RPGT Malaysia

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Real Property Gains Tax also known as RPGT is a form of capital gains tax imposed by the Malaysian Government on the disposal of property in Malaysia. Real Property Gains Tax was previously suspended temporarily from 2008 to 2009. It was reintroduced again in 2010 and the rates have been increasing since then.

According to the Real Property Gain Tax Act 1976, Real Property Gains Tax is a tax imposed on chargeable gains from the disposal of property. A chargeable gain is defined as the profit derived from selling the property at a higher price than the original purchase price. Real Property Gains Tax is only applicable to the seller and the seller needs to pay to the Inland Revenue Board.

An example of this would be A purchased a piece of property for RM500000 in 2000. After that, A sold this piece of property to B for RM700000 and gain RM200000 as profit. In this scenario, the RPGT is calculated based on the RM200000 profit. The seller will only be taxed on positive net gains after being entitled to deduct the miscellaneous charges such as stamp duty, legal fees, advertisement charges and etc. according to the RPGT Act 1976.

According to Budget 2014, the progressive increase of RPGT rates is to reduce the speculation on the real estate market and housing prices by the Malaysian Government.

Applicable RPGT Rates

The effective RPGT rates are listed below:

  • If the seller sells off the property within 3 years from the date of purchase, that seller has to pay 30% of the RPGT and this applies to companies, Malaysian citizens, permanent residents and non-citizens
  • If the seller sells off the property in the 4th year from the date of purchase, that seller has to pay 20% of the RPGT if the seller is an individual with Malaysian citizenship and permanent resident or companies and 30% if the seller is not a Malaysian citizen
  • If the seller sells off the property in the 5th year from the date of purchase, that seller has to pay 15% of the RPGT if the seller is an individual with Malaysian citizenship and permanent resident or companies and 30% if the seller is not a Malaysian citizen
  • If the seller sells off the property in the 6th year from the date of purchase, that seller has to pay 5% if it is company or if the seller is not a Malaysian citizen while Malaysian citizens and permanent residents do not have to pay any taxes

When Do You Have to Pay RPGT?

As prescribed by the law, the purchaser’s solicitors are required to hold 3% of the purchase price from the deposit. They will then have to remit the same to the Inland Revenue Board within 60 days from the date when the sale and purchase agreement was made to meet the RPGT payable. It is important to note that there will be a penalty of 10% of the amount payable to RPGT if the payment is not made within 60 days. The seller can choose to file the necessary forms with the Inland Revenue Board on their own or they can choose to seek assistance from the solicitors at a fee as prescribed by the Solicitors Remuneration Order 2006. It is also important to understand that the seller does not have to pay for the RPGT if he or she sells the property at a loss because there is no chargeable gain or an allowable loss.

Exemptions

Every seller is also entitled to a once in a lifetime exemption from paying RPGT and this is only applicable to the disposal of a private residence. According to the RPGT Act 1976, a private residence is defined as a building or part of a building in Malaysia that is owned by an individual owner and certified as a proper place of residence. Besides that, permanent residents may also apply for this exemption. However, this exemption is not applicable to commercial properties. In order for the seller to apply for this once in a lifetime exemption, he or she needs to do the following:

  • The seller needs to show that the private residence is owned and occupied by the individual owner
  • The seller needs to show the certificate of fitness for occupation for the private residence
  • The seller needs to show the Certificate of Completion & Compliance issued for the private residence.

Another exemption is the transfer of the property between family members in the form of affection and love. Examples of such instances are the transfer between husband and wife, transfer between parents and child and transfer between grandparent and grandchild. In these instances, the person that transferred the property did not gain any profit or suffer any loss. Hence, it is deemed that the property is sold off at the original purchase price. Besides the examples mention above, other transfers between family members such as transfer between siblings are not exempted from RPGT.

Conclusion

The Malaysian Government believes that the implementation of RPGT will help new home buyers to purchase new houses but the progressive increase of RPGT rates may impact the sales of the sub-sales or secondary home market in the long term. It can also discourage local and foreign property investors to invest in Malaysian properties. However, the good thing about RPGT is that it has a lesser impact on genuine home buyers compared to property speculators.