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.
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.
*Real estate speculation is when an individual with stock market knowledge reads the market and makes calculated decisions. This leads them to buy property when prices are low, and sell when the market price rises due to area development.
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).
People who are selling properties or shares in Real Property Companies (RPC) will be involved. They are usually categorized into groups like below:
According to the Inland Revenue Board of Malaysia (LHDN Malaysia) :
-Read More: Malaysian Government Has Temporarily Frozen New Application of MM2H
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 |
For individuals, here are some exemptions:
You can check the details on the government website: PROCEDURES FOR SUBMISSION OF REAL PROPERTY GAINS TAX FORM
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
The government has recently announced in Budget 2022 a tax relief - that they will no longer be collecting real property gains tax (RPGT) on properties disposed of during the sixth year of ownership and above. This means that when you sell off (or dispose of) the property you had for more than 6 years, you will not be required to pay the RPGT tax needed during the transaction!
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