Like any highly bureaucratized agency, the government of Malaysia maintains its share of unique laws and regulations. Two forms of land tax fall into the matrix of laws specific to the Southeast Asian nation. The government levies these taxes, known as quit rent and assessment tax, against landowners who meet legal qualifications. Some exemptions apply to these taxes based on the nature of land use or the organization in possession of land.
Quit rent constitutes a form of tax levied against all alienated land in Malaysia. Though mandated by federal law, state governments assess and collect all quit rent. Alienated land constitutes any leased land owned by the government, or any land formerly owned by the government. All land not owned by indigenous peoples constitutes alienated land, since the government forcefully claimed that land from the indigenous peoples at some point in history. Quit rent rates hinge on land usage—rubber farming, coffee growth, fruit orchards and other properties—and total hectares possessed.
Local councils in each Malaysian state levy assessment tax against those who provide residential housing units. The amount of an annual assessment tax hinges on the value of the property, which the state determines in most cases by the amount of rent paid on the property during the course of a year. Any repairs or improvements made to a property that increases its value impact assessment tax. As per the Local Government Act of 1976, assessment tax rates may not exceed 35 percent of the value of a property in a given year. Assessment tax comes due every sixth months. This tax applies to those who provide residential properties and those who provide residential properties with accompanying farmland for agricultural purposes.
Some organizations are exempt from assessment tax and quit rent. Local government councils may choose to exempt from assessment tax any organization not using property exclusively for profit. Owners of property housing a place of public worship, licensed burial grounds and crematoriums, public schools and public places dedicated to charity of science, literature or the arts generally don’t pay assessment tax. States may choose to exempt certain organizations from quit rent tax. The state of Selangor, for instance, exempts all registered places of public worship.
Quit rent and assessment tax is due by a certain date each year without demand from the government. Land and property owners must known state due dates and assessment rates and act of their own volition in paying the tax. Those who pay either tax after the due date must pay a fine. Malaysian states hold the legal right to begin foreclosure and reclamation proceedings on alienated land in the event of unpaid taxes, even if payment comes one day late. Malaysian states allow for the payment of quit rent online.
Quit rent systems existed in many colonial territories. Colonial governments commonly alienated, or forcefully took, land from indigenous peoples and awarded use of that land to colonial settlers. The United States had such a system before the revolutionary war. In 1760, the colonial government passed a 10 year quit rent exemption on properties in the Lake Champlain area to encourage settlements in upstate New York and Vermont. This system only persists in Malaysia in the 21st Century. Assessment tax is unique to Malaysia.
- Colliers Law Firm Malaysia: Quit Rent
- Colliers Law Firm Malaysia: Assessment Tax
- “International Master Tax Guide 2009/10”; Crowe Horwath International; 2009
- Malaysia Ministry of Finance: Land Alienation
- “Land Law and Policy and Papua New Guinea”; JT Mugambwa et al; 2002
- The Star Online; Quit-rent Exemption for Places of Worship; Wani Muthiah et al; 2008