Real Property Gain Tax (RPGT)
What is Real Property Gain Tax (RPGT)?
RPGT is a form of Capital Gains Tax or in other words a tax chargeable on gains arising from the disposal of real properties situated in Malaysia levied by the Inland Revenue Board (LHDN).
Whether you are a property investor or an owner looking to sell your current home, it is important to be aware of all costs associated with a real estate transaction as RPGT is chargeable upon profits made on the seller and/or vendor and/or disposer, as the case maybe from the sale of your land or real property, put differently it is a tax on profit, where the resale price is higher than the purchase price.
RPGT rates in Malaysia were adjusted in Budget 2019, with new changes announced as part of Budget 2020.
BUDGET 2019
The most recent RPGT amendments in lieu of our Budget 2019 announced by Ministry of Finance (MOF), Malaysians who are selling off their property in the sixth (and subsequent) years of ownership will now have to pay a 5% RPGT.
Foreigners and companies will also see an increase in RPGT rates, from 5% to 10%.
BUDGET 2020
Another interesting new change on RPGT by our government is that by shifting the ‘base year’ which RPGT is assessed against from 1st January 2000 to 1st January 2013.
It basically means that if you bought a property before 1st January 2013, the value of that property is now assessed against the estimated value on 1st January 2013, and not the actual date of purchase for your property.
In addition, our government also make an announcement on 5th June 2020 as to the several incentives as part of their strategy to stimulate the property market, which including real property gains tax (RPGT) exemption for Malaysia citizens for disposal of up to three (3) properties between 1st June, 2020 and 31st December, 2021 as Malaysia enters the Recovery Movement Control Order (“RMCO”) phase. However, there are no official gazette has yet been reached in relation to this arrangement.
What is the applicable rate of tax?
| Date of Disposal | Individual (Citizen & Permanent Resident) | Individual (Non-Citizen & Non-Permanent Resident) | Companies |
|---|---|---|---|
| Within three (3) years after the date of acquisition of the chargeable assets | 30% | 30% | 30% |
| In the 4th year | 20% | 30% | 20% |
| In the 5th year | 15% | 30% | 15% |
| In the 6th year and subsequent year | 5% | 10% | 10% |
As long as you own a property and dispose of the property by having certain profits gain, RPGT applies to you regardless you are a foreigners or Malaysian citizens. However, it is important to note that the government provides a tax relief when there is no profit made at all, i.e. selling price is equal to the original purchase price, or when a person suffers a loss from the property sold i.e. selling price is lower than the original purchase price.
How to calculate RPGT?
Here is the example for a property disposed at the 3rd year in 2016.
| Example | |
|---|---|
| Selling Price | 800,000.00 |
| Less: original purchase price inclusive of other costs (i.e. legal fees, accounting fees, surveyor’s fees, renovation fees and/or repair to maintain or upgrade the property such as interior design, estate agency fees and etc) | (500,000.00) |
| Chargeable gain | 300,000.00 |
| RPGT tax at 30% | 90,000.00 |
When do I require paying for RPGT?
The buyer and/or purchaser’s and/or acquirer, as the case maybe solicitors are required to retain 3% of the purchase price from the deposit payable to the vendor and/or seller and/or the disposer and remit the same to LHDN within sixty (60) days from the date of the Sale and Purchase Agreement or the unconditional date of the Sale and Agreement, as per the related cases involved.
Any payment made after 60 days may incur a penalty cost of 10% of the amount payable to LHDN. Take an example that the RPGT tax amounting to RM15,000-00, 10% of the amount payable will be RM1,500-00.
How to file your RPGT?
The seller may reach out to their solicitors for their assistance to file the necessary forms i.e. CKHT 1A & 3 with the LHDN independently.
What are the RPGT exemptions?
-
- Malaysian citizens or permanent residents are allowed a once-in-a-lifetime exemption on any chargeable gain from the disposal of a private residence.
- An amount of RM10,000-00 or 10% of the chargeable gain, whichever is greater, accruing to an individual.
- An exemption on gains when a property is transferred within the family, either between husband and wife, parent and child, or even grandparents (transfer between sibling/brothers or sisters is not applicable).
- Disposal of low cost, medium low and affordable residential homes of RM200,000-00 and below, in the 6th and subsequent years.
Am I subject to RPGT if I am disposing of a property held under the estate of the deceased as the executor, trustees to a purchaser?
The Inland Revenue Board will take into account the date of death of the deceased to determine the acquisition date of the said property.
Date of death of the deceased = Acquisition Date by the executor
The executor oversees the selling or disposing the estate before distributing it to the beneficiaries. The RPGT charged on the deceased’s estate is based on this acquisition date by the executor
This article is written by
Liew Chen Siang
Partners, Low & Partners
Anastasia Lim Yee Zing
Senior Associate, Low & Partners
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