18 April 2011

Real Property Gains Tax (2011)

Malaysia is known as "tax heaven" of the world. Why? Because Malaysia does not impose tax on any capital gains derived from investment, such as shares, unit trust... But, there is only one type of capital gains that attracted tax - property.
PARC @ One South, Seri Kembangan
Real property gains tax (RPGT) is a form of capital gains tax. RPGT is charged on gains arising from the disposal of real property in Malaysia. These so called real property is defined as:
  • any land situated in Malaysia and any interest, option or other right in or over such land; or
  • shares in a real property company
How much?

Actually, we have RPGT in our tax system many years ago until 31 March 2007, when government abolished RPGT to attract foreigners to invest in Malaysia. But then, from 1 January 2010, RPGT is re-imposed at the rate of 5% on gains arising from disposals of chargeable assets in respect of real properties that are disposed within 5 years of owning.

What is real property company?
It is a controlled company holding real property or shares in another real property company as a major asset. And, the "major asset" here refers to defined value > 75% of the value of its total tangible assets.

Mon't Kiara
Withholding of RPGT
With effect from 1 January 2010, an acquirer of chargeable asset must withhold 2% of the total value of the acquisition price to be paid to the Inland Revenue Board within 60 days from the date of disposal.
Are there any exemptions?
  • an amount of RM10,000 or 10% of the chargeable gain, whichever is greater, accruing to an individual (w.e.f 1 January 2010)
  • gain arising on disposal as a result of compulsory acquisition of property under law
  • gain accruing to an individual who is a citizen or a permanent resident in respect of the disposal of one private residence
In other words, everyone of us have one "Free RPGT" card in hand. This is the ONLY card that the government gave us, and we can decide to use it or not, and when to unveil the card. You can saved it for another day, because it is not compulsory to use it for your first disposal.


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