RPGT on Inherited Property Malaysia: Rules, Exemptions & Worked Examples

Most Malaysians who inherit property assume they will pay RPGT on the original purchase price their parents or grandparents paid decades ago. That would be devastating. If your father bought a house for RM80,000 in 1990 and you sell it for RM600,000 today, a taxable gain of RM520,000 would generate a massive tax bill even at the lowest rate. Fortunately, that is not how it works. The RPGT rules for inherited property are significantly more favorable — but only if you understand them.

The acquisition price for inherited property is the market value at the date of death, not the original purchase price. The holding period depends on who disposes: for executors, it starts from the date of death; for beneficiaries, from the date of transfer. These rules together mean that many inherited property disposals attract reduced or zero RPGT. But you need to get the paperwork right and understand the mechanics. This guide covers the complete picture.

The Two Key Rules for Inherited Property

Rule 1: Acquisition Price = Market Value at Date of Death

Under Schedule 2 of the Real Property Gains Tax Act 1976 (RPGTA), when property passes from a deceased person to an executor, the acquisition price is deemed to be the market value of the property at the date of the deceased's death (LHDN — Transfer of Asset Inherited from Deceased Estate). When the executor subsequently transfers to a beneficiary, the transfer is treated as a no-gain-no-loss transaction.

This is critical. It resets the cost base.

Rule 2: Holding Period Depends on Who Disposes

The holding period — which determines which RPGT rate band applies — depends on who sells the property (LHDN — Transfer of Asset Inherited from Deceased Estate):

• If the executor sells (before transferring to a beneficiary): the acquisition date is deemed to be the date of death of the deceased (Paragraph 15B(1), Schedule 2, RPGTA 1976). The holding period runs from the date of death to the date of disposal.
• If a beneficiary receives the property and later sells: the beneficiary's acquisition date is the date of transfer from the estate. The holding period runs from that transfer date to the date of disposal.

In neither case does the holding period go back to the deceased's original purchase date. This is a common misconception.

The market value reset at date of death is favorable because it eliminates historical gains. However, the holding period does not go back to the deceased's original purchase date — it starts from either the date of death (executor) or date of transfer (beneficiary). For a citizen, the executor route may be more advantageous if the deceased passed away more than 5 years ago, as it pushes the holding period into the 0% bracket.

Worked Example: Father's Property

Facts:

• Father purchased a house in Petaling Jaya in 2005 for RM200,000
• Father passed away in 2020
• Market value of the house at date of death (2020): RM500,000
• Child (Malaysian citizen) inherits the property
• Child sells the property in 2026 for RM700,000

RPGT Calculation (assuming executor sells from estate):

Even though the property appreciated by RM500,000 from the original purchase, the estate only faces tax on the RM200,000 gain since the date of death. Because the holding period from the date of death (2020) to disposal (2026) is 6 years, the 0% rate applies for a citizen.

Important: If the property had been transferred to the child first (say in 2023 after obtaining the Grant of Probate) and the child then sold in 2026, the holding period would be only 3 years (2023 to 2026), attracting 30% RPGT. The route of disposal — executor vs beneficiary — matters enormously.

Worked Example: Recent Purchase, Early Death

Facts:

• Mother purchased a condo in KL in 2022 for RM400,000
• Mother passed away in 2024
• Market value at date of death (2024): RM420,000
• Son (Malaysian citizen) inherits and sells in 2026 for RM480,000

RPGT Calculation (assuming executor sells from estate):

Here the holding period is only 2 years because it is counted from the date of death (2024), not the deceased's original purchase date (2022). If the son had received the property in 2025 and sold in 2026, the holding period would be even shorter (1 year). The acquisition price reset to RM420,000 (market value at death) reduces the gain from RM80,000 to RM60,000, but the short holding period still results in the highest RPGT rate band.

Planning note: In cases where the deceased purchased recently, the executor may consider holding the property within the estate until the holding period from the date of death exceeds 5 years before selling, to reach the 0% rate for citizens.

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Worked Example: Foreigner Inheriting

Facts:

• Father (Malaysian citizen) purchased in 2010 for RM300,000
• Father passed away in 2023
• Market value at death: RM550,000
• Daughter (non-citizen, non-PR — e.g., Singaporean) inherits
• Daughter sells in 2026 for RM650,000

RPGT Calculation (assuming executor sells from estate):

Foreigners never reach 0%. The best rate for a foreigner is 10% from year 6 onward (LHDN — RPGT Rates). In this case the holding period is only 3 years from the date of death (not from the original 2010 purchase), pushing the rate to 30%.

Note: The automatic RM10,000 or 10% exemption (Paragraph 2, Schedule 4, RPGTA 1976) is available to all individuals including foreigners — only the once-in-a-lifetime private residence exemption is restricted to citizens and PRs (LHDN — Exemption).

Grant of Probate vs Letter of Administration

Before you can deal with inherited property, you need legal authority to act on behalf of the estate. This comes in two forms:

Grant of Probate

If the deceased left a will naming an executor, the executor applies to the High Court for a Grant of Probate. This document gives the executor the legal authority to administer the estate — including transferring or selling property.

Timeline: Typically 3-12 months depending on the complexity of the estate and court backlog.

Cost: Filing fee + lawyer fee (typically RM3,000-RM10,000 depending on estate complexity).

Letter of Administration

If there is no will, the next-of-kin must apply for a Letter of Administration. The Distribution Act 1958 (applicable to non-Muslims in Peninsular Malaysia and Sarawak) determines who the beneficiaries are and in what proportions.

For Muslim estates, the Faraid distribution rules under Islamic law apply instead.

Timeline for Letter of Administration: 6-18 months. Longer because all potential beneficiaries must consent, and the court must be satisfied that the distribution is in order.

Small Estate (RM5 Million or Below)

Since the Small Estates (Distribution) (Amendment) Act 2022 came into force in July 2024, the threshold for small estates has been raised from RM2 million to RM5 million. If the total estate value is RM5 million or below, the distribution can be handled by the Estate Distribution Unit under the Department of the Director-General of Lands and Mines (JKPTG) or the relevant Land Office — without going to the High Court. This is significantly faster (1-6 months) and cheaper.

Stamp Duty on Transfer to Beneficiary

When property is transferred from the estate to a beneficiary, stamp duty is charged at a concessionary rate.

Transfer by Love and Affection

Under the Stamp Act 1949 and prevailing exemption orders, a transfer of property between family members by way of "love and affection" qualifies for stamp duty relief — but only for transfers between:

• Husband and wife
• Parent and child
• Grandparent and grandchild

Since 1 April 2023, the stamp duty treatment for parent-child and grandparent-grandchild transfers is 100% exemption on the first RM1 million of the property value, with 50% exemption on any excess above RM1 million. The recipient must be a Malaysian citizen. For spousal transfers, a 50% remission on stamp duty applies.

Transfer Under Estate Distribution

A transfer from a deceased's estate to a beneficiary pursuant to a Grant of Probate or Letter of Administration is treated as a transfer by operation of law. The stamp duty treatment:

The exact exemption depends on the instrument and the state. Practically, most estate-to-beneficiary transfers under a Grant of Probate attract either zero or nominal stamp duty. Consult your lawyer for the specific application.

Multiple Heirs and Joint Ownership

When multiple beneficiaries inherit a property, issues arise:

Option 1: Transfer to One Beneficiary (Others Renounce)

The other heirs renounce their share. The property transfers wholly to one beneficiary. This is clean and simple but requires all heirs to agree.

• RPGT implications: Only one person holds the property. On future sale, that person's RPGT is calculated as described above.

Option 2: Joint Ownership

All heirs become registered co-owners. This creates complications:

Option 3: Sell and Distribute Proceeds

The executor or administrator sells the property and distributes cash to the beneficiaries according to the will or Distribution Act. This avoids co-ownership issues.

• RPGT: Charged at the estate level before distribution. The estate is treated as the disposer.

Recommendation

For investment purposes, Option 1 (single ownership) or Option 3 (sell and distribute) is preferable. Joint ownership of inherited property is a frequent source of family disputes and transaction paralysis.

RPGT Filing for Inherited Property

Filing Deadline

The RPGT return must be filed within 60 days of the disposal date (date of the SPA for the sale). From 1 January 2025, the Self-Assessment System for RPGT (STS RPGT) applies — the disposer computes the chargeable gain and RPGT payable in the return form, with payment due within 90 days of disposal (LHDN — RPGT).

Required Forms

Documents to Attach

• Copy of Grant of Probate or Letter of Administration
• Death certificate
• Valuation report showing market value at date of death
• SPA for the disposal
• Your IC or passport

Valuation at Date of Death

You will need a valuation report from a registered valuer (BOVAEA-registered) stating the market value of the property at the date of death. This is used to establish the acquisition price.

Cost of retrospective valuation: RM500-RM2,000 depending on property type and how far back the valuation date is.

If the date of death is recent (within 1-2 years), obtaining comparable transaction data is straightforward. For deaths that occurred many years ago, the valuer may need to rely on index-based adjustments, which LHDN may challenge.

The Once-in-Lifetime Exemption

Malaysian citizens and permanent residents are entitled to a once-in-lifetime RPGT exemption on the disposal of a private residence (Section 8, RPGTA 1976; LHDN — Exemption). This applies to inherited property too — provided:

1. You (the heir) have not previously used this exemption
2. The property qualifies as your private residence (you lived in it)
3. You are a Malaysian citizen or PR

If the inherited property was the deceased's private residence and you have been living in it, you may be able to claim this exemption — eliminating the entire RPGT liability.

This is the most powerful RPGT exemption available. Do not waste it on a small gain. If you have multiple properties, use it on the disposal with the largest chargeable gain.

Summary: RPGT on Inherited Property Decision Tree

Common Mistakes

1. Using the original purchase price instead of market value at death. This is the most expensive mistake. Always use the market value at the date of death.

2. Assuming the holding period goes back to the deceased's original purchase date. It does not. For executors, the holding period starts from the date of death. For beneficiaries, it starts from the date of transfer. This is a critical distinction that affects which RPGT rate band applies.

3. Not obtaining a valuation report. Without a formal valuation at the date of death, LHDN will use their own estimate — which may not be in your favor.

4. Wasting the once-in-lifetime exemption on a small gain. If your chargeable gain is RM20,000 and RPGT is 0% anyway, do not claim the once-in-lifetime exemption. Save it for a larger future disposal.

5. Delaying the sale to "wait for better prices" without considering that the acquisition price is already locked at the death date. Any appreciation after the death date increases your chargeable gain.

Sources

• LHDN — Transfer of Asset Inherited from Deceased Estate
• LHDN — RPGT Rates (Schedule 5, RPGTA 1976)
• LHDN — RPGT Exemptions (Schedule 4, RPGTA 1976)
• LHDN — Disposal Price Deemed Equal to Acquisition Price
• LHDN — RPGT Forms
• Real Property Gains Tax Act 1976 — Schedule 2 (Paragraph 15B)
• Distribution Act 1958 — intestate succession for non-Muslims
• Small Estates (Distribution) (Amendment) Act 2022 — RM5M threshold effective July 2024

Related Reading

• RPGT Malaysia (2026): Rates, Exemptions & Calculator
• RPGT Calculator