Real Property Gains Tax (RPGT) in Malaysia

If you are wondering if you might be taxed on the disposal of your property, we will help you Save Money with the six honest answers to the following : What, Why, Who, How, Where and When.

What is Real Property Gains Tax (RPGT)?

RPGT is a form of tax levied by the Inland Revenue (LHDN) on capital gains derived from the disposal of real property (which generally means any land and building).

How net capital gains is calculated is discussed below under ‘How RPGT is calculated?’.


Why do we have RPGT in Malaysia?

There are many reasons why RPGT is imposed. One of the more significant reasons why the government imposes this tax is to curb property speculation to avoid property bubbles forming. From time to time, the government may decide to increase or decrease RPGT to suit the their agenda e.g. they could reduce RPGT to encourage investments (this actually happened between 1 April 2007 – 31 December 2009 where property transactions during this period were exempted from RPGT to spur investments).

The other obvious reason is that RPGT is a source of revenue for the government to develop the nation. As for how effectively the government does this is an altogether separate topic for discussion not covered here.


Who needs to pay RPGT?

Both individuals and companies! Having said that, a Malaysian or a PR in Malaysia may claim a one-time (once in a lifetime!) exemption of RM10,000 or 10% of the gain (greater of the two) upon disposal of a private residence.

How RPGT is calculated?

The bad news is that if you are disposing off a property at a significant gain, you are likely to be taxed for it. But here is the good news. You will only be taxed on your net capital gains as opposed to the gross capital gain. Gross capital gains are simply calculated by taking the selling price less the purchase price.

To arrive at your net capital gains, you are allowed to subtract from the gross capital gain certain expenses (don't forget to keep the bills!) such as:

  • Legal fees
  • Real estate fees (sales commission) incurred to sell the property (typically between 2% – 3% of the selling price)
  • Administrative fees
  • Expenditure incurred to maintain/upgrade the property. This can include upgrade works done the property such as renovations and interior design works

 

Generally, the dates which are used to determine the RPGT tax rates are dependent on the date when the property was acquired and date when property was disposed off) are the dates of the respective Sale and Purchase Agreements.

The same applies for properties under construction i.e. the purchase date is determined as the date on the Sale and Purchase Agreement, when you agreed to buy the property and not the property completion date.

Gifts between family members are deemed to be "No gain no loss" transactions and thus for subsequent disposals the acquisition price will be that of the initial giver's acquisition price.

RPGT Rates in Malaysia

After the Budget 2014 announcement, RPGT has been increased substantially to 30% for properties disposed within 3 years years or less (previously, it was 15% for 2 years and below and 10% for 3 years and below), 20% for properties disposed within 4 years of purchase and 15% for 5 years (previously it was 10% for both 4 and 5 years).0% RPGT for properties older than 5 years kept as it is.

The new rates will be in effect from 1st January 2014 onwards.

Foreigners can only buy properties with a minimum value or RM1M RPGT at 30% for first 5 years and 5% thereafter.

So if you want to Save Money by not having to pay RPGT, all you have to do is sell your property after the 5th year!

Below is a table showing the evolution of the RPGT rates in Malaysia, the relevant tax brackets for each time period (take your net capital gain and multiply it with the corresponding tax percentage subject to the property holding period):

RPGT Rates for Individuals

These RPGT rates apply towards individuals who are citizens and permanent residents of Malaysia.

RPGT for IndividualsDisposals on Oct-95 to Mar-07Disposals on Apr-07 to Dec-09Disposals on Jan-10 to Dec-112012 Budget2013 Budget2014 Budget
Disposal in 1st year
30%
0%
5%
10%
15%
30%
Disposal in 2nd year
30%
0%
5%
10%
15%
30%
Disposal in 3rd year
20%
0%
5%
5%
10%
30%
Disposal in 4th year
15%
0%
5%
5%
10%
20%
Disposal in 5th year
5%
0%
5%
5%
10%
15%
Disposal in 6th year and beyond
0%
0%
0%
0%
0%
0%

RPGT Rates for Companies

These RPGT rates apply towards Companies in Malaysia.

RPGT for CompaniesBudget 2013Budget 2014
Disposal in 1st year15%30%
Disposal in 2nd year15%30%
Disposal in 3rd year10%30%
Disposal in 4th year10%20%
Disposal in 5th year10%15%
Disposal in 6th year and beyond0%5%

RPGT Rates for Non-Citizens and Non-Permanent Residents

These RPGT rates apply towards individuals who are not citizens or permanent residents of Malaysia.

RPGT for Non-PRsBudget 2013Budget 2014
Disposal in 1st year15%30%
Disposal in 2nd year15%30%
Disposal in 3rd year10%30%
Disposal in 4th year10%30%
Disposal in 5th year10%30%
Disposal in 6th year and beyond0%5%

 



Where and When do you pay RPGT?

Given the nature of RPGT, it can only be paid after you have sold off the property. You are allowed a 60 day grace period to settle the tax that you are meant to pay.

Your conveyancing lawyer or tax agent should be able to submit the relevant CHKTK form on your behalf and pay any dues to Lembaga Hasil Dalam Negeri (LHDN) from the proceeds of your property sale. However, it is best not to assume but to make sure. So do check with your lawyers or tax agents on this matter with your newfound knowledge.


The SaveMoney.my Malaysian RPGT 2012 Calculator

Want to calculate your RPGT? Use our quick little calculator to see the levels of RPGT you are expected to pay for your property disposal!

The SaveMoney.my Malaysian RPGT 2012 Calculator

 

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