Based on the Real Property Gains Tax Act 1976, RPGT is a tax on chargeable gains derived from disposal of property. A chargeable gain is the profit when the disposal price is more than purchase price of the property. What most people don’t know is that RPGT is also applicable in the procurement and disposal of shares in companies where 75% of their tangible assets are in properties, a.k.a. Real Property Companies (RPC). RPGT applies to both residents and non-residents.
You will be only be taxed on the positive net capital gains which is disposal price less the purchased price less the miscellaneous charges such as: stamp duty, legal fees, advertisement charges, etc. Additionally, a waiver on the taxable amount is granted to individuals (but not companies). The holding period is from the date on the S&P agreement till the disposal date. For a simple and a quick calculation, the formula is:
Chargeable Gain = Disposal Price - Purchased Price
Net Chargeable Gain = Chargeable Gain - Exemption Waiver (RM10,000 or 10% of Chargeable Gain, whichever is higher)
Tax payable = RPGT Rate (based on holding period) * Net Chargeable Gain
Good news! There are some exemptions allowed for RPGT. Among the exemptions are:
1) Exemption on gains from the disposal of one residential property once in a lifetime to individual (please utilise this once in lifetime opportunity wisely).
2) Exemption on gains arising from the disposal of real property between family members (e.g. husband and wife; parents and children; grandparents and grandchildren).
3) 10% of profits OR RM10,000 per transaction (whichever is higher) is not taxable.
As of now, Budget 2014 is the latest update we have on the RPGT. In accordance with the Budget 2014 announcement, rates for RPGT has been increased. The Government’s reason for the hike is mainly to reduce speculative activities on housing prices and the real estate market. The Government believes that increasing the RPGT enables the Rakyat to purchase affordable new houses.
However, in the long-term, a hike in RPGT rates will slow down the sales of the secondary market (sub-sales) and may also have the effect of reducing property investments by local and foreign property investors. The following is the RPGT rates effective from 1st January 2014:
|Disposal||Citizens / PR||Non-Citizens||Companies|
|1) Less or equal to 3 years||30%||30%||30%|
|2) Less or equal to 4 years||20%||30%||20%|
|3) Less or equal to 5 years||15%||30%||15%|
|4) More than 5 years||Nil||5%||5%|
The increase in RPGT has its own pros and cons. It has less impact on genuine buyers compared to speculators. For a quick calculation of RPGT, please do use a RPGT calculator. The process of getting a loan for property is a complex and a tedious one. Do not worry! Utilise our Home Loan Comparison tool to find out which loan is the best fit for you!