(Re-imposed with effective from 1 Jan 2010)

In the Budget 2010, Government has re-imposed the Real Property Gains Tax (RPGT). The RPGT will be fixed at 5% on the gains from the disposal of real property with effective from 1 January 2010. The RPGT for the first year is 5% and it’s same for second, third, fourth and fifth year.

Real Property Gains are gains derived from disposal, sell, convey, assign, transfer, settle or alienate whether by agreement or by force of law which fall under chargeable asset. All chargeable assets must be made during the year of assessment and all particulars must be furnished as requested.

Example to illustrate the calculation of RPGT payable

Ms.R purchased a property on year 2006 at RM100,000 and sold after or on 1st JAN 2010 at RM200,000 (within five years of the date of purchase). She made RM100,000 from the transaction and the gains are subject to 5% RPGT and the calculation will be:

RM100,000 (Property Gains) – RM10,000 (Waived Exemption) = RM90,000 (Taxable Gains)

RM90,000 (Taxable Gains) x 5% (RPGT Rate) = RM4,500 (RPGT Chargeable)

Thus, the RPGT chargeable to Ms.R will be RM4,500.

Allowable Loss

Allowable loss means a loss made after the disposal. Tax relief shall be allowed in respect of the following accrued:

1.If the disposal price is less than the acquisition price.
2.If the disposal price is equal to the acquisition price

Exemption
(under Real Property Gains Tax (Exemption) Order 2009)

The flat 5% RPGT for the 1st five years will be implemented through the Real Property Gains Tax (Exemption) Order 2009. This Order has gazetted and take effective since 1st JAN 2010. Therefore, the existing rate of RPGT, which is within 30% to 5% as in Schedule 5 of the Real Property Gains Tax 1976, will no longer be applicable.

However, there are three circumstances where the property owner is exempted from the 5% RGPT.

* The level of exemption is increased from RM5,000 to RM10,000 or 10% of the chargeable gains, which ever is the higher

* Gifts between parent and child, husband and wife, grandparent and grandchild; and

* disposal of a residential property once in a lifetime.

5% RPGT will be applied to properties sold within five years of purchase effective from 1st January 2010. The RPGT for the first year is 5% and it’s same for second, third, fourth and fifth year.

Basis Of Taxation

The chargeable gains arising from the disposal of any land situated in Malaysia and any interest, option or other right in or over such land or the disposal of shares in a 'real property company' is subject to Real Property Gains Tax.

Chargeable Assets

An Act enacted by the Duli Yang Maha Mulia Seri Paduka Baginda Yang di-Pertuan Agong as the Real Property Gain Tax Act 1976. Interpreted chargeable asset as real property gain tax, shall be charged in accordance to this Real Property Gain Tax Act 1976 in respect of chargeable gain accruing on the disposal of any real property. Subject to this Act, the chargeable gain from disposal of real property shall be charged according to the category Tax Rates in Ringgit Malaysia.

Disposer's Responsibilities

The disposer of a real property has to submit the following within 30 days from the date of disposal of the asset:

1. Completed Form CKHT 1;

2. Copies of stamped Sale and Purchase Agreement or Form 14A (memorandum of transfer) to prove the acquisition and disposal of the asset;

3. Copy of grant/title deed (if any);

4. Copies of bills and receipts for expenses claimed. (in case of companies or non-citizen and non-permanent resident individuals, details not required if asset is disposed in the sixth or subsequent year from the date of acquisition).

Acquirer's Responsibilities

An acquirer has to submit the following within 30 days from the date of disposal of the asset:

1. Completed CKHT 2 forms;

2. Copy of stamped Sale and Purchase Agreement or Form 14A (memorandum of transfer) to prove the acquisition;

3. Copy of grant/title deed (if any).

Acquirer (or his solicitor) is also required to retain the whole of the consideration monies or a sum not exceeding five percent (5%) of the total value of the consideration whichever is the lower, until he receives clearance (Form CKHT 4 or CKHT 5) from the Inland Revenue Board.

Red Statement below no longer be applicable, please refer to Real Property Gains Tax (Exemption) Order 2009.

Exemptions Available For Real Property Gains Tax (RPGT)

(i) A gain arising on disposal prior to 7 November 1975, the date of coming into force of the RPGT Act 1976.

(ii) An amount of RM5,000 or 10% of the chargeable gain, whichever is greater, for each disposal of a property by an individual.

(iii) A gain accruing to the Government, a State Government or a local authority.

(iv) A once in a lifetime exemption on a gain accruing to an individual who is a citizen or a permanent resident or to a husband and wife in respect of the disposal of two private residence (each for husband and wife as amended in Budget 2005).

(v) A gain equal to to the amount of estate duty payable where the disposer is compelled to dispose the property in order to pay the estate duty.

A No Loss And No Gain Situation

Applicable only to companies (as defined in the RPGT Act 1976) for the following situations:-

(i) Transfer of asset between companies in the same group to bring about greater efficiency in operation for a consideration consisting of not less than 75% syer in the transferee company and the balance of a money payment.

(ii) Transfer of asset between any companies for any consideration in any scheme of reorganisation, reconstruction or amalgamation whereby the transferee company is being restructured to implement any such scheme in compliance with Government policy on capital participation in industry.

(iii) Distribution of asset by a liquidator of a company and the liquidation of the company was made under a scheme of reorganisation, reconstruction or amalgamation whereby the transferee company is being restructured to implement any such scheme in compliance with Government policy on capital participation in industry.

Several Transactions Where Disposal Price Is Deemed Equal To Acquisition Price:

(i) Transfer of assets between spouses.
(ii) Gifts made to the Government, State Government, local authority or a charity exempt from income tax.

(iii) Disposal of an asset as a result of a compulsory acquisition under any law.

(iv) Disposal of an asset by a person to an Islamic Bank under a scheme where that person is financed by such bank in accordance with the Syariah.

Example To Illustrate Calculation Of Real Property Gains Tax

Disposal Price on 10.01.2000		300,000
Less: Renovation/extension costs	20,000
Legal fees	3,000	23,000	277,000
Acquisition Price on 15.04.1996		200,000
Add: Duty stamp paid	3,000
Legal fees	2,500	5,500	205,500
			71,500
Less: Exemption of RM5,000 or 10%of the chargeable gain, whichever is greater			7,150
Chargeable gain			64,350

Tax on RM64,350 @ 15% = RM9,652.50

Rate of tax 15% for disposal in the fourth year after the date of acquisition.

Rates Of Tax (Real Property Gains Tax)

CATEGORY OF DISPOSAL	COMPANY (%)	INDIVIDUALS & OTHER PERSON (%)
Disposal within 2 years	30	30
Disposal in the 3 rd year	20	20
Disposal in the 4 th year	15	15
Disposal in the 5 th year	5	5
Disposal in the 6 th year and subsequent years	5	0

The above rates apply for disposals on or after 27 October 1995.

An individual who is not a citizen and not a permanent resident is subject to the following rates:-

CATEGORY OF DISPOSAL	RATE OF TAX (%)
Disposal within 5 years after the date of acquisition of the chargeable asset	30
Disposal in the 6 th and subsequent years after the date of acquisition	5