something you can reconstruct after the fact. Confirm the position with LHDN or a tax agent before you commit to a sale.
Buyer checklist
Under the Real Property Gains Tax Act 1976 (Act 169), the statutory calculation of capital gains when disposing of real property turns decisively on the legally deemed 'acquisition price'. For inherited real estate, the governing provision is Schedule 2 Paragraph 19(3A): where an asset of a deceased person is transferred to a legatee by his executor, or by the trustee of a trust created under his will, the legatee is deemed to acquire the asset at the market value as at the date of transfer of ownership to the legatee (less any allowable sums received or forfeited under subsubparagraph 4(1)(a), (b), or (c), and subject to subparagraph 4(3)). Paragraph 19(1) similarly applies to a gift of an asset on death. This produces a stark, counterintuitive contrast within the same family: under Schedule 2 Paragraph 12(2), a lifetime gift executed between husband and wife, parent and child, or grandparent and grandchild transfers the asset at no gain no loss, passing the original donor's historical acquisition price directly onto the recipient and deferring the accrued tax liability onto them; in contrast, inheriting that exact same property following death under Schedule 2 Paragraph 19(3A) resets the legatee's acquisition price to the prevailing market value at the date of transfer, meaning the substantial capital gain accrued during the deceased's lifetime effectively falls away for tax calculation purposes. When selling the inherited asset, the disposer must submit a statutory tax return under Section 13(1) within sixty (60) days of disposal, while the purchaser is statutorily mandated under Section 21B(1) to withhold and remit to the Inland Revenue Board (LHDN) a sum not exceeding three per cent (3%) of the total consideration. Property heirs must confirm their specific tax computations directly with LHDN or a licensed tax agent.
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| 1 | Locate the formal Grant of Probate or Letters of Administration to identify the registered executor or administrator. |
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| 2 | Obtain the formal stamped transfer documentation to verify the exact date of transfer of ownership to the legatee. |
| 3 | Commission a certified valuation report establishing the open market value of the property as at that transfer date. |
| 4 | Submit the statutory RPGT disposal return under Section 13(1) within sixty (60) days of the subsequent sale date. |
| 5 | Instruct your conveyancing solicitor to handle the statutory three per cent (3%) retention under Section 21B(1) with LHDN. |
Common questions
How is the acquisition price of an inherited property determined for Real Property Gains Tax?
Under Schedule 2 Paragraph 19(3A) of the Real Property Gains Tax Act 1976, when an asset is transferred to a legatee by an executor or will trustee, the legatee is deemed to acquire it at the market value as at the date of transfer of ownership to the legatee.
Why does inheriting a property produce a different tax outcome than receiving it as a lifetime gift?
Under Schedule 2 Paragraph 12(2), a lifetime gift passes the donor's original historical acquisition price to the recipient, deferring accumulated gains onto them. In contrast, Paragraph 19(3A) steps up an inherited property's baseline to market value at the date of transfer.
What is the statutory deadline to file an RPGT return after selling an inherited property?
Under Section 13(1) of the Real Property Gains Tax Act 1976, the disposer must submit a formal return to the Director General of the Inland Revenue Board within sixty (60) days of the date of disposal.
What percentage of the purchase price must the buyer withhold and remit to LHDN upon disposal?
Under Section 21B(1) of the Real Property Gains Tax Act 1976, the acquirer is legally required to withhold and remit the whole of the money or a sum not exceeding three per cent (3%) of the total consideration, whichever is less.
Lewis Chong
REN 69566 · IQI GlobalProperty advisor helping KL, JB, and Penang buyers make data-backed property decisions.
Related reading
Use one buyer framework across different news.
Transferring a property to your child: the RPGT question
Gifting real property to your child without monetary consideration remains a disposal under the Real Property Gains Tax Act 1976. Schedule 2 paragraph 12(2) provides no-gain-no-loss relief for citizen donors, but critically defers the tax liability onto the child rather than erasing it.
Lewis Conclusion
Do not execute a deed of gift to your child thinking you have wiped away real property gains tax forever. Review the parent's historical acquisition price and retain every single original renovation and legal invoice; your child will desperately need those receipts to establish their permitted expenses when they sell decades later.
The RPGT clock starts the day you dispose, not the day you get paid
The statutory RPGT filing clock under section 13(1) starts on the exact date of disposal, not when completion takes place or purchase money is received. Understanding the sixty-day filing rule and the section 21B retention mechanism prevents costly penalties and legal complications.
Lewis Conclusion
Do not leave RPGT paperwork to the final month of completion. Instruct your conveyancing solicitor to draft and verify your section 13(1) returns immediately upon signing the sale and purchase agreement, and ensure all historical acquisition documents and permitted expense receipts are compiled within the first thirty days.
You sold at a loss - do you still have to file?
Disposing of real property at a financial loss does not extinguish your statutory obligation to file an RPGT return under section 13(1). Formally declaring an allowable loss to LHDN preserves tax relief for future real property gains and secures the return of withheld funds.
Lewis Conclusion
Never assume a loss means zero paperwork. File your section 13(1) return meticulously with all historical purchase invoices and legal fee documentation within the sixty-day deadline to lock in your allowable loss with LHDN and reclaim your section 21B retention refund without delay.
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Locate the formal Grant of Probate or Letters of Administration to identify the registered executor or administrator.
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Obtain the formal stamped transfer documentation to verify the exact date of transfer of ownership to the legatee.
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Commission a certified valuation report establishing the open market value of the property as at that transfer date.
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Submit the statutory RPGT disposal return under Section 13(1) within sixty (60) days of the subsequent sale date.