by 
When you sell a factory or industrial land in Malaysia, the profit is taxed under Real Property Gains Tax (RPGT). The rate depends on who owns it and how long you held it: 30% if you sell within three years, falling to 0% for Malaysian individuals and 10% for companies and foreigners from the sixth year. The buyer’s lawyer holds back 3% of the price (7% for a foreign seller) and pays it to LHDN, and you file the RPGT return within 60 days.
Most factories in Johor are owned through a company, so the company rates are the ones most owners need. This guide covers the rates, how to work out the gain, a full example and the filing steps.
RPGT rates in 2026
| Year of disposal | Malaysian individual | Malaysian company | Foreign individual or foreign company |
|---|---|---|---|
| Within 3 years | 30% | 30% | 30% |
| 4th year | 20% | 20% | 30% |
| 5th year | 15% | 15% | 30% |
| 6th year and after | 0% | 10% | 10% |
The holding period runs from the date you acquired the property to the date you dispose of it. For RPGT, both dates are normally the dates of the SPAs, not the dates the titles changed. Budget 2026 and Budget 2027 did not change these rates.
👉 A company never reaches 0%. If you plan to hold a factory for the long term and sell it one day, that 10% is part of the real return on the investment.
How the chargeable gain is worked out
RPGT is charged on the gain, not on the price:
- Disposal price: the sale price, minus the costs of selling, such as the agent’s commission and your legal fees.
- Acquisition cost: what you paid, plus the costs of buying, such as stamp duty, legal fees and valuation fees.
- Enhancement costs: money spent to add value to the property, such as extending the factory, adding a mezzanine office or upgrading the power supply. Keep the invoices and approvals; ordinary repairs do not count.
- Gain = disposal price − acquisition cost − enhancement costs.
Individuals get an exemption of RM10,000 or 10% of the gain, whichever is higher. Companies do not get this exemption.
Example: a company sells a factory in the 7th year
| Item | Amount |
|---|---|
| Bought in 2019 for | RM2,000,000 |
| Buying costs (stamp duty, legal fees) | RM80,000 |
| Extension of the factory (with approvals) | RM300,000 |
| Sold in 2026 for | RM3,500,000 |
| Selling costs (agent, legal) | RM90,000 |
| Chargeable gain | RM1,030,000 |
| RPGT at 10% (6th year and after) | RM103,000 |
| Retained by buyer’s lawyer (3% of RM3,500,000) | RM105,000 |
| Refund due to the seller | RM2,000 |
The gain is RM3,500,000 − RM90,000 − RM2,000,000 − RM80,000 − RM300,000 = RM1,030,000. If the same company had sold in the third year, the RPGT would be 30%, or RM309,000, so the timing of a sale matters a great deal.
The 3% or 7% retention
When you sell, the buyer (through the buyer’s lawyer) must hold back part of the price and pay it to LHDN within 60 days:
- 3% of the price if the seller is a Malaysian citizen, permanent resident or Malaysian company.
- 7% of the price if the seller is not a citizen or permanent resident.
The retention is a deposit against your RPGT, not the final tax. If your RPGT is lower, LHDN refunds the difference after your return is processed. If it is higher, you pay the balance. Malaysian individuals selling after five years still have the 3% retained, and get it back after filing.
Filing the RPGT return
- The seller files the disposal return (Form CKHT 1A for individuals, the company version for companies) within 60 days of the SPA date. Most sellers ask their lawyer or tax agent to do it.
- The buyer files Form CKHT 2A and pays the retention within 60 days.
- LHDN issues the assessment. Any balance is paid, or the excess retention is refunded.
Late filing and late payment carry penalties, so give your lawyer the purchase documents, receipts and enhancement invoices early. Many sellers no longer have the papers from ten years ago; without them, you may not be able to claim the costs.
When the gain is income tax instead
RPGT applies to capital gains. If buying and selling property is your business, for example a property developer or a company that trades industrial land, the profit is taxed as business income instead, at the normal company tax rate. LHDN looks at the facts: how long you held the property, how often you sell, and why you bought it. A manufacturer selling its own factory after ten years is clearly a capital disposal.
Selling your shares instead of the factory
Some owners sell the company that owns the factory rather than the factory itself. If most of a company’s assets are Malaysian property, it is a real property company (RPC), and the sale of its shares is also subject to RPGT. Stamp duty on shares is lower than on the MOT, which is why buyers sometimes ask for this route, but there are other risks for the buyer, such as the company’s past liabilities. Get tax and legal advice before you agree to a share sale.
Frequently asked questions
Do I pay RPGT if I sell my factory at a loss?
No. If there is no gain after costs, there is no RPGT. You still need to file the return, and the 3% or 7% retention is refunded.
Is RPGT charged on the disposal of industrial land?
Yes. RPGT applies to all real property in Malaysia, including vacant industrial land and land sold to data centre developers. For current land prices, see our guide to Johor industrial land prices.
Can I reduce RPGT legally?
Keep every receipt for buying costs and enhancements, time the sale after the fifth year where you can, and check whether an individual or company holding suits your plans before you buy. These choices are best made with a tax agent at the time of purchase, not at the time of sale.
Thinking of selling your factory? See current factories for sale in Johor to compare prices, or contact Jimmy Toh for a valuation of your property.
This article is general information, not legal or tax advice. Rates and rules change, so please confirm the details with your lawyer or tax agent before you sign.
