Chapter 6

Real Property Gain

Tax (RPGT)

ACC3313 TAXATION 2 Slide 1

1. REAL PROPERTY GAIN TAX

By the end of the lesson, student should be able:

1. Understand the meaning of RPGT
2. Understand chargeability of RPGT
3. Understand the treatment of gift
4. Explain date of disposal and date of acquisition

2
 What is RPGT?

RPGT is a tax on capital gains imposed on

the disposal of a chargeable asset and this
includes real property. It is governed by
the Real Property Gains TaxAct 1976.

3
• The Real Property Gain Tax (exemption) Order
2007 exempted all persons from the
provisions of RPGTAct 1976 with regards to
any disposal of chargeable assets from 1 April
2007 to 31 December 2009.
• Real Property Gains Tax (RPGT) was
reintroduced effective 1 January 2010 after a
lapse of 2 years and 9 months.

4
 Who is covered?
• It applies to both tax resident and non-
resident persons who transact in real property
situated in Malaysia and shares in real
property companies.
• Person includes a company, a partnership, a
body of person and corporation sole.

5
 What is real property?
• It is land situated in Malaysia or any interest,
option or right in or such land situated in
Malaysia.

6
 What is the definition of land?
• Section 2 of RPGTAdefines land as:
i. The surface of the earth all substances
forming that surface.
ii. The earth below the surface and substances
therein.
iii. Building on land and anything attached to
land or permanently fastened to anything
attached to land.

7
iv. Standing timber, trees, crops and vegetarian
grown on land.
v. Land covered with water.

8
 The real property include:
• Any landed property in Malaysia such as
residential properties (apartments,
condominium and houses), commercial
properties (factories, office buildings, shop
houses) and land.

9
 How is RPGT computed?
• In simple terms, RPGTis computed on the
capital gains on the disposal of a chargeable
asset, that is, the differential between the
disposal price and the acquisition price of the
real property.

(Disposal price – Acquisition price) x RPGT rate = RPGT

10
How is the disposal pricedetermined?
• Disposal Price (Paragraph 5 schedule 2):
Amount of sale consideration in money or
money’s worth.
LESS:
i. The amount of any expenditure wholly and
exclusively incurred on the asset at any time
after its acquisition for the purpose of
enhancing or preserving the value of the
asset.
11
ii. The amount of any expenditure wholly and
exclusively incurred on the asset at any time
after its acquisition in establishing,
preserving or defending the owner’s title to,
or a right over the asset.
iii. The incidental costs to the person of making
the disposal of the chargeableasset.

12
• Incidental cost (Paragraph 6(1) & (2) schedule
2 consist of:
i. Fees, commission or remuneration paid for
the professional services of any surveyor,
valuer, accountant, agent or legal adviser.
ii. Cost of transfer. Eg: stamp duty.
iii. Cost of advertising to find abuyer.

13
CALCULATION FOR DISPOSAL PRICE
RM
Consideration received xx
Less: Permitted expenses:
Enhancement cost (x)
Legal fess in defending (x)
title
Less: Incidental cost:
Commission (x)
Legal fees (x)
Advertisement (x)
Disposal price xx
14
Permitted expenses refer to any expenses
incurred wholly and exclusively on the asset
after its acquisition for the purpose of enhancing
or preserving its value and expenses incurred in
established and defending title or right over the
asset.

15
Melly Sdn Bhd disposed of an asset in 2010 for
consideration of RM1 million. The disposal price
is arrived as follows:
RM RM
Consideration received 1,000,000

Deduct:
Cost of renovation 200,000
Legal expenses 30,000
Incidental expenses 10,000 (240,000)
Disposal price 760,000

16
Exercise 1:

Winner Sdn Bhd disposed of an asset in 2011

for a consideration of RM850,000. The company
incurred expenses as follows:

Alteration and extensions RM85,000

Legal expenses for protection RM25,000
of title of asset
Incidental expenses RM 6,000
Quit rent and assessment year RM 2,500
2010 & 2011
17
Answer:

RM RM
Consideration received 850,000

Deduct:
Alteration & extension 85,000
Legal expenses 25,000
Incidental expenses 6,000 (116,000)
Disposal price 734,000

18
How is the acquisition pricedetermined?

Acquisition price (Paragraph 4 Schedule 2)

Acquisition of an asset is the purchase

consideration plus any incidental costs (or
permitted expenses) which include:

i. Fees, commission or remuneration paid for the

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

19
ii.Cost of transfer (eg: stamp duty)

iii.Other incidental costs (example advertising cost

to find a seller)

iv.Interest paid on capital employed to acquire the

asset where a claim for such an expenses has not
been made under the ITA

20
From 1 January 2010, the interest paid to finance
the acquisition of a chargeable asset will no longer
be regarded as an incidental cost to the acquisition
price of chargeable asset.

21
In addition, the following may be deducted in
arriving at the acquisition price:

i.Compensation for damages, injury, destruction,

risk of depreciation

ii.Receipt under a policy of insurance for damages

to the property

iii. Deposit forfeited in respect of the property

22
 CALCULATION FOR ACQUISITION PRICE
RM
Consideration paid xx
Plus: Incidental costs:
Interest(applicable only prior to 1 x
January 2010
Stamp duty x
Legal fees and professional fess x
Advertisement x
Commission x
Less: Recoveries:
Insurance compensation (x)
Compensation for damages (x)
Deposit forfeited (x)
Acquisition price xx
23
Example 2:

Biji Saga Sdn Bhd acquired an asset in 2010 for a

consideration of RM6,000,000. The acquisition
price, taking into consideration incidental costs and
deductions, is computed as follows:

24
 RM RM

Consideration paid 6,000,000

Add:
Incidental costs 24,000
Professional fee 108,000
6,132,000
Deduct : Capital receipt
Compensation damages 72,500
Insurance 143,000
Deposit forfeited 300,000 (515,500)
Acquisition price 5,616,500

25
Exercise 2:

Pn Hartini bought the terrace house for RM450,000

at Bandar Baru Bangi. Payment was paid on
20 August 2009. The house was transferred to her on
10 February 2010. Purchase of agreement made on
1 October 2010. Other cost incurred by Pn Hartini
were as follows:

26
Stamp duty 4,500
Legal fees 20,000
Cost of extension 60,000

On January 2010 Pn Hartini received RM40,600 from

developer as compensation for damages and
received RM10,200 from insurance company for that
damages. On September 2012, Pn Hartini received
RM5,000 from an intended buyer who called off
deal, thus forfeiting her deposit.

27
Answer:

RM RM
Consideration paid 450,000
Add:
Legal fees 20,000
Stamp duty 4,500
474,500
Deduct : Capital receipt
Compensation for damages 40,600
Insurance 10,200
Deposits forfeited 5,000 (55,800)
Acquisition price 418,700
28
How is the RPGT rate determined?

The rate of tax on RPGTis based on the holding

period of the chargeable asset.

The rate ranges from 30 per cent down to 5 per

cent. There is an in-built exemption mechanism in
the legislation which effectively brings the rate
down to 5 per cent for all current disposal
chargeable to RPGT.

29
New RPGT Rates from 1 January 2019

30
31
Evolution of RPGT

A tax on property was introduced in 1974 under

the Land Speculation TaxAct. This was
subsequently replaced with the Real Property
Gains TaxAct in November 1975. Although in
existence since the mid-70s, the Government
pro-actively adjusted the rates of the RPGTthrough
the years to cater to the property market
conditions.

32
It’s natural for the most people to react to the
reintroduction of RPGT,having enjoyed full
exemption for a few years previously, however,
compared to the original rates of RPGTwhich
range up to 30%, the recent hike of up to 10% is
actually quite mild.

33
 Exemption from RPGT
RPGT exemptions currently available are as
follows:
-Gain in respect of any disposal of a chargeable
asset from 1 April 2007 until 31 December 2009.
-Gain in respect of any disposal of a chargeable
asset on or after 1 January 2010 where the
disposal is made after 5 years from the date of
the acquisition of the chargeable asset (Now
cancelled);

34
RM10,000 or 10% of the chargeable gain,
whichever is greater accruing to an individual
in respect of a disposal of a chargeable asset;

- Gain accruing to an individual who is a

citizen or permanent resident of Malaysia in
respect of the disposal of one private
residence;

35
- Gain accruing to a wife who is a citizen or
permanent resident of Malaysia but whose
husband is neither a citizen nor a permanent
resident, in respect of the disposal of one
private residence owned by the wife; and

- Gain accruing to the Government, State

Government or a local authority.

36
 How to determine the acquisition date?

Generally, the acquisition date of the acquirer

coincides with the disposal date of the
disposer.

37
 When is the disposal date?

Disposal date is the date of the agreement for

disposal of the asset. Where there is no
agreement, disposal date is the date of
completion of the disposal, i.e. the earlier of:

• Date of transfer of ownership of the asset by

the disposer, or
• Date when the whole amount of consideration
is received by the disposer
38
 Treatment of losses on disposal

Unutilized losses can be carried forward

indefinitely except losses arising from the
disposal of shares in a real property company.

39
Transactions in which the disposal price is
deemed equal to acquisition price (i.e. “No
gain no loss” transaction) – per Para 3 Sch 2 of
the RPGTAct 1976:

a) Devolution of a deceased person’s assets

to his trustee or legatee.
b) Transfer between spouses.

40
c)Transfer of assets owned by an individual, his wife
or by an individual jointly with his wife or with a
connected person to a company controlled by the
individual, his wife or by an individual jointly with his
wife or with a connected person, for a consideration
consisting substantially (more than 75%) of shares in
that company.

d)Transfer between an individual and a nominee who

has no vested interest in the assets.

41
e)Transfer by way of security in or over an
asset.

f)Gift to the Government, local authority or

charity exempt from income tax.

g) Disposal due to compulsory acquisition.

h)Disposal of chargeable assets pursuant to

an approved financing scheme which is in
accordance with Syariah principle, where such
disposal will not be required for conventional
financing schemes.
42
Gifts – per Sch Para 12 of the RPGTAct 1976

Gifts between husband and wife, parent and

child or grandparent and grandchild are
deemed to be “No gain no loss” transaction.

43
Example:

Mr Tan transferred a house to his daughter

Susan on 25 Feb 2008 when its market price
was RM650,000. The incidental costs for the
transferred amounted to RM5,000 the house
was acquired by Mr Tan on 1 Mac 2004 for
RM300,000.

44
Answer:

Disposal price by Mr Tanis

deemed (300,000 + 5,000) 305,000
Less: acquisition price +
incidental expenses
(300,000 + 5,000) (305,000)
Chargeable gain NIL

Susan’s acquisition price is RM305,000.

This sum is the disposal price of Mr
Tan.
45
 Where the asset is acquired as a gift on
death, the recipient is deemed to acquire the
asset at its market value as at the date of
transfer or ownership of the asset to the
recipient.

46
 Private residence exemption

Malaysian citizens or permanent resident

individuals are given RPGT exemption on
disposal of one residential property. This is a
“once in a life time” exemption and must be
fulfilled in order to get the exemption:

1) Individual must be a citizen or permanent

resident of Malaysia.

47
2)Real property must be a residential
property or part of the building is used for
residence (eg : shophouse)

3)Residential building is occupied or rented

or fit for occupation

4)Residential property is owned by such

individual or spouse of the individual; or

5)Disposer had not elected for the

exemption prior to this as the exemption is
only available once in a lifetime.
48