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Real Property Gains Tax (RPGT) 2024 in Malaysia: How to calculate it?

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Malaysian individuals and permanent residents (PRs) who dispose of their properties in the sixth year onwards will no longer be charged the 5% RPGT, as of 1 January 2022.

rpgt-new-2019-malaysia
Andriy Popov | 123rf

The latest RPGT Exemptions

Under Budget 2022, Finance Minister Tengku Zafrul announced that the government will no longer impose Real Property Gains Tax or RPGT for property disposals by individuals comprising Malaysian citizens and permanent residents starting from the sixth year. This means that the RPGT rate for property disposals in the 6th year and subsequent years after the acquisition is to be reduced from 5% and 10% to 0%, effective from 1 Jan 2022.

That aside, both local and foreign homeowners, as well as companies, would need to equip themselves with the basic know-how of RPGT, especially on how to calculate the applicable rates and what are the available exemptions for each of them.

Following is what you need to know.

What is Real Property Gains Tax (RPGT) Malaysia?

According to the Real Property Gains Tax Act 1976, RPGT is a form of Capital Gains Tax in Malaysia levied by the Inland Revenue (LHDN). It is chargeable upon profit made from the sale of your land or real property, where the resale price is higher than the purchase price. 

RPGT is generally classified into 3 tiers:

  1. Individuals (Citizens & Permanent Residents)
  2. Individuals (Non-Citizens/Foreigners)
  3. Companies

When it was first enacted, RPGT’s main purpose was to curb speculative activities in the local property market. Its function as revenue-generating tax legislation was secondary.

How much is RPGT in Malaysia?

RPGT was first implemented in 1995 and it has seen quite a few changes over the years. The most recent RPGT amendment which was announced during Budget 2022 and implemented in January 2022 – is where Malaysians and permanent residents who are selling off their property in the sixth and subsequent years of ownership will no longer have to pay a 5% RPGT. Foreigners and companies, on the other hand, will have their RPGT rates maintained at 10%.

Previously, Malaysian and permanent residents who sell off their properties after the 5th year of ownership are required to pay a 5% RPGT on the profits earned from the sale. 

What is the RPGT rate in Malaysia?

Below are the new RPGT rates effective from January 2022

RPGT RatesIndividuals – Malaysian Citizens & PRsIndividuals – Non- Citizens & ForeignersCompanies
Disposal in 1st year30%30%30%
Disposal in 2nd year30%30%30%
Disposal in 3rd year30%30%30%
Disposal in 4th year20%30%20%
Disposal in 5th year15%30%15%
Disposal in 6th year & beyond0% (Reduced from 5%)10%10%

Beginning 1 January 2022, RPGT rates from the 6th year onwards will be abolished for Individuals including Malaysian citizens and permanent residents.

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Who should pay RPGT?

RPGT is not applicable if the disposal price of a property is deemed equal to or lower than the acquisition price. It is only chargeable if there is a profit gain from the disposal of the real property.

qualify-RPGT
Mustansar Syed | 123rf

Individuals (Malaysian citizens, PRs, Non-Citizens & Foreigners)

If any of the above parties sell their property at a profit, they will have to pay RPGT based on their chargeable gain.

Companies

Usually, the selling of shares by companies is not subject to RPGT except for Real Property Companies or RPCs whose core business is in real property. An RPC company constitutes only if it has real property[1] or RPC shares amounting to no less than 75% of its company’s total tangible assets. However, if the company disposes of its shares or real property to the point where its RPC share percentage falls below 75% and it ceases to be an RPC, then the shares that are disposed of will not retain their RPC characteristic and will be liable for the RPGT provision.

Additionally, if a company reclassifies its real property from fixed asset to current asset (say, trading stocks) then it is also deemed as a disposal of a chargeable asset and is subject to RPGT. The disposal price of such assets will be at their market value at the date of reclassification.

NOTE: A property development company will be regarded as an RPC as real property includes the development land situated in Malaysia. This is notwithstanding that the development land itself is subject to income tax and not RPGT.

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RPGT exemptions for Individuals & Companies

For Individuals

1) An exemption of 10% of profits or RM10,000 per transaction (whichever is higher) for the following four scenarios:

Malaysian citizens & Permanent Residents

a) If an asset is transferred as a gift by a donor who is a Malaysian citizen and the acquirers are either husband and wife, parent and children or grandparents and grandchildren. This exemption is not applicable for transfers between siblings.
b) Once-in-a-lifetime exemption on the chargeable gain on disposal of 1 private residence by a Malaysian citizen.

financial-incentive-exemption-rpgt.
Ion Chiosea | 123rf

c) If an asset is transferred to a company, then the asset owner or owner’s spouse must be a Malaysian citizen. If the asset is jointly owned by 2 individuals, both need to be Malaysian citizens to make the transfer.

d)  Homeowners who own low or medium-cost housing priced or valued below RM200,000 are exempted from RPGT when disposing of their property.

Applicable for Companies

1) 10% of profits or RM10,000 per transaction (whichever is higher) is exempted

2) Intercompany transfer of shares is exempted from RPGT as follows:

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Allowable Expenses for RPGT 2024

Any incidental costs incurred in disposing of the property (as follows) can be deducted from chargeable gain to calculate RPGT:

  • Legal fees, accounting fees, surveyor’s fees, etc.
  • Real estate fees (sales commission)
  • Administrative fees
  • Repair or renovation to maintain or upgrade the property such as interior design such as IKEA furniture to redecorate your house
  • Cost of preserving or defending one’s title to, or to a right over the asset
  • Cost of advertising to make the disposal

What is Allowable Loss for RPGT 2024?

If there is more than one transaction of real property in the assessment year, any loss incurred from a single transaction can be offset against another transaction, which generates a chargeable gain, as long as both transactions fall under the same year.

How do I determine the applicable RPGT years?

1) The property acquisition and disposal dates are based on the date of signing the Sales and Purchase Agreement (SPA) for both completed and under-construction properties.

2) Say you inherited a property from a relative or friend who has passed away, when selling it off (you will be known as the executor), as per the RPGT Act for deceased’s estates:

Date of death of the deceased = Acquisition Date by the executor

The executor oversees the selling or disposing of the estate before distributing it to the beneficiaries. The RPGT charged on the deceased person’s estate is based on this acquisition date by the executor.

RPGT base year amendment to 2013

During the tabling of Budget 2020, an RPGT amendment was made to provide some relief to property sellers – it was announced that for the calculation of property gain tax of units purchased before 2013, the Government will use the market price on 1st January 2013 as the initial point of valuation. Previously, the base year was set at 1 January 2000. As RPGT is charged on the profit made from the sale, a later base rate would mean a lower calculated profit, thus reducing the property seller’s tax burden. 

Read more on how RPGT rates have changed over the years and what is subject to RPGT in Malaysia.

How is RPGT calculated in Malaysia?

ringgit-loan-malaysia.
123rf

For Individuals

The following formulas are the same for Citizens, PRs, Non-Citizens & Foreigners. Their RPGT rates will vary depending on their holding period and residential status (refer to the table above).

RPGT is charged on Net Chargeable Gains.

Gross Chargeable Gain: Acquisition price – Disposal price
Net Chargeable Gain: Gross Chargeable Gain – Allowable Expense – RPGT Exemption – Allowable Loss
TAX PAYABLE = RPGT Rate (based on the number of years of property ownership) X Net Chargeable Gains

Example: 
For instance, let’s say Adam and Hanis (both Malaysian citizens) bought a condominium in Hartamas on 4th January 2019 for RM300,000. With plans to start a family, they decided to upgrade to a bigger place and on 31 January 2023 they sold off the condominium for RM500,000.

Gross Chargeable Gain: RM 500,000 – RM 300,000 = RM 200,000
*Assuming Adam has an Allowable Expense of RM 30,000 and an RM20,000 RPGT Exemption of 10% of profit (200,000 x 10%)
Net Chargeable Gain: RM 200,000RM 30,000RM 20,000 = RM 150,000

TAX PAYABLE = 15% RPGT x RM 150,000RM22,500

(RPGT rate is based on Budget 2022 for Individual Citizens’ disposal in the 5th year)

For Companies

Acquisition Price: A/B x C, where
A = number of shares held by the shareholder; 
B = total issued shares of the company
C = the defined value of the real property at the date of acquisition of the chargeable asset

Gross Chargeable Gain: Disposal Price – Acquisition Price
Net chargeable Gain: Gross Chargeable Gain – Allowable Expense – RPGT Exemption –Allowable Loss
TAX PAYABLE = RPGT Rate (based on the number of years of property ownership) x Net Chargeable Gains

Example:

Synergy Sdn Bhd was incorporated on 1 January 2020 with Mr Andrews, Mr Brian & Mr Tate holding 100,000 shares each. It was not an RPC during the time of its incorporation. However, on 31st March 2022, the company acquired its first and only real property at RM 1.2 million. As a result, its total tangible assets including the real property became RM 1.5 million, turning it into an RPC.

On 31, January 2023, Mr Andrews decided to sell his 100,000 shares for RM 1 million to Mr Lodge.

Acquisition Price: 100,000/300,000 x RM 1,200,000 = RM 400,000
Disposal Price: RM 1,000,000
Gross Chargeable Gain: RM 1,000,000 – RM 400,000 = RM 600,000
*Assuming Mr Andrews has an Allowable Expense of RM 50,000, an RPGT Exemption of RM 600,00 ( 600,000 x 10%) and an Allowable Loss of RM 35,000.
Net Chargeable Gain: RM 600,000RM 50,000RM 60,000RM 35,000 = RM 455,000

TAX PAYABLE = 30% RPGT  X RM 455,000 = RM 136,500

(RPGT rate is based on Budget 2022 for Companies disposal in the 3rd year)

When to pay RPGT in Malaysia?

For locals and permanent residents who sell off property, their lawyers will retain 3% of the property’s selling price/disposal price when the purchaser pays the first deposit to buy the property for the purpose of RPGT payment. For non-citizens & foreigners, this retention rate is 7%.

Your solicitor will make the payment with necessary forms to Inland Revenue Board within sixty (60) days from the date of the sale and purchase agreement to meet the RPGT payable.

How to file RPGT in Malaysia?

Those who wish to file their RPGT themselves can obtain the necessary forms from the nearest LHDN branch or download them from IRB’s website.

STEP 1: Complete the Disposal of Real Property (CKHT 1A) form, your Sales and Purchase Agreement (SPA) form and other documents supporting the RPGT deductions you plan to make.

STEP 2: Fill out the Notification under Section 27 in the RPGTA 1976 (CKHT 3) form – to apply for RPGT exemptions.

STEP 3: Get your property purchaser to complete the Acquisition of Real Property (CKHT 4) form that usually comes hand in hand with a copy of the SPA.

STEP 4: Submit all forms and supporting documents to the nearest LHDN branch within 60 days of the sale.

What is the consequence of late payment of RPGT?

Any payment after 60 days may attract a penalty payable by the seller. The penalty is 10% of the amount payable as RPGT. To find out more about when it was introduced in Malaysia and how have the rates changed over the years, read RPGT in Malaysia: A brief history, latest exemptions and calculation

_______________­­­­­­­­­­­­­­­­­­­­­­­__
[1] Real property is land, or any property directly attached to it including residential property (condominium, houses, apartments), commercial buildings (shops & office) and even crops, machinery, ponds, canals, roads, etc.

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Edited by Reena Kaur Bhatt

Disclaimer: The information is provided for general information only. iProperty.com Malaysia Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

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Real Property Gains Tax (RPGT) in Malaysia

You will have to pay RPGT as long as you made a profit on the sale of a property in Malaysia. RPGT will apply to both Malaysians and Permanent Residents (PRs) as well as foreigners who reside in Malaysia.
Capital gains tax is a tax is charged on the gains obtained from the sale of any investments assets (capital). Nevertheless, capital gains tax is not charged in Malaysia with the exception for RPGT, which is the tax charged on the gains made from the disposal of a property.
RPGT will be applicable for the disposal of real property, including shares in a real property company (RPC). Real property is any piece of land situated in Malaysia as well as any interest, option or other right in or over such land.