Real Property Gains Tax (RPGT) in Malaysia
Real Property Gains Tax (RPGT) is a tax chargeable on the profit gained from the disposal of a property and is payable to the Inland Revenue Board. As such, RPGT is only applicable to a seller. It was suspended temporarily in 2008-2009, and reintroduced in 2010. Based on the Real Property Gain Tax Act 1976, RPGT is a tax on chargeable gains derived from disposal of property. A chargeable gain is the profit when the disposal price is more than purchase price of the property. RPGT applies to both residents and non-residents. You will be only be taxed on the positive net capital gains which is disposal price less the purchased price less the miscellaneous charges such as; (stamp duty, legal fees, advertisement charges ,etc). Additionally, a waiver on the taxable amount is granted to individuals (but not companies).
The holding period is from the date on the S&P agreement till to the disposal date. A capital gains tax (CGT) is a tax on capital gains, the profit realized on the sale of a non-inventory asset that was greater than the amount realized on the sale. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property. Not all countries implement a capital gains tax and most have different rates of taxation for individuals and corporations. For example, A bought a piece of property in 2000 at a value of RM500,000. Subsequently, A sold the property to B at the value of RM700,000, gaining RM200,000 from the disposal of the property. The RPGT is calculated for RM200,000.
RPGT is only chargeable if there is a profit gained from the disposal of the property. As such, if the disposal price is lower than the acquisition price, there is no profit gained and therefore no RPGT is payable. Likewise, if the disposal price is equal to the acquisition price, there is neither a chargeable gain nor an allowable loss. As such, no RPGT is payable. As prescribed by law, the purchaser’s solicitors are required to retain 3% of the purchase price from the deposit and remit the same to the Inland Revenue Board within sixty (60) days from the date of the sale and purchase agreement to meet the RPGT payable. There are exemptions allowed for RPGT.
Among the exemptions are:
1) Exemption on gains from the disposal of one residential property once in a lifetime to individual (Please utilize this once in lifetime opportunity wisely!)
2) Exemption on gains arising from the disposal of real property between family members (e.g. husband and wife, parents and children and grandparents and grandchildren)
In these instances, the transferor is deemed to have received no gain and suffered no loss and the transferee is deemed to have acquired the property at an acquisition price equal to the acquisition price paid by the transferor together with any permitted expenses incurred by the transferor. Apart from the above transfers, any forms of transfer between family members are not entitled to apply for exemption, such as transfer between siblings.
3) 10% of profits OR RM10,000 per transaction (whichever is higher) is not taxable
According to the Budget 2019 announcement, the rates for RPGT has been increased. The government’s reason for the hike is to enhance the Government’s commitment to long term fiscal sustainability via increased tax collection. For those property owners who want to reduce the Real Property Gains Tax, the only the way is to sell out your property after 5 years of ownership.
Effective from 1.1.2019, the RPGT rates are as follows:
|Holding Period||Citizen or Permanent Resident||Company||Non-Citizen or Non-Permanent Resident|
|Within 3 years||30%||30%||30%|
|In the 4th years||20%||20%||30%|
|In the 5th years||15%||15%||30%|
|Beyond 5 years||5%||10%||10%|