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Real Property Gains Tax
 
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Real Property Gains Tax
Posted Date: Dec 30, 2007

1. Basis of Taxation

The chargeable gains arising from the disposal of any land situated in Malaysia or any interest, option or other right in or over such land or the disposal of shares in a 'real property company' is subject to Real Property Gains Tax.

2. Rates of Tax

Category of Disposal

Company (%)

Individuals & Other Person 
(%)

Disposal within 2 years

30

30

Disposal in the 3rd year

20

20

Disposal in the 4th year

15

15

Disposal in the 5th year

5

5

Disposal in the 6th and subsequent years

5

0

The above rates apply for disposals on or after 27 October 1995.

An individual who is not a citizen and not a permanent resident is subject to the following rates:

Category of Disposal

Rate of Tax (%)

Disposal within 5 years after the date of acquisition of the chargeable asset

30

Disposal in the 6th and subsequent years after the date of acquisition of the chargeable asset

5

These rates apply for disposals on or after 17 October 1997

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3. Example to illustrate how Real Property Gains Tax is calculated

Price on 10.01.2000

300,000
Less: Renovation/extension costs
20,000
    Legal fees
3,000
23,000
277,000
Acquisition Price on 15.04.1996
200,000
Add: Duty stamp paid
3,000
    Legal fees
2,500
5,500
205,500
71,500
Less: Exemption of RM5,000 or 10%of the chargeable gain, whichever is greater
7,150
Chargeable gain
64,350

Tax on RM64,350 @ 15% = RM9,652.50
Rate of tax 15% for disposal in the fourth year after the date of acquisition.

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4. Disposer's Responsibilities

The disposer of a real property has to submit the following within 30 days from the date of the Sale and Purchase agreement:

(i) Completed CKHT 1 form;
 
(ii) Copies of stamped Sale and Purchase Agreement or Form 14A (memorandum of transfer) to prove the acquisition and the disposal of the property;
 
(iii) Copy of the title deed / grant (if any);
 
(iv) Copies of bills and receipts for expenses claimed.
 
  (in case of companies or non-citizen and non-permanent resident individuals, details not required if asset is disposed in the sixth or subsequent year from the date of acquisition).

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5. Acquirer's Responsibilities

An acquirer has to submit the following within one month from the date of signing of the Sale and Purchase Agreement:

(i) Completed CKHT 2 forms (in duplicate);
 
(ii) Copy of stamped Sale and Purchase Agreement or Form 14A (memorandum of transfer) to prove the acquisition;
 
(iii) Copy of title deed / grant (if any).
 

Acquirer (or his solicitor) is also required to retain the whole of the consideration monies or a sum not exceeding five percent (5%) of the total value of the consideration whichever is the lower, until he receives clearance (Form CKHT 4 or CKHT 5) from the Inland Revenue Board.

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6. Exemptions Available

(i) A gain arising on disposal prior to 7 November 1975, the date of coming into force of the RPGT Act 1976.
 
(ii) An amount of RM5,000 or 10% of the chargeable gain, whichever is greater, for each disposal of a property by an individual.
 
(iii) A gain accruing to the Government, a State Government or a local authority.
 
(iv) A once in a lifetime exemption on a gain accruing to an individual who is a citizen or a permanent resident or to a husband and wife in respect of the disposal of one private residence.
 
(v) A gain equal to to the amount of estate duty payable where the disposer is compelled to dispose the property in order to pay the estate duty.

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7. A No Loss And No Gain Situation

Applicable only to companies (as defined in the RPGT Act 1976) for the following situations:-

(i)

Transfer of asset between companies in the same group to bring about greater efficiency in operation for a consideration consisting of not less than 75% syer in the transferee company and the balance of a money payment.
 

(ii)

Transfer of asset between any companies for any consideration in any scheme of reorganisation, reconstruction or amalgamation whereby the transferee company is being restructured to implement any such scheme in compliance with Government policy on capital participation in industry.
 

(iii)

Distribution of asset by a liquidator of a company and the liquidation of the company was made under a scheme of reorganisation, reconstruction or amalgamation whereby the transferee company is being restructured to implement any such scheme in compliance with Government policy on capital participation in industry.

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8. Several Transactions Where Disposal Price Is Deemed Equal To Acquisition Price

(i) Transfer of assets between spouses.
 
(ii) Gifts made to the Government, State Government, local authority or a charity exempt from income tax.
 
(iii) Disposal of an asset as a result of a compulsory acquisition under any law.
 
(iv) Disposal of an asset by a person to an Islamic Bank under a scheme where that person is financed by such bank in accordance with the Syariah.

For further questions on RPGT, please go to their web site at http://www.hasilnet.org.my

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