Pursuant to Real Property Gains Tax Act 1976, Real Property Gains Tax (RPGT) is tax charged by the Inland Revenue Board (LHDN) on gains derived from the disposal of real property such as land and building. Both individuals and companies are subjected to RPGT.
RPGT is also charged on the disposal of shares in a real property company (RPC). An RPC is a company holding real property or shares in another RPC with value not less than 75% of the value of the company’s total tangible assets.
RPGT had undergone a couple of revisions since introduced in 1976, and the last revision was done in 2014. In this revision, with effect strating from 1st Jan 2014, the RPGT rates have been increased from 0% to 15% to the new rates of 0% to 30%.
The reason for the reason increase is to curb property speculation & sudden surge in property price, which affect the affordability of people to buy a property.
1. RPGT 2014 Rates
RPGT rates are depending on the entity (resident, individual or company) and the most importantly holding period. There are three (3) separate tier group for RPGT 2014 rates. The groups are Malaysian Citizen and Permanent Resident (PR) individuals, Companies and Non-Citizen or Non-Permanent Resident.
For the Malaysian citizen and permanent resident individuals, any property disposed within the first five (5) years of purchase is subjected to RPGT. Beyond that, there is no RPGT imposed.
For the Companies and Non-Citizen or Non-Permanent Resident group RPGT imposed when they disposed the property even the property held more than five (5) years.
Holding Period is determined base on date of signing of Sales & Purchase Agreement (SPA) and date of disposal. Take note on the anniversary date to determine the actual RPGT rates.
RPGT 2014 tier rates for all three (3) groups are tabulated in the table below.
|Holding Period||Citizen or Permanent Resident||Company||Non-Citizen or Non-Permanent Resident|
|within 1 year||30%||30%||30%|
|within 2 years||30%||30%||30%|
|within 3 years||30%||30%||30%|
|within 4 years||20%||20%||30%|
|within 5 years||15%||15%||30%|
|Beyond 5 years||0%||5%||5%|
As per Schedule 4 of the Real Property Gains Tax Act 1976 individual can obtain RPGT exemption base on the following.
- Disposal of one residential property once in a lifetime.
- Transfer as gifts in between family members. This exemption is only applicable for transfer in between husband and wife, parent and child, grandparent and grandchild. Take notes that transfer between sibling, brothers or sisters are not applicable.
- Waiver Exemption equivalent to 10% of chargeable gains or RM10,000 whichever is higher is not taxable. Prior to 1 Jan 2010, the exemption was equal to RM5,000 or 10% of the chargeable gain, whichever was greater.
3. RPGT 2014 Calculation
In short the RPGT payable is calculated base on the following formula
RPGT Payable = RPGT Rates x (Chargable Gains – Waiver Exemption)
- RPGT Rates → as per item (1) above
- Chargeable Gains → net capital gains after deducting in between disposal price, acquisition price and allowable expenses. Typical allowable expenses are
- Legal fees
- Sales commission
- Administrative fees
- Repair and renovation
- Waiver Exemption → as per item (2) bullet (3) above
You may refer to 1-million-dollar-blog website for Real Property Gains Tax Calculator
4. Payment of RPGT
RPGT is only payable once the property sold off. The payment has to be paid at Inland Revenue Board (LHDN) within 60 days.
Normally, lawyer whom you engage to handle the transaction will do it for you by submitting the relevant CHKTK from. It is wise to check they already do this to avoid any misunderstanding.
5. Other Resources
Real Property Gains Tax Act 1976 (revision up to 2006)
Real Property Gains Tax Calculator (2014)