Real Property Gains Tax (RPGT) is a form of Capital Gains Tax that is imposed on the disposal of property in Malaysia. It was suspended temporarily in 2008-2009, and reintroduced in 2010. In 2014, RPGT was increased for the 5th straight year since 2009. So how is it calculated, and what does it impact?
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. What most people don’t know is that RPGT is also applicable in the procurement and disposal of shares in companies where 75% of their tangible assets are in properties, also known as Real Property Companies (RPC). 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. For a simple and a quick calculation, the formula is;
Chargeable Gain = Disposal Price – Purchased Price
Net Chargeable Gain
= Chargeable gain – Exemption Waiver (RM10,000 or 10% of Chargeable Gain,whichever is higher)
Tax payable = RPGT rate (based on holding period)* Net Chargeable Gain
Accordance with the Budget 2014 announcement, the rates for RPGT has been increased. Government’s reason for the hike is mainly to reduce speculative activities on housing prices and real estate market. Government believes that hiking up RPGT enable the Rakyat to purchase affordable new houses. However in long term, hike in RPGT rates will slow down the sales of the secondary markets (sub-sales) and also might reduce property investments by local and foreign property investors. The following is the RPGT rates effective from 1st January 2014.
Good news! 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)
3) 10% of profits OR RM10,000 per transaction (whichever is higher) is not taxable