STATUTORY VALUATION

RES 611

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 OBJECTIVE

AT THE END OF THE COURSE, THE STUDENT

ARE EXPECTED TO BE ABLE TO :
• DETERMINE THE DISPOSAL PRICE
• DETERMINE THE ACQUISITION PRICE
• DETERMINE THE RATE OF THE TAX
• DETERMINE THE AMOUNT OF EXEMPTION
• CONDUCT VALUATION FOR REAL
PROPERTY GAINS TAX

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 INTRODUCTION

• Real property gains tax (RPGT) is a form of

capital gains tax. RPGT is charged on gains
arising from the disposal of real property
which is defined as “any land situated in
Malaysia and including any interest, option or
other right in or over such land or shares in a
real property company (RPC).

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• RPC is a controlled company holding real
property or shares in another RPC of which
the defined value is not less than 75% of the
value of the company’s total tangible assets.

• RPGT is legislated with effect from 7/11/75 to

tax gains on disposal of real property in
Malaysia.

• It replaces Land Speculation Tax Act 1974

with the aim of controlling land speculation
 RPGT VS INCOME TAX
• Mutually Exclusive
• RPGT levied in situation where Income Tax Act
not applicable.
• Real Property as trade of business is subject to
income tax.

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 REAL PROPERTY GAINS TAX

ACCORDING TO SECTION 3(1) OF THE ACT,

RPGT SHALL BE CHARGED IN RESPECT OF
CHARGEABLE GAIN ACCRUING ON THE
DISPOSAL OF ANY REAL PROPERTY
(REFERRED TO AS “ CHARGEABLE ASSET”)

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 CHARGEABLE PERSONS
 Schedule 1 RPGT Act:
a) Body of persons and partnership
b) Co-proprietorship
c) Incapacitated persons
d) Non-residents
e) Rulers and Ruling Chief
f) Companies
g) Hindu Joint Family
h) Estate of a deceased person/Trust

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 REAL PROPERTY GAINS TAX

Scope of Charge

Section 3(1)

Chargeable gain accruing on the Disposal of any real property (chargeable

asset)

Disposal price x (a) sell, convey, transfer, (i) any land situated in Malaysia;
- Acquisition price (x) assign, settle or alienate any interest, option or other right
Chargeable gain xx by agreement / law in / over such land

(b) every method, scheme or (ii) disposal of shares – para 3(b)

arrangement by which
ownership of an asset is (iii) disposal of RPC shares
transferred
(c) include deemed disposal

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REAL PROPERTY GAINS TAX
IF
DISPOSAL PRICE > ACQUISITION PRICE
CHARGEABLE GAIN

IF
DISPOSAL PRICE < ACQUISITION PRICE
ALLOWABLE LOSS

IF
DISPOSAL PRICE = ACQUISITION PRICE,
NEITHER CHARGEABLE GAIN NOR ALLOWABLE LOSS

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 COMPUTATION OF RPGT

Disposal Price
less Acquisition Price
Chargeable Gain
less exemption (Sch 4) *
Gain subject to RPGT
x tax rate %
RPGT payable

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 DISPOSAL PRICE

THE AMOUNT OR VALUE CONSIDERATION IN MONEY OR

MONEY’S WORTH FOR THE DISPOSAL OF THE ASSET

LESS - Permitted expenses

i) Any expenditure incurred on the asset after its acquisition by or on

behalf of the disposer for the purpose of enhancing or preserving
the value of the asset (enhancement costs)

ii) Any expenditure incurred after his acquisition of the asset by the
disposer in establishing, preserving or defending his title to, or to a
right over the asset.

iii) Incidental costs to the disposer of making the disposal.

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 INCIDENTAL COST

INCLUDES:

i) fees, commission or remuneration paid for the professional

services of any surveyor, valuer, accountant, agent or legal adviser

ii) Cost of transfer (including stamp duty)

iii) For acquisition, the cost of advertising to find a seller and any
interest paid on capital employed to acquire the asset with
exception of para 7(a), (b) and (c) Sch. 2

iv) For disposal, the cost of advertising to find a buyer and costs
reasonably incurred for the purposes of this Act in making any
valuation or in ascertaining market value.

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 DISPOSAL PRICE (Example 1 )

Ahmad disposed his a double storey terraced

house in June 2021 for RM650,000. He spent
RM90,000 renovating the house in 2018. The
estate agent’s fees for the disposal is
RM5,000, advertisement RM 1,000 and the
legal expenses RM11,000.

 Determine the disposal price for Ahmad

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 ACQUISITION PRICE

CONSIDERATION PAID WHOLLY AND EXCLUSIVELY FOR THE

ACQUISITION OF REAL PROPERTY

PLUS
+ INCIDENTAL COST INCURRED ON THE ACQUISITION

LESS:

i) Compensation for any kind of damage or injury to the asset or

destruction or dissipation of the asset or depreciation or risk of
depreciation of the asset

ii) Insurance received for any kind of damage or injury to or the loss,
destruction or depreciation of the asset

iii) Sum forfeited as a deposit made in connection with an intended

transfer of the asset

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 ACQUISITION PRICE – (Example 2)
 As in Example 1, Ahmad has acquired the property in 2015 with a
consideration of RM300,000. The legal fees and stamp duty
incured was RM5,000. The commission paid to agents for the
purchase is RM3,000. Six months later cracks appeared on the
floor in the porch area and Ahmad recovered RM30,000 from the
developer for the damage.

On 1st March 2017, Ahmad entered into an agreement to sell the

shophouse to Stapa for RM600,000. Stapa paid a deposit of
RM60,000 but was unable to secure a loan and the sale was
aborted. Later, part of the master bedroom was destroyed by fire
and Ahmad was paid a sum of RM20,000 under its fire insurance
policy.

Compute the acquisition price for Ahmad.

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 CHARGEABLE GAIN

SCENARIO 1
Compute the CHARGEABLE GAIN on the
disposal.
SCENARIO 2
What happen if the compensation
received in Example 2 is more than the
consideration, say RM350,000 instead of
RM30,000?
Refer Para 4(2) Sch 2.

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 REAL PROPERTY GAINS TAX

WHERE AN ASSET, WHICH IS DISPOSED

OF, WAS ACQUIRED BY THE DISPOSER
PRIOR (BEFORE) TO 1 JANUARY 1970,
THE ACQUISITION PRICE SHALL BE THE
MARKET VALUE OF THE ASSET AS AT
1 JANUARY 1970.

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 REAL PROPERTY GAINS TAX

Disposal price Acquisition price

is the asset disposed of is the asset disposed of

acquired prior to 1.1.1970? acquired prior to 1.1.1970?

Yes No No Yes
(i) Enhancement cost RM RM RM RM (i) Incidental cost
(ii) Preserving / Consideration received in 90,000 (a) Consideration paid in money 50,000 (ii) Compensation for
defending title money or money’s worth or money’s worth damages
(b) Incidental cost (e.g legal (iii) Insurance compensation
Incurred before 1.1.1970 Less: Para 5 fees, stamp duty, (iv) Forfeiture of deposit
is ignored (a) Enhancement cost (1)(a) 21,000 advertisement and Incurred / received before
: renovation cost brokerage) [para 6] 3,500 1.1.70 is ignored
: construction of buildings 53,500
(b) Legal fees in defending Less: Para 4 Market value as at
land title (1)(b) 5,000 (a) Compensation for 1.1.1970 in place of the
(c) Incidental cost (e.g damages (1)(a) 2,000 consideration paid
(advert, brokerage) (1)(c) 4,000 (b) Compensation for
(30,000) insurance policy (1)(b) 10,000
Disposal price 60,000 (c) Forfeiture of deposit (1)(c) 500
(12,500)
Acquisition price 41,000

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 DISPOSAL AND ACQUISITION PRICE DEEMED AT
MARKET VALUE (Para 9 Sch. 2)

• A bargain not at arm’s length

• or gift.
• A disposal of real property for a consideration that cannot be
valued.
• A disposal of real property in connection with loss of
employment or
gratuity payment.
• Transfer of real property for satisfaction of debt.
• Lump sum disposal of real property and other assets.
• Where anti avoidance under section 25(2) applies.

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 DISPOSAL DATE AND ACQUISITION DATE

It is crucial to determine the acquisition and disposal date

because the RPGT rates depends on the length of
ownership of the chargeable asset is held (Holding Period).

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.

ACQUISITION DATE

 The disposal date of a seller would be the acquisition

date to the purchaser.

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DISPOSAL DATE

A disposal shall take place:

 on the date of agreement if there is a written agreement
 if there is no agreement, on the date of completion of
the disposal
Date of completion means:
 the date of ownership transferred by the disposer OR
 the date on which the disposer received the whole
amount in money for the transfer, whichever is the
earlier.

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CONDITIONAL CONTRACTS (Para 16, Sch. 2)

Conditional contract would defer the date of disposal to a

later date than the written agreement date.

This refers to a contract where the amount of the

consideration depends mainly or wholly on the value of
the asset at the time when the condition is satisfied.

The acquisition and disposal date shall be the date

when the condition is satisfied.

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 DISPOSAL DATE

 On 1st June 2009, Alia signed an agreement to

sell her house to Julie for RM350,000 and Julie
paid a deposit of RM25,000. However due to
some financial problems the sale was cancelled.
Finally Alia managed to sell the property to her
sister Linda for RM320,000. The agreement was
signed on 10th February 2010 and Linda paid a
deposit of 10% from the purchase price. The
balance of the payment will be paid in two
instalments, i.e. August 2010 and January 2011.
 Determine tha date of disposal for Alia.

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 DETERMINATION OF DISPOSAL/ACQUISITION
DATE
DISPOSAL DATE / ACQUISITION DATE

Normal Exception:
Conditional contract

Yes Is there a written agreement No No Does the contract require approval Yes
for the disposal? from FIC or SC?

Date of agreement Date of completion Date of agreement Last of all such

condition is satisfied

Ownership is Whole of the amount / value

transferred of the consideration
has been received
whichever is the earlier

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 RPGT EXEMPTION FOR INDIVIDUALS
(Sch. 4 , sec 9)

i. gain accrued before Act came into force

ii. an amount of RM10,000 or 10% of
chargeable gain, whichever is greater
Also applies to disposal which is or was part of a larger chargeable asset at the time of disposal.
(with effect 11.1 3013)
(An individual means a natural person)
The exemption does not apply to a partnership or a company. An executor is also not an individual,
therefore not eligible for the exemption.

iii. a gain accruing to the government

iv. gain equal to amount of estate duty (where
disposer is compelled to dispose property in
order to pay estate duty)

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• For co-proprietor disposing his
undivided sharein an asset, an
exemption is available to each co-
proprietor in determining the tax
payable in respect of his share of the
property.

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 Private Residence Exemption
(Sch 3)

• Section 8 exempts an individual who is a

citizen or a permanent resident liability to
RPGT in respect of gain on disposal of a
private residence.
• This exemption can be obtained only once in a
life time in respect of only one residential
property.

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 Private Residence Exemption
(Sch 3) cont...

• Private residence is a building or part of a building in

Malaysia owned by an individual and certified fit for a place
of residence.
• Ownership
Registered proprietor as in title
• Occupied
An individual need not occupy, provided CF has been issued.
It may be rented out or left vacant.
• Part of building
Where only part is used for private residence, only that part
qualifies for exemption

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 Example on private Residence exemption
(double storey shophouse)

Azlan bought a double storey shophouse at MV of

RM250,000 in December 2010. The floor area is as follows:
GF 150 sq.m. (shop)
FF 120 sq.m. (residential)
He later sold the property at MV of RM280,000 in January 2014.
Azlan applied for the private residence exemption for this disposal.
Determine the amount of RPGT to be paid by Azlan.

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 REAL PROPERTY GAINS TAX
RATES OF TAX (Section 4 and 7(4), Sch. 5)
PART I
Category of Disposal Rate of Tax

Disposal within two years after the date of 30 %

acquisition of the chargeable asset………
Disposal in the third year after the date of 20 %
acquisition of the chargeable asset………
Disposal in the fourth year after the date of 15 %
acquisition of the chargeable asset………
Disposal in the fifth year after the date of 5%
acquisition of the chargeable asset………
Disposal in the sixth year after the date of Nil
acquisition of the chargeable asset or there-
after

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 REAL PROPERTY GAINS TAX
PART II

In the case where the disposer is a company, the following rates of tax shall
apply

Category of Disposal Rate of Tax

Disposal within two years after the date of 30 %

acquisition of the chargeable asset………
Disposal in the third year after the date of 20 %
acquisition of the chargeable asset………
Disposal in the fourth year after the date of 15 %
acquisition of the chargeable asset………
Disposal in the fifth year after the date of
acquisition of the chargeable asset or there-
after……………………………………………. 5%

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 REAL PROPERTY GAINS TAX
PART III

In the case of an individual who is not a citizen and not permanent

resident, the following rates of tax shall apply:

Category of Disposal Rate of Tax

Disposal within five years after the date of 30 %

acquisition of the chargeable asset………
Disposal in the sixth year after the date of
acquisition of the chargeable asset or there-
after…………………………………………… 5%

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o However, through RPGT (exemption)(no.2) Order
2007, the Minister exempts any person from all
provisions of the Act in respect of any disposal of
chargeable assets after 31 March 2007.

o Disposal of any chargeable asset from 01 April 2007 to

31 Disember 2009 is exempted from RPGT

o The exemption order was revoked with effect 01

January 2010 through RPGT (Exemption) Order
2009[P.U. (A) 376/2009].

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o For any disposal of chargeable assets made
after 31 December 2009, tax is imposed at a
fixed rate of 5% on the gains arising from the
disposal within 5 years of the date of
acquisition of such chargeable assets.

o Any disposal after 5 years of

purchase/acquisition is exempted from
payment of RPGT. The Order effect from 1
January 2010.

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o In the Budget 2011, Effective 1.1.2012 Real
Property Gains Tax (RPGT) has been increased
for the first two years to 10 % each year from
the 5 % previously. The tax increase is to help
curb speculation in the real estate market.
o Later in 2012 Budget the tax rate is increased
to 15% for the first 2 years and 10% for the next
third, fourth and fifth years. This is effective
from 1.1.2013.

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The formula used for the portion of chargeable gain
exempted from tax is
A x C
B

A= Chargeable gain x applicable tax rate –

(Chargeable gain X rate of exemption )
B = Chargeable gain x applicable tax rate
C = Chargeable gain

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Example:

A disposes a piece of property on March 2013

for RM1,500,000. The property was acquired in
June 2011 for RM1,100,000.

The computation as follows;

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Disposal 1,500,000
Acquisition 1,000,000
Chargeable gain 400,000
Exempt (Sch 4) 40,000
Chargeable gain subject to tax 360,000
Exempt portion
180,000
(360,000 x 30%)-(360,000 x 15%)x 360,000

(360,000 x 30%) 180,000

RPGT Payable 30% of 180,000 RM54,000
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 The exemption order was again revoked with effect 01 January 2014 through
Perintah Cukai Keuntungan Harta Tanah (Pengecualian) (Pembatalan) 2013
[P.U.(A) 369]
RATES FOR RPGT 2014
Citizen or Non-Citizen or
g Period Permanent Company Non-Permanent
Resident 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%

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 TAX RELIEF FOR ALLOWABLE LOSSES
Sec 7(4), Para 33 Sch 2

• Tax relief is allowed as a result of loss

(loss multiply by rate of tax)
• Tax relief can be deducted against total
tax assessed for year of assessment
when a disposal is made
• If relief is not utilised in the relevant
year, it can be carried forward to offset
against future RPGT payable if any.
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Example (For Tax Relief)
Disposals in 2010 Chargeable Rate of tax Tax assessed Loss
Gain (RM)
Asset A sold within 2 yrs 50,000 5% 2,500
of acquisiton
Asset B sold within 3 yrs 30,000 5% 1,500
of acquisiton

Asset C sold within 3 yrs 5% nil (25,000)

of acquisiton

Total tax for Year of 4,000

Assessment 2010
LessTax relief (5% x25,000) 1,250
Net tax for 2010 2750

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GIFT (Para 12, Sch. 2)

The disposal of an asset by way of a gift, shall be deemed to

be a disposal at the market value of the asset.

The above only applies where the donor and recipient are:
– Husband and wife
– Parent and child
– Grandparent and grandchild

Condition:
Gift is made within 5 years after the date of acquisition of the
asset by the donor.

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 GIFT (Para 12, Sch. 2)

Under the above situation, the disposal

would be treated as a no gain no loss
transaction and not taxable under RPGT.

Therefore the donor would not be liable to

any RPGT.

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 BENEFICIARY

The beneficiary of the gift would be deemed to have

acquired the real property at the acquisition price paid by
the donor + permitted expenses incurred by the donor.

Permitted expenses mean:

• Capital expenditure for enhancement of the real
property.
• Legal fees in establishing, preserving or defending the
title of the real property.

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DISPOSAL PRICE DEEMED EQUAL TO ACQUISITION
PRICE (Sch 2 Para 3)

Under the following circumtances, DP=deemed

equal to AP, no gain no loss position :
a) The devolution (delegation of power) of the
assets of a deceased person on his executor
or legatee (recipient of legacy) under a will
or intestacy (person died without will) or
on the trustee of a trust created under his
will

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DISPOSAL PRICE DEEMED EQUAL TO ACQUISITION
PRICE (cont…)

b) Transfer of assets between spouses or

transfer of assets owned by:
An individual
His wife
An individual jointly with wife
An individual jointly with a
connected person
to a company (resident or not
resident in M’sia) controlled by
these people. The consideration
can be shares in the company or
substantial amount comprises of
shares (at least 75%) and the
balance in money payment (cash)

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 DISPOSAL PRICE DEEMED EQUAL TO
ACQUISITION PRICE (cont…)

c) Conveyance or transfer of an asset by way of security

Or
The transfer of a subsisting interest or right by way of
security in or over the asset (including re-transfer on the
redemption of the security

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DISPOSAL PRICE DEEMED EQUAL TO ACQUISITION
PRICE (cont…)

d) Gift made to the Government, State

Government, local authority or charity
(exempt from income tax under the income
tax law).

e) Disposal of an asset as a result of a

Compulsory acquisition.

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DISPOSAL PRICE DEEMED EQUAL TO ACQUISITION
PRICE (cont…)

f) The disposal of an asset by a person to an

Islamic Bank provided that person is
financed by such bank in accordance with
the syariah principle of Al-Murabahah.

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 Deceased Person’s Estate
• i) Chargeable asset received as a gift on
death Sch 2 para 19(1)
• ii) Chargeable asset accepted by legateein
place of money legacy Sch 2 para 19(2)
• iii) Chargeable asset dispose under a will
otherwise to a legatee Sch 2 para 19(3)

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 Transfer to a controlled Company
Sch 2 Para 3(b)

• Transfer consisting of shares and balance

money payment
• Deemed to have acquired the asset at AP=AP
paid by the the transferor plus permitted
expenses (no gain no loss)
• The share is considered as chargeable asset
AP= Transferor AP for asset
add permitted expenses
less payment received

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 Computation of RPGT 1
 Encik Muhamad bought a double storey terraced house on 1st Mach
2009 for RM200,000 which is the MV.
 Legal fees incurred for the purchase was RM5000. In August the same
year the car porch was leaning and En Muhamad succeeded in
recovering RM5000 by way of damages from the developer.
 En Muhamad spent RM6,000 repairing the porch. On 1st January 2010,
his friend En Wahid offered to buy the house and paid a deposit of
RM20,000.
 However, En. Wahid failed to secure a bank loan and the sale was
aborted.
 In March 2010, part of the kitchen was burnt and he received RM10,000
being compensation from an insurance company. He then spent
RM8000 repairing the kitchen.
 Finally in September 2010 he sold the house through an estate agent for
RM260,000. Sales commission was RM5,000.
 Compute the RPGT payable by En. Muhamad

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 Computation of RPGT 2
 Encik Muhamad bought a double storey terraced house on 1st Mach
2009 for RM200,000 which is the MV.
 Legal fees incurred for the purchase was RM5000. In August the same
year the car porch was leaning and En Muhamad succeeded in
recovering RM5000 by way of damages from the developer.
 En Muhamad spent RM6,000 repairing the porch. On 1st January 2010,
his friend En Wahid offered to buy the house and paid a deposit of
RM20,000.
 However, En. Wahid failed to secure a bank loan and the sale was
aborted.
 In March 2010, part of the kitchen was burnt and he received RM10,000
being compensation from an insurance company. He then spent
RM8000 repairing the kitchen.
 Finally in February 2012 he sold the house through an estate agent for
RM260,000. Sales commission was RM5,000.
 Compute the RPGT payable by En. Muhamad

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 Computation of RPGT 3
 Encik Muhamad bought a double storey terraced house on 1st
Mach 2007 for RM200,000 which is the MV.
 Legal fees incurred for the purchase was RM5000. In August the
same year the car porch was leaning and En Muhamad succeeded
in recovering RM5000 by way of damages from the developer.
 En Muhamad spent RM6,000 repairing the porch. On 1st
September 2008, his friend En Wahid offered to buy the house
and paid a deposit of RM20,000.
 However, En. Wahid failed to secure a bank loan and the sale was
aborted. In October 2008, part of the kitchen was burnt and he
received RM10,000 being compensation from an insurance
company.
 He then spent RM8000 repairing the kitchen. Finally in December
2009 he sold the house through an estate agent for RM260,000.
Sales commission was RM5,000.
 Compute the RPGT payable by En. Muhamad

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DISPOSAL PRICE
Consideration Received
less
FORMAT RPGT
i) enhancement costs
ii) costs in establishing title
iii) Incidental costs
Legal Fees
Commision on sales
Administration

Other expenses
Disposal Price (A)

ACQUISITION PRICE
Consideration Paid
Plus Incidental costs
Legal/prof fees
Stamp duty
Commision on sales
Administration

Other expenses
Less ;
i) compensation from damage
ii) compensation from insurance co.
iii) deposit forfeited
iv) other expenses
Acquisition Price (B)

Chargeable gain/allowable loss (A - B)

less exemption 10% Para 2 Sch 4

Chargeable Gain

Less Allowable Loss

Chargeable Gain/Allowable loss

x tax rate
RPGT payable 56
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