In Malaysia, Real Property Gains Tax (RPGT) is a tax imposed by the Inland Revenue Board (LHDN) on chargeable gains which find their source in the disposal of real property. This fact is specified in the Real Property Gains Tax Act 1976 (Act 169).
Real Property Gains Tax
RPGT is imposed as a result of the profits made from the difference between the disposal price and acquisition price. Thus, when the resale price is greater than the purchase price, RPGT takes effect.
All RPGT valuations are to be reported within eight working days of the receipt by Jabatan Penilaian dan Perkhidmatan Harta (JPPH). JPPH is the body which determines the market value of the property disposed of or acquired as requested by Lembaga Hasil Dalam Negeri (LHDN).
Regardless of their status as citizens, permanent residents, or neither, RPGT is charged on every person living in Malaysia on all gains which arise from the disposal or real property owned including shares in a real property company (RPC).
NOTE: An RPC is defined as a controlled company with total tangible assets consisting of 75% or more in real property and shares combined in another RPC.
A recent adjustment to the RPGT was the increase to the rate for foreign investors and companies who sell properties after more than five years of ownership from 5% to 10%. Also, anyone who purchased a property before January 1, 2013, will now have its value assessed against the estimated value on that date instead of the actual purchase date.
Disposal price is the amount of money or the value of consideration in monetary terms obtained through the disposal of any asset with certain subtractions which are the following:
The cost incurred during the upgrading or increasing of the value of the asset
The cost incurred at any time after the acquisition of the asset by the purchaser for the purposes of determining, maintaining, or protecting rights to the asset
The cost incurred by the vendor when the asset is sold
Acquisition price is the value of the consideration in monetary terms paid for the acquisition of the asset along with the incidental costs of acquisition after the following have been subtracted:
Any amount of money received by way of compensation for any damage caused to the asset
Any sum received under a policy of insurance for any kind of damage or injury related to the loss, destruction, or depreciation of the asset
Any sum forfeited as a deposit which is related to an intended transfer of the asset
Disposal of a Property or Asset
Disposal is the transfer of ownership from one person to another through settlement, sale, conveyance, alienation, or assignment.
RPGT Rates for disposal or selling of properties are as follows :
Type of Resident
Malaysian Citizens / Permanent Residents
Ranging from 5% to 30% depending on how long the period of ownership is
Foreigners & Non-Citizens
10% or 30%, depending on the period of ownership
Companies (if 75% of its tangible assets involve real estate)
Ranging from 10% to 30% depending on how long the period of ownership is
It is important to note that after each disposal, both the previous owner and the new owner are both required to submit an RPGT return within 60 days of the disposal date. The date of disposal is the same as the date of the written agreement of the disposal.
Should there happen to be no written agreement, the disposal date will be defined as the date of final payment which confirms the transfer of the property or asset. In cases which require government approval for the disposal to be completed, the disposal date will either be the date of the approval or the date upon which the last necessary criterion was fulfilled.
ADVICE: Make sure to file your RPGT no longer than 60 days as late payments have a 10% penalty on top of everything else!
Acquisition of Property
For any acquisition of property, there will be an acquirer and a disposer. Each of these parties have different roles to play.
Withholding by Acquirer
When a transfer of property or assets in Malaysia is either fully or partially paid in cash, the acquirer is required to withhold the entire cash consideration at a rate of either 3% of the total acquisition price or 7% if the disposer is neither a citizen and nor an incorporated company in Malaysia.
This withheld cash is to be submitted and be applied against the amount of RPGT payable by the disposer.
Payment by Disposer
The disposer is then required to pay the balance of RPGT within 30 days from the date of asset notice.
In certain transactions, the disposal price may be regarded as equal to its acquisition price. Those transactions include the following:
Transfers of assets owned by a citizen between spouses
Gifts sent to the government, an approved charity, or a local authority
Devolution of assets of a deceased individual
Disposal of assets due to mandatory acquisition according to any law
Disposal of chargeable asset pursuant to a scheme of financing approved by any official financial authorities of Malaysia
For other cases, transfer of real property may be regarded as being of neither any net gain nor loss to the disposer. An example of such is the transfer of real property with prior approval of the Director General of Inland Revenue (DGIR) by a company to companies in the same group for the purposes of increasing operational efficiency for a consideration consisting of not less than 75% in shares.
Allowable losses refer to circumstances which involve the sale of multiple properties during the same tax year. When a seller loses money by selling at a price below the purchase price, the seller can use that loss to offset any profit on another sale made. Allowable losses can be rolled over into future tax years.
NOTE: If it was a gain, the amount would be subjected to RPGT.
Objections and Grievances
Any objections regarding valuation must be directly addressed to LHDN. A copy of any objection must also be sent to JPPH Malaysia.
JPPH provides consultancy services related to valuation and property services and determines the market value of any disposed property. Any person aggrieved by an assessment made may make an appeal; LHDN and JPPH will make the final decision regarding the grievance.
How Real Property Gains Tax in Malaysia Is Calculated
When a person is to calculate the RPGT amount to be paid in Malaysia, the chargeable gain which is defined as the difference between the purchase price and the sale price is first calculated. After calculating the chargeable gain, it is then multiplied with the relevant RPGT rate. The result is the amount of RPGT to be paid.
The government of Malaysia has provided certain RPGT exemptions for taxpayers who have fulfilled a certain criterion. These criteria relate to the profits which are earned through the sale of property.
Any Malaysian citizen or permanent resident who sells property in Malaysia is permitted to receive an exemption on any chargeable gain earned through the disposal of a private residence
A private residence is legally defined as a building or part of a building which is either owned by an individual or used for the purpose of residence
This exemption is worth either RM10,000 or 10% of the chargeable gain, whichever is higher
The exemption may be claimed once during the course of the claimant’s life
Another RPGT exemption exists for those who transfer property to their spouse, child, parent, grandchild, or grandparent
Of course, RPGT is but one element of the complex tax system which exists in Malaysia. This system’s complexity may cause some difficulty for certain people to properly understand their tax obligations to avoid committing tax crimes.
Malaysia’s capital city, Kuala Lumpur has one of the biggest expat communities in Malaysia, due to the international students that come from different countries in the world to study at the Universities, along with the myriad amount of job opportunities for expats who come for work.
Is Malaysia a good place to invest in property?Intern2021-09-23T12:24:02+08:00
Malaysia has a lot to offer, with its business-friendly policies, notable oil reserves, it is one of the best places to invest in. Malaysia is also one of the only countries that allow foreigners to own land on top of their acceptance to foreigners to live in Malaysia.
Is there a penalty for misstatement of information for property tax?Intern2021-09-23T12:23:33+08:00
If you sell a property such as a house with a loss, you will not be subjected to RPGT because there was no profit made. In the case that there was a profit made, you are required to pay the RPGT within the 60 days of the sale.