Background
Real property gain tax (RPGT) is levied on any gain upon the selling of real property
under the provision of the Real Property Gains Tax Act 1976. Nevertheless, the rates
imposed is depends on the period of holding the property as stipulated under
Schedule 5 of RPGT Act 1976.
The purpose of the property gain tax is avoided or minimizes the speculation in the
property market. It is a tax on capital gain upon the transfer of ownership of:
a) real property
b) shares in real property company
c) shares in controlled company
Due to economic downturn, the government announced exemption of RPGT for
individuals and companies in 2007. The exemption means ‘ignoring’ the RPGT Act,
but not abolishes the Act.
RPGT
Real property gain tax is paid by the seller of the property or individual, company,
partnership, group of people or sole authority, either living or not in Malaysia, who is
the one enjoy gain from the transfer or selling of the real property. (as provided in
section 2 of the Real Property Gains Tax Act, 1976).
RPGT is imposed on chargeable gain accruing to a chargeable person for the
disposal of real property.
Chargeable gain (sec 7) – when disposal price exceeds acquisition price
Disposal (sec 2) – as long as ownership of property change hands, it will constitute
a disposal Chargeable person (sec 6) – includes company and partnerships
Real property – land as defined in sec 2, situated in Malaysia
Rate of tax
-rate imposed varies depending on various criteria such as the period of ownership
over the property that will be exposed
-effective from 1 Jan 2022, No RPGT imposed on properties disposed of after the
5th year from the date of an agreement signed for acquisition of the said property.
-privilege is only for Malaysians and Permanent Residents only
-RPGT rate on foreigners and companies maintained at 10%
-taxed on net capital gains that difference between the sale price and the purchase
price
Acquisition and disposal date
It is crucial to determine the acquisition and disposal date because the RPGT
rate depends on the length of ownership of the chargeable asset is held.
Acquisition date - generally the date of acquisition of the assets by the acquirer
shall be deemed to coincide with the date of disposal of that by the disposer to the
acquirer
Disposal date – a disposal shall take place;-
1. On the date of agreement if there is a written agreement
2. If there is no agreement on the date of completion of the disposal
Date of completion means:-
1. The date of ownership transferred by the disposer OR
2. The date on which the disposer received the whole in money for
the transfer,whichever is the earlier
Disposal Price and Acquisition Price of properties
Acquisition Price (Schedule 2 para 4)
Acquisition price is the amount or value of the consideration in money or money's
worth given byor on behalf of the owner wholly and exclusively for the purchase of
the asset plus incidental costs (such as duty stamp, lawyer's fee, valuation fee,
agency fee) less capital receipts:
1. compensation or similar receipts for any damage, injury, destruction,
dissipation,depreciation or risk depreciation that asset;
2. receipt under an insurance policy for any damage, injury to, loss,
destruction, ordepreciation of the asset;
3. deposit forfeited to the acquirer in respect of intended transfer of the
asset
Disposal Price (Schedule 2 para 5)
Is the amount of consideration received when disposing the property less:-
1. all expenses wholly or exclusively incurred in enhancing or reserving
the value of the asset, e.g. alterations, improvements or extensions;
2. all expenses incurred, after acquiring the asset, in respect of preserving
or defending the title to the asset;
3. The incidential costs to the seller of making the disposal.
Responsibility to submit Relevant documents to LHDN
-Within 60 days from the date of disposal of asset
-Date of disposal is date on written agreement
-Failure to submit RPGT within speculated date will result in penalty
How RPGT Calculated
-RPGT determined base on chargeable gains made from sale of property
-RPGT rate is determined by the number of years of ownership with a greater rate
imposed for shorter periods of ownership
- RPGT rate effective January 2023 as per below
Disposal Malaysian Citizens Non-Malaysian Companies
or Permanent citizens
Residents
Within first 3 years 30% 30% 30%
Disposal in 4th 20% 30% 20%
year
Disposal in 5th 15% 30% 15%
year
Disposal in 6th 0% 10% 10%
year and beyond
For quick calculation, the formula is:
Chargeable Gain= Disposal Price – Acquisition price- Incidental Costs
Net Chargeable Gain= Chargeable Gain - Exemption waiver (RM 10,000-00 or 10%
of Chargeable Gain whichever is higher)
Tax Payable= RPGT rate (based on holding period) x Net Chargeable Gain
Chargeable profit/gain
Under the provision of section 7(1), Real Property Gains Tax Act, 1976,
if an asset ischargeable is disposed, then:
1. If the disposal price is exceeded the acquisition price, then
there is taxable gain.
2. If the disposal price is less than the acquisition price, then there is
a permitted loss.
3. If the disposal price and acquisition is equal, then there is no
taxable gain orpermitted loss.
i If DP > AP Chargeable Gain
ii IF DP < AP Allowable loss
iii If DP = AP No chargeable gain, no allowable loss
Eg 1
Ali purchase a house 12 years ago for RM 500,000-00 and now he wants to sell it.
The market price now is RM 700,000-00
To calculate chargeable gain we minus the price of RM 700,000-00 from the original
price of RM 500,000-00 and incidental cost i.e RM 10,000-00 for lawyer fees.
Calculation
Chargeable Gain= Disposal Price – Purchased price- Incidental Costs
RM 700,000- RM 500,000- RM 10,000 = RM 190,000
Chargeable gain is RM 190,000-00
Net Chargeable Gain
Net Chargeable Gain= Chargeable Gain - Exemption waiver (RM 10,000-00 or 10%
of Chargeable Gain whichever is higher)
= RM 190,000- (RM 190,000x10%)
=RM 171,000
Tax Payable= RPGT rate (based on holding period) x Net Chargeable Gain
=RM 171,000 x 0%
=RM 0
Eg 2
Ali sold his house in Feb 2015 for RM450,000. When acquiring the house Ali had to
pay RM4,000for Stamp Duty, RM4,000 for Lawyer's fee and RM5,000 for Agency
fee. Ali do some renovation works for RM100,000. He bought the house for
RM250,000 in April 2012. When he disposed the house, Ali paid RM4,000 for
Lawyer's fee and RM9,000 for Agency fee. Calculate the amount of real property
gain tax, Ali should paid.
Disposal price
Gross selling price RM450,000
less
Renovation cost RM100,000
Incindental cost
Lawyer's fee RM4,000
Agency fee RM9,000 RM13,000 RM113,000
Disposal price RM337,00
0
Acquisition price
Gross purchasing price RM250,000
Plus
Incidental Cost
Stamp duty RM4,000
Lawyer's fee RM4,000
Agency fee RM5,000 RM 13,000
Acquisition price RM263,00
0
Gains = Disposal price less Acquisition price
RM337,000 - RM263,000 = RM74,000
less
Permitted allowance (schedule 4)
RM74,000 x 10% or RM10,000 (whichever is greater) (RM
10,000)
Chargeable gain RM64,000
Tax rates will depend on the period of holding the asset
Disposal in 2015, Acquired in 2012 = Period of
holding 3 years
Rates used is ???? %
RM64,000
x ??%
Thus, the amount real property gains tax to be paid by Ali is RM
RPGT exemption for individuals (schedule 4)
1. Gain accrued before Act came into force
2. Permitted allowance for an amount of RM10,000 OR 10% of chargeable gain,
whichever is greater. Prior to 1 Jan 2010, the exemption was equal to
RM5,000 or 10% of the chargeable gain, whichever was greater.
3. A gain accruing to the government
4. Gain equal to amount of estate duty (where disposer is compelled to
dispose property in order to pay estate duty.
5. RPGT exemption on gains from the disposal of one residential property
once in a lifetimeto individuals
6. RPGT exemption on gains arising from the disposal of real property
between familymembers (e.g. husband and wife, parents and children,
and grandparents and grandchildren).
RPGT exemption for Private Residence (schedule 3)
Section 8 exempts an individual who is a citizen or a permanent resident liability to
RPGT in respect of gain on disposal of a private residence. This exemption can be
obtained only once in a life time in respect of only one residential property. Private
residence is a building or part of a building in Malaysia owned by an individual and
certified fit for a place residence.
Ownership – Registered proprietor as in title
Occupied – an individual need not occupy, provided CF has been issued. It
may rented outor left vacant
Part of building – where only part is used for private residence only part
qualifies forexemption
Under the provision of Section 8, in referring with Third Schedule, exemption can be
given to an individual who disposed his first official resident.
Tax relief for allowable losses
Tax relief is allowable as a result or loss (loss multiply by rate of tax).
Tax relief can be deducted against total tax assessed for year of
assessment when adisposal is made.
If relief is not utilized the relevant year it can be carried forward to offset against
future RPGTpayable if any.
