Understanding Real Property Gains Tax (RPGT) In Malaysia
Understanding Real Property Gains Tax (RPGT) In Malaysia
Real Property Gains Tax Act 1976 (“RPGT Act”) is an Act to provide for the imposition, assessment and collection of a tax chargeable on the gains accruing on the disposal or sale of any real property in Malaysia.
Real property is defined to mean any land situated in Malaysia and any interest, option or other right in or over such land, regardless of whether the real property in question is held under a master title or under a separate individual title. Bear in mind that this tax will also be chargeable on disposal of shares in a real property company which holds real properties with value not less than 75% of the value of the company’s total tangible assets.
A “chargeable person” is defined under the RPGT Act to mean a person chargeable with the RPGT and it includes individuals, companies, partnership and corporations, whether or not the chargeable person residents in Malaysia. Non-residents are also liable to RPGT.
RPGT is imposed only when there is a chargeable gain on the disposal of real property, ie, when the disposal price exceeds the acquisition price. Contrarily if the disposal price is less than the acquisition price, then there is an allowable loss. There will neither be a chargeable gain nor an allowance loss if the disposal price is equal to the acquisition price.
In calculation of the chargeable gains, certain costs may be deducted by the vendor from the disposal price with the effect of lowering the chargeable gains. They include any costs incurred at any time after the acquisition by the vendor for the purpose of enhancing or preserving the value of the property. Therefore, any cost such as renovation or extension works, legal fees or valuation expense would come within the meaning of “incidental cost”.
Chargeable gain = Disposal price – Acquisition price – Incidental Costs
Example A:-
If A bought a property for acquisition price of RM200,000.00 in the year of 2010
When A decides to sell his property for selling price of RM300,000.00 in the year of 2019
Then the chargeable gains in question will be RM100,000.00
Example B:-
If B bought a property for acquisition price of RM200,000.00 in the year of 2010
When B decides to sell his property for selling price of RM150,000.00 in the year of 2019
Then there is no chargeable gain and B suffers losses in the sale of his property.
FORMULA OF THE RPGT
RPGT payable = RPGT rate x net chargeable gain
Effective from 1st January 2019, the RPGT rates are listed out as follows:-
In cases where the disposer is a Malaysian
| Disposal within the 1st 3 years after acquiring the property | 30% |
| Disposal in the 4th year after acquiring the property | 20% |
| Disposal in the 5th year after acquiring the property | 15% |
| 6th year and thereafter | 5% |
In cases where the disposer is a company
| Disposal within the 1st 3 years after acquiring the property | 30% |
| Disposal in the 4th year after acquiring the property | 20% |
| Disposal in the 5th year after acquiring the property | 15% |
| 6th year and thereafter | 10% |
In cases where the disposer is a non-Malaysian / Foreigner
| Disposal within the 1st 5 years after acquiring the property | 30% |
| 6th year and thereafter | 10% |
Sale and Purchase Transaction – How and When to Pay?
In a sale and purchase transaction, the purchaser is under obligation to remit an amount equivalent to 3% of the purchase price of the property in question (in cases if the disposer is a foreigner or non-Malaysian, then it will be 7% of the purchase price) within 60 days from the date of disposal, ie. Either the date of the Sale and Purchase Agreement or the date when the Sale and Purchase Agreement becomes unconditional. The common conveyancing practice is that the purchaser’s solicitors usually will retain the aforesaid 3% from the deposit payable to the vendor upon the signing of the Sale and Purchase Agreement and pay to Director General within the 60 days. The Director General will then refund any excess paid or further require the disposer to settle the shortfall, if any. Failure to pay in the manner and time prescribed will incur a penalty of 10% on the amount which is to be retained.
RPGT Exemptions!!!
Everyone is entitled to an exemption on gains/profits from disposal or sale of one private residential property in his/her lifetime once in a lifetime. A formal application on prescribed forms has to be submitted to the Director General.
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