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What is Real Property Gains Tax (RPGT) in Malaysia [2021]

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If you are selling property or land in Malaysia, you’ve probably come across the term “RPGT” or “Real Property Gain Tax” before. Ever wondered what this tax is? Or how much do we need to pay for the tax?

Well, this article can help you get an idea on what “RPGT” is.

1. What is RPGT/ Real Estate Gain Tax?

Let’s start with a brief historical background on RPGT.

The Malaysian Revenue Agency administers the Real Estate Gains Tax (RPGT) by the Real Estate Gains Tax Act 1976 (RPGTA 1976). RPGTA was launched on November 7, 1975 to replace the 1974 Land Speculation Tax Act. Both bills were introduced to limit speculation in real estate.

RPGT is collected on the basis of the proceeds receivable from the disposal of valuable assets (such as houses, commercial buildings, farms and vacant land). From October 21, 1988, RPGT was expanded to gain from the selling of shares in real estate companies (RPC).

In short, Real Property Gains Tax (RPGT) is a tax charged on gains arising from the disposal/selling of properties or shares in Real Property Companies (RPC).

2. Who needs to pay the tax?

People who are selling properties or shares in Real Property Companies (RPC) will be involved. They are usually categorized into groups like below:

  1. Individuals (Citizens & Permanent Residents)
  2. Individuals (Non-Citizens/Foreigners)
  3. Companies

 

3. What is the rate of RPGT?

According to the Inland Revenue Board of Malaysia (LHDN Malaysia) :

-Read More: Malaysian Government Has Temporarily Frozen New Application of MM2H

4. How to calculate the RPGT that I am supposed to pay?

RPGT is charged on Net Chargeable Gains.

For individual (Part I and Part  III), it can be calculated according to the format below:

 

Gross Chargeable Gain: Acquisition price – Disposal price
Net Chargeable Gain: Gross Chargeable Gain – Allowable Expense – RPGT Exemptions – Allowable Loss
TAX PAYABLE = RPGT Rate (based on the number of years of property ownership) X Net Chargeable Gains

For companies, it will be calculated according to the format below:

Gross Chargeable Gain: Disposal price – Acquisition price*
Net Chargeable Gain: Gross Chargeable Gain – Allowable Expense – RPGT Exemptions – Allowable Loss
TAX PAYABLE = RPGT Rate (based on the number of years of property ownership) X Net Chargeable Gains*Acquisition price:(number of shares held by the shareholder/total issued shares of the company) X  the defined value of the real property at the date of acquisition of the chargeable asset

 

5. Are there any exemptions available?

For individuals, here are some exemptions:

  • The exemption is granted on the gain derived from the disposal of a private residence. The individual is entitled to the exemption once in a lifetime. (The individual must be a Malaysian citizen or a Malaysian permanent resident.)
  • Disposal of the whole share OR part of the whole share owned by an individual, the exemption is RM10,000 or 10% of the chargeable gain, whichever is greater.
  • The sale of part or all of the shares held by an individual is exempted from taxation at 10% or RM10,000 (whichever is higher).

 

6. What documents should I prepare?

You can check the details on the government website: PROCEDURES FOR SUBMISSION OF REAL PROPERTY GAINS TAX FORM

7. Any new updates about RPGT in 2020?

There are two updates in the year 2020 for RPGT.

First, new base year for RPGT.

Before 2020, the base year was set at January 1, 2000. However, in the 2020 Budget of Malaysia, it was amended to January 1, 2013.

As RPGT is calculated based on the net profit of the sale, a later base year will help lower down the profit and reduce the property owner's tax burden when they plan to sell the house.

Second, incentives announced on June, 2020.

With the impact of Covid-19, Malaysia's Prime Minister Tan Sri Muhyiddin Yassin announced several incentives, intending to boost the property market in Malaysia.

Under these incentives, Malaysians will be exempted from paying the 5% (or higher) RPGT for the disposal of properties from June 1, 2020 till December 31, 2021. The exemption is limited to the disposal of three units of residential homes per individual.

 

Source:Inland Revenue Board of Malaysia


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