Understanding The Concept Of Real Property Gains Tax (RPGT)

In previous article, we’ve talked about what is Real Property Gains Tax (RPGT) as well as how to calculate RPGT while selling the property to others. So, let us continue the topic of what is the frequently asked question which may be relevant in understanding the actual concept of RPGT as follows;

When should I pay for RPGT

As prescribed by law, the buyer’s lawyers are required to retain a 3% of the purchase price from the deposit and remit the same to the Inland Revenue Board within 60 days from the date of the S&P Agreement to meet the RPGT payable.

In instances where the consent of the State Authority is required to sell the property to a purchaser and/or charge the property to a financial institution, or a court order for sale is required to dispose of the property, remittance of the 3% of the purchase price may be deferred until such consent or court order for sale is obtained.

penalty for late payment

Is there any penalty for late payment?

Any payment after 60 days may attract a penalty payable by the seller. The penalty is 10% of the amount payable as RPGT.

Where should I get the documents or forms?

The seller can get the relevant documents or forms with the Inland Revenue Board individually or get yourself a lawyers to do it for you.

Am I entitled to any discount if this is the first time that I sold-out the property?

According to Real Property Gains Tax Act 1976 allows certain incidental costs of the purchase of the property and disposal of the property to be taken into account, such as legal fees for the purchase and disposal of the property and property agency fees.

discount

What if I sell the property below the purchase price, am I still need to pay RPGT?

RPGT is only chargeable if the disposal price is higher than the purchase price and you gaining profit from it. For example, you bough a property at RM 500k, after several years, you sell it out to others at RM 450k (due to certain reasons that force you to sell the property at lower price), and you have no gaining any profits from the sale. Hence, you no need to pay for RPGT.

In addition, there is no RPGT is payable if the disposal price is equal to the purchase price, as there is no any profit gained or any loss.

Is there any RPGT exemption available in Malaysia?

Good news! There are exemptions allowed for RPGT. Among the exemptions are:

  • A Malaysian citizen or a permanent resident is entitled to a once in a lifetime exemption of RPGT on any chargeable gain arising from the disposal of his/her residential property only. (So, utilize this entitlement wisely)
  • An individual will be given an exemption equal to RM 10,000 or a 10% of the chargeable gain, whichever is higher.
  • Exemption on gains arising from the disposal of real property between family members, e.g. parents and children, husband and wife and grandparents and grandchildren.

Do take note that this exemption is only applicable for an individual who owned residential property. It does not applicable for the company who owned residential property.

How to calculate the years? 

The dates are usually used to determine the RPGT tax rates are dependent on the date when the property was acquired, and you can find your property “disposal date” on the respective S&P Agreements. The same applies for properties under construction i.e. the purchase date is determined as the date on the S&P Agreement, when you agreed to buy the property and not the property completion date. So be aware of it.

calculate

How to calculate RPGT?

In order to calculate the RPGY by yourself, you will need to determine the gains and the holding period.

Here is the example for the disposal of a property at the 5th year in 2014.

Amount (RM)
Selling price 800,000
Purchase price + miscellaneous costs –  500,000
Chargeable gain 300,000
Exemption of RM 10,000 or 10% –  30,000
Taxable amount 270,000
RPGT tax at 15% 40,500

Do take note that, you will not only need to pay RM 40,500 for RPGT, you will also need to pay for legal fees, stamp duties and other costs during the disposal of a property.

Am I still need to pay for RPGT, if I’m disposing of a property held under the estate of the deceased to a purchaser?

In this case, the date on which the Inland Revenue Board will take into account to determine the purchase date is the date of death of the deceased. In other words, you will need to pay for RPGT if the disposal of the property is made within 5 years from the date of death of the deceased, even though the deceased has owned the property for more than 5 years during his lifetime.

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