Assessment which is also known as ‘cukai pintu’ or ‘cukai taksiran’ is a local land tax levied by the local government to fund the development and maintenance of local infrastructure and services such as street lighting, municipal waste collection, parks cleaning or any miscellaneous tasks which will contribute to the well-kept and pleasant living environment.
From residential properties like bungalows to industrial buildings like factories and manufacturing sites, all property owners must pay assessment rates. In general, if we own a property in Malaysia, we must pay assessment rates. Even if we rent out the property, we must pay these fees as the property owner. If a building is vacant, we are still obligated to pay assessment rates, but we may apply for a refund and remission rates. If we do not notify the local authority in writing within 7 days of the property becoming vacant, remission rates will apply from the date the letter is received. Some states provide exemptions from assessment rates for low and middle-income housing, so we may check the local rules to see if we are qualified.
Assessment rates are calculated based on the property’s estimated annual rental value, with the general rate being around 2-7% of that value. This value is also affected by the property’s size and type. Simply put, a small, low-cost apartment would be charged less than a large bungalow. Assume your single-story house’s estimated monthly rental is RM4,000. As a result, the estimated annual rental is RM4,000 x 12 = RM48,000. Using a 4% (landed property) rate on your estimated annual rental, you would owe the local council RM1,920 per year. As assessment rates are collected in two instalments throughout the year, we would need to pay RM960 every six months. Another example, let’s say we also own a low-cost apartment with a monthly rental of RM1,500. Thus, the annual rental would be RM1,500 x 12 = RM18,000. With a 2% interest rate (for low-cost apartments), we would owe the local council RM360 per year or RM180 per half-year.
Payments for assessment rates are generally due on the last day of February (for the first half of the year) and the last day of August (for the second half of the year), though some states may have different payment terms.
Rates imposed by the local authorities are based on the Annual Value of the property with the exception of the State of Johor and Melaka which adopts Improved Value which is also known as the Market Value. Annual Value means the estimated gross annual rent at which the holding might reasonably be expected to let from year to year with the landlord paying the expenses of repair, insurance, maintenance or upkeep and all public rates and taxes. As for Improved Value, it means the price that an owner willing and not obliged to sell might reasonably expect to obtain from a willing purchaser with whom he was bargaining for the sale and purchase of the holding. (JPPH, 2019)
Rates charged are based on a certain percentage of the Annual Value or the Improved Value. This percentage may be varied from year to year by the Local Authority with the State Authority’s approval and is subject to maximum percentage rates as determined.
