ETM 3407 Property Taxation : Rating ( assessment

rates )
manco-decodes.blogspot.com/p/etm-3407-property-taxation-chapter-5.html

Other name for assessment rate in Malaysia : 

..
cukai taksiran, cukai pintu,  kadaran cukai pintu

LEARNING OUTCOME

Student are able to :

a. identify relevant provision in the Local Government Act 1976

b. identify the authority governs rating [assessment] exercise

c. explain the basis of assessment and assessment rates

d. explain an appeal, relief and exemption (if any) available

to rating.

e. explain the valuation list and its uses in local authority assessment tax

Nature and Incidences

• a local government tax imposed under Part XV [Rating & Valuation], Local Government
Act 1976 (Act 171)

holdings [real property] within local authority/municipal council
• imposed all rateable
jurisdiction for the service rendered

• paid by the owner or occupier of rateable holdings to the respective local authority.

• payable half yearly in advance to the respective local authority in the month January
(January – June) and July (July – December).
• Contribution in Aid of Rate [CAR] are paid by federal government, state government or
their agencies on rateable holdings own by them situated in the jurisdiction of a
respective local authority in lieu of the rates leviable on such properties.

PURPOSE OF LEVYING RATING [ASSESSMENT RATES]

The main purpose of levying rating [assessment rates] is to provide the local authority
with the revenue it requires for providing public services such as street lighting, waste
disposal, road repairs and etc.

RATING PRINCIPLES

General principle to be observed in the preparation of valuation for rating purposes :

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i. Rebus Sic Stantibus – from latin words mean ‘as things stand’. The rateable holdings
must be valued on the assumption that at the relevant date:

a.physical state and actual use of the rate-able holding 

b.any relevant factors affecting the mode or character of occupation,
c. the occupation and use of other premises in the locality, the transport services
and other facilities and amenities in the locality were the same as they were at the
time the assessment is made.

ii. Hypothetical tenant – The hereditament (rateable holdings) being valued must
assume to be vacant and let. Hypothetical tenant would include all possible occupiers
including the actual occupiers.

iii. Tone of List - is to be taken as the general level of the valuation prevailing in the
assessment lists of each authority in any given year. Once this general level has been
established, it will be adopted for rating purposes. This is done in the interest of
uniformity. Example : corner house & intermediate house

RATING AUTHORITY

assessments for rating purposes has been the responsibility of the local Authority
as provided in PART XV , Local Government Act 1976 (ACT 171)
Sec 127 - The local authority may, with the approval of the State Authority, from time
to time as is deemed necessary, imposed either separately or as a consolidated
rate, the annual rate or rates within a local authority area for the purposes of this Act
or for other purposes which it is the duty of the local authority to perform under any
other written law

LOCAL GOVERNMENT ACT 1976 [ACT 171]

Sec 2 – Interpretation 

“local authority” means any City Council, Municipal Council or District Council as
the case may be, an in relation to the Federal Territory means the Commissioner of
the City of Kuala Lumpur appointed under section 3 of the Federal Capital Act,
1960.
“improvements” in relation to a holding means all work done or material used at
any time on or for the benefit of the holding by the expenditure of capital or labour
by the owner or occupier thereof in so far as the effect of the work done or material
used to increase the value of the holding.
“holdings” means any land with or without buildings thereon, which is held under a
separate document of title and in the case of subdivided buildings, the common
property and any parcel thereof and, in the case of Penang and Malacca “holdings“
includes messuages, buildings easements and hereditaments of any tenure,
whether open or enclosed, whether built on or not, whether public or private and
whether maintained or under statutory authority

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 “rateable holding” means a holding which is subject to the payment of a rate
made and levied under this Act.
“land” includes things attached to the earth or permanently fastened to anything
attached to the earth;
“building” includes any house, hut, shed or roofed enclosure, whether used for
human habitation or otherwise, and also any wall, fence, platform, underground
tank, staging, gate, post, pillars, paling, frame, hoarding, slip, dock, wharf, pier, jetty,
landing stage, swimming pool, bridge, railway lines, overhead or underground
pipelines, or any other structure, support or foundation.
“annual value” means the estimate gross annual rent at which the holding might
reasonably be expected to let from year to year the landlord paying expenses of
repair, insurance, maintenance or upkeep and all public rates and taxes; 
“improved value” of holding 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 sale and purchase of a holding

Sec 130 – Basis of assessment 

Assessment rate imposed may be assess upon annual value of the holdings for
most state in Malaysia or upon improved value of the holdings for the state of Johor 
In estimating annual value no account shall be taken of any restrictions or control on
rent (applicable to prewar building)
The annual value of the land which is vacant, partially occupied or partially built
upon, shall be defined as on either an annual value or 10% of market value as the
annual value.
The annual value of the following land shall be taken at 10% of market value as the
annual value.

i. which is partially occupied or partially built upon

ii. which is vacant, unoccupied or not built upon;

iii. with an incomplete building; or iv. with a building which has been certified by the local
authority to be abandoned or dilapidated or unfit for human habitation

If there is a building in the case of (ii) & (iii), then the building should be ignored.
If it were vacant land with no buildings there on, the local authority with approval by
State Authority, may reduce the percentages to a minimum of 5% of the market
value.
The definition of improved value is similar to capital/market value of the holding.

ASSESSMENT RATES CALCULATION

Annual Value Basis Assessment = Annual Value X Assessment Value Rate

annual value can be revised every 5 years

Improved Value Basis

Assessment Value  =  Improved Value X Assessment Rate

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RATES FOR ASSESSMENT
Rates are varies from one local authority/municipal council to the other.

Rates below are applicable to holdings situated in Majlis Bandaraya Shah Alam [MBSA]
jurisdiction.

Below are rates applicable to holdings located within Majlis Bandaraya Johor Bahru
[MBJB] jurisdiction.

residential

commercial
industrial

agricultural
malay reserve

PROPERTY EXEMPTED FROM ASSESSMENT RATES

Sec 134 – Exemption from rates 

The State Authority may at its discretion exempt such holding or such part thereof from
the payment of any rate when any building or part thereof used exclusively –

a. as public places for religious worship

b. as licensed public burial grounds or crematoria

c. for public schools;

d. as public places for
charitable purposes or for the purposes of science, literature or the
fine arts, and not for pecuniary profit.

REMISSION AND REFUND OF RATES

Sec 163 – Remission or refund of rates

is applicable where a building is not occupied and no rent is payable. In such a

case, the Local Authority/Municipal Council may order that a portion of the rates be
refunded or remitted.
Conditions For The Application Of Remission / Refund of Rates 

a. The building is unoccupied and no rent is payable for a period exceeding 1 month after
the expiry of the relevant half year, i.e. before 31 January/31 July.
b. Notice in writing has been given to the Valuation Department of
the Local Authority
within 7 days of the commencement of the vacancy. Applications for remission / refund of
rates must be sent not later than 1 month from the date of expiry of the relevant half year,
i.e. before 31 January / 31 July.

d. Show proof that the building is in good repair and fit for occupation.

e. Reasonable efforts have been made to obtain a tenant, for example, by using the
services of a real estate agent or advertising in the newspapers or displaying a 'For
Rental' sign at the building.

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OBJECTION & APPEAL AGAINST ASSESSMENT RATES
Owners have the right to object to the Local Authority on the rateable value placed on
their holdings. Owners also have a right of appeal to the High Court.

Sec 147 – Objection and Appeal ( Important )

• any person aggrieved with the assessment imposed may make objection in writing
within a period of one month from the date of the Assessment Notice. Objections may be
made on the following grounds:

a. that any holding ( property ), which is rateable, is valued beyond its rateable value;
b. that any holding valued is not rateable;

c. That any person who, or any holding which ought to be included in the Valuation List is
omitted there from;
d. That any holding
is valued below its rateable value, or

e. That any holding or holdings which have been  jointly or separately valued ought to be
valued otherwise.

VALUATION LIST

• Prepared under Section 137, LGA 1976 and also known as Tone of List for all holdings
not exempted from payment of rates.

• Contents : the serial number, land title number, location of the rateable property, house
number, owner, occupier, type of property and rateable value.

• prepared and completed once every five years or within such extended period as the
State Authority may determine.

• It remains in force until superseded by a new Valuation List.

• It shall be
i. published
in two local newspapers at least one of which is in the national language.
ii. deposited in the office of the local authority, and

iii. opened for inspection by all owners and occupiers of holdings comprised therein
during office hours.

• assessment rates shall be payable in respect of the rateable holdings in accordance to

valuation list

Sec 143, LGA 1976 - the local authority shall confirm valuation lists on or before the
thirty-first day of December of the year preceding the year in which any Valuation List is to
come into force, with the approval of the State Authority.

It shall be deemed to be the Valuation List until such time as it is superseded by another
Valuation List.

PURPOSE OF VALUATION LIST

to standardize the basis of value in determining the annual value or improved value on
each rateable holdings.

PREPARATION OF VALUATION LIST

Flowchart diagram on the preparation of valuation list

Gazettes

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 ↓
conduct site inspection on rateable holding
↓
valuation
↓
determine the annual value or improve value
 ↓ ↑ *
objective and appeal
 ↓
approved and confirmation on valuation list 

Thank You

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