Real Property Gain Tax (RPGT) in Malaysia

What is RPGT?

 

Real Property Gain Tax (RPGT) is a capital gain which is changeable on the profit gained from the disposal of a property and required to be paid to the IRB. If the disposal price is higher than the purchase price, the gain from the disposal will be tax chargeable. This is applicable to both resident and non-residents. It also will be applied to the company. Therefore, if you sell the property and make a positive capital gain from the disposal, you will be charged RPGT in Malaysia. However, there are some exemptions for the individual and company to apply to reduce their RPGT. The primary goal of RPGT is to reduce speculative activities in the local real estate market. Its role to generate money was secondary.

RPGT 2022

RPGT Rates	Individual (Resident)	Individual (Non-resident)	Companies
Disposal in 1st year	30%	30%	30%
Disposal in 2nd year	30%	30%	30%
Disposal in 3rd year	30%	30%	30%
Disposal in 4th year	20%	30%	20%
Disposal in 5th year	15%	30%	15%
Disposal beyond 5 years	0%	10%	10%

Who should pay for RPGT?

Individual (Resident and Non-Resident)

If any of the parties sell the property and gain a profit from it, they are forced to pay for the RPGT based on their gain.

 

Companies

Normally, selling the shares by companies are not subject to RPGT except for Real Property Companies or RPCs whose main business is in real property. A company recognized as RPC only if the company has real property or RPC shares amount greater or equal than 75% of its company’s tangible assets. However, if the company disposes of it until the total amount of RPC shares less than 75%, it will no longer be recognized as RPC, the share that is disposed will not retain their RPC characteristic and hence will be liable for the RPGT provision.

The reclassification of real property from non-current asset to current asset, is also deemed as disposal of chargeable asset which is subject to RPGT. The price will be based on the date of reclassification.

RPGT Exemptions

For Individual (Resident and Non-Resident)

–        An exemption of 10% of profits or RM10,000 per transaction (whichever is higher).

Permanent Residents

– If the real property is transferred as a gift and the acquirer is either husband and wife, parents and children, or grandparents and grandchildren, the RPGT can be exempted from this situation. However, transfer of assets between siblings is not applicable in this scenario.

– For the Malaysian citizen, they have once-in-a-lifetime exemption on the RPGT for the disposal of private residence.

– There is exemption for the assets transferred to a company. However, it consists of the requirements that the owner of the asset must be Malaysian citizen and it must fully transfer its ownership to company.

– A house value which is lower than RM200,000 is exempted from RPGT when the property is being disposed.

Companies

– An exemption of 10% of profits or RM10,000 per transaction (whichever is higher).

Allowable Expenses

There are some incidental expenses that are deducted from the gain of the disposal of assets. The following are the examples of the expenses:

– Legal fees, accounting fees, surveyor’s fee, etc.

– Real estate fees (sales commission)

– Administrative fees

– Repair or renovation to maintain or upgrade the property such as interior design such as IKEA furniture to redecorate your house

– Cost of preserving or defending one’s title to, or to a right over the asset

– Cost of advertising to make the disposal

When to pay RPGT?

The lawyer will be in charge to help you make the payment with the forms to the IRB. For the permanent residents who sell their assets, their lawyer will retain 3% of the property’s disposal price when the purchaser of the asset pays the first deposit to buy the property. The retained percentage amount is for the purpose of RPGT payment. For the non-citizen, the retention rate will increase to 7%. The lawyer will pay the Inland Revenue Board within sixty (60) days from the date of the sale and purchase agreement using the necessary forms to pay the RPGT due.

Penalty of RPGT

–        Fail to submit the Form

 If the disposer or acquirer fails to submit completed form within 60 days or after the extended date of permitted time or fails to declare the disposal of the asset. It has a penalty that is very serious to them which is that the IRB can charge up to 3 times the amount of tax charged.

–        Incorrect information

If the disposer makes an incorrect return or incorrect information on the disposal of the assets. IRB may impose a penalty to the disposer which can be charged an equal amount of tax (maximum 100%).

–        Fail to remit the payment

The disposer will be subject to an increase under this subsection if making an incorrect return which cause acquirer fail to remit the payment. The increase is 10% on the amount of tax charged.

Why AL Account Management？

Our founder is Chartered Accountant with the Malaysian Institute of Accountants (MIA), member of Association of Chartered Certified Accountants (ACCA) and Company Secretary in Malaysia. Our dedicated professional team provides a comprehensive and professional service to your company based on your needs. We will provide the high quality of service from our professional team. For more information, please contact us by dropping us an email at [email protected].

#RealPropertyGainTax #RPGT #Malaysia #ALAccountancy

 5/5 Facebook
Twitter
LinkedIn