TUNKU ABDUL RAHMAN UNIVERSITY COLLEGE

9/8/2022
BBFT 3014 ADVANCED TAXATION
Tutorial 5: (I) Real Property Company & (II) Stamp Duty

LEARNING OUTCOMES:

A) Real property company

1) Controlled company
=> Not more than 50 members
=> Controlled by Not more than 5 persons.

2) Defined value (DV)

=> Defined value of the real property NOT less than 75% total tangible assets (TTA)
=> Excluded : Intangible assets (Goodwill, patent)

When comply with above (1) & (2) => RPC

=> Date of transfer = Deemed acquisition date.
=> Defined values = Deemed acquisition price.

B) Stamp duty (Stamp Act 1949)

1) Stamp duty would be charged on the instruments (e.g. agreement for a lease, equipment, bond, loan, etc.)

2) Rates of duty RM %
On the first 100,000 1%
On the next 400,000 2%
On the next 500,000 3%
On the excess over RM1,000,000 4%
1,000,000

3) Exemption of Stamp duty (Section 15A of the Stamp Act 1949):

1) The transferee company is incorporated in Malaysia.
2) There is a transfer of beneficial interest in property from one company with limited liability to another;
3) Both transferor and transferee are associated companies; (Takeover for a consideration ((stated in its memorandum of association)
consisting of at least 90% of the shares (transferee (Newco.) issued to the transferor (existing company) )
4) The transfer of the property is to achieve greater efficiency in operation.

Note: Associated companies:

A B Co. A and Co. B are associated if Co. A holds at least 90% of the shares in Co. B

Z X Co. X and Co. Y are associated if Co. Z holds at least 90% of the shares respectively in Co. X and Co. Y

C) Tutorial Questions Analysis

Question 1 => Company Malaysia => Transferred real property to subsidiary company => real property company.
Question 2 => Citizen Malaysia => Inheritance property => Transferred to controlled company via CASH.
Question 3 => Citizen Malaysia => Transferred to controlled company via shares => Bonus shares => Disposal of all shares.
Question 4 => Para. 3(1)(b) of Sch. 2 (Transfer from Individual to Co.) vs. Para. 17(1)(a) of Sch. 2 (Transfer from Co. to Co.) =>
Theory
Question 5 & 6 => Stamp duty

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QUESTION 1 9/8/2022
Snapshot:
TSB = Wholly-owned subsidiary of HSB RM
5/5/2019 HSB acquired Shophouse 2,000,000
Legal fee 30,000
Stamp duty 54,000
Renovation 300,000
Total 2,384,000
Y1 4/5/2020 Part (a)
Y2 4/5/2021 Disposal price = market value (RM4 mil) as holding co. & subsidiary co. are connected
Y3 4/5/2022 persons

Y4 4/5/2023 RM
End 2022 Transferred shophouse to TSB (wholly owned subsidiary):
Cash consideration 3,000,000

31/12/2022 market value 4,000,000

Part (b) Part (c)

Para.17(1)(a) of Sch. 2 : No Gain No Loss treatment Real property company
1) Transferee company (TSB) = tax resident in M'sia 1) Controlled company
2) Transferor company (HSB) & transferee company (TSB) => in the => Not more than 50 shareholders (only HSB)
same group => Not more than 5 persons (only HSB)
3) Prior approval from Director General 2) Defined value (DV) =>NOT less than 75% total TANGIBLE
4) Consideration => not less than 75% in shares ASSETS (TTA)

5) Purpose: Greater efficiency of 2 companies in the same group Excluded : Intangible assets (Goodwill, patent)
Deemed acquisition date = 31.12.2022
Deemed acquisition price = Defined vales (RM4,500,000)

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QUESTION 2 9/8/2022
Snapshot:
RM
1/7/2014 Mr. Ong purchased House 700,000
June 2018 Renovation 200,000
900,000
1/7/2018 Gift to Adam (son)
Part (a)
Y1 30/6/2019 From Mr. Ong to Adam => GIFT to son:
Y2 30/6/2020 => No gain no loss treatment. => Para. 12 of Sch. 2 of RPGTA 1976
Y3 30/6/2021 Mr. Ong (donor) = > No RPGT
Y4 30/6/2022
Adam : Acquire date: 1/7/2018 & Disposal price deemed equal to the acquisition price = RM900,000
Y5 30/6/2023

From Adam to AO S/B

Disposal price = market value (RM1.4 mil) => Adam and the company controlled by him are connected
persons

RM
4/7/2022 Transferred to AO S/B Cash consideration 1,200,000
(80% shareholding)
(20% held by friend) Market value 1,400,000
Part (b)
Ways to avoid RPGT:
1) Dispose in year 6 (1/7/2023) => Zero tax OR
2) Company controlled by Adam (80% ), citizen in M'sia & Consideration not less than 75% in shares

Part (c)
Real property company
1) Controlled company
=> Not more than 50 shareholders (80% by Adam)
=> Controlled Not more than 5 persons (only Adam & friend)
2) Defined value (DV) =>NOT less than 75% total tangible assets (TTA)
For Adam:
Deemed acquisition date = 4/7/2022
Deemed acquisition price = Defined vales (RM1,700,000 (x) 80% = RM1,360,000)
If Adam sells all his shares:

1) If sales before 1/7/2023 and chargeable gain exceeding RM10,000 (minimum exemption under Para.2 Sch. 4), he will be
liable to real property gains tax.

2) If sales in the 6th after the date of acquisition (after 30/6/2023) , it will not be labile to RPGT.

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 9/8/2022

QUESTION 3
Snapshot:
RM
5/5/2016 Grace purchased Bungalow 1,700,000
Legal fee & stamp duty 60,000
Renovation 300,000
2,060,000

1) Company controlled by Grace (50%) & David.

2) Consideration not less than 75% in shares ( 100% in shares)
=> No gain no loss treatment (Schedule 2 of RPGTA 1976.)
1) Disposal price deemed equal to the acquisition price = RM2,060,000
2) 2,000,000 Shares = Chargeable assets = RM2,060,000
RM
7/7/2018 Transferred to MSB 2,000,000 shares @ RM1 each 2,000,000
(50% shareholding)
(50% shareholding by David (brother)) Market value 2,200,000

18/3/2020 Bonus shares on a one-for-one basis

8/8/2022 sold 5,000,000 shares to David 5,000.000 shares @ RM1 each 5,000,000

Market value (Connected persons) 5,000.000 shares @ RM3.30 each 16,500,000

Grace Shares Acquisition Price Sales Price CG(RM) Exemption Gain(RM) Tax rate RPGT(RM)
(1) Firstly held 500,000 500,000 / 3,000,000 x 1,250,000 -125,000 1,125,000 15% 168,750.00
RM2,400,000 = 500,000 (x) RM3.30 =
7/7/2018 - 8/8/2022 OR RM10K
RM400,000 RM1,650,000
(within 5 years) WIH
(2) Bungalow 2,000,000 RM2,060,000 2,000,000 (x) RM3.30 = 4,540,000 -454,000 4,086,000 15% 612,900.00
RM6,600,000
7/7/2018 - 8/8/2022 OR RM10K
(within 5 years) WIH
Total 2,500,000
(3) Bonus shares 2,500,000 RM Nil 2,500,000 (x) RM3.30 = 8,250,000 -825,000 7,425,000 30% 2,227,500.00
RM8,250,000
18/3/2020 - 8/8/2022 OR RM10K
(within 3 years) WIH
Total 5,000,000 14,040,000 -1,404,000 12,636,000 3,009,150.00

THANK YOU & SEE YOU NEXT WEEK

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