TOPIC 5

REAL PROPERTY GAINS TAX

(RPGT)
ATXD223

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 Learning Outcomes

1. Explain the nature of real property tax gain.

2. Deal with the basic calculation of real property tax

gain.

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 INTRODUCTION
• The first legislation to tax gains from the disposal of real
property was introduced via Land Speculation Tax Act (1974).

• The Act was repealed in 1975 and replaced with Real

Property Gains Tax Act (RPGTA) 1976 to imposed RPGT on
gain arising from the disposal of real properties situated in
Malaysia.

• No RPGT regime: from 1 April 2007 to 31 December 2009.

• Year of assessment: calendar year.

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 CONCEPTS AND DEFINITION
• “REAL PROPERTY”: any land situated in Malaysia and any
interest, option or other right in or over such land

• Section 2 RPGTA defines land as:

– The surface of the earth and all substances forming
that surface
– The earth below the surface and substances
therein
– Buildings on land and anything attached to land or
permanently fastened to anything attached to land
– Standing timber, trees, crops and other vegetation
growing on land
– Land covered by water

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 CHARGEABLE PERSON
• The tax is charged on a chargeable person in respect of
any chargeable gains on the disposal of a chargeable
asset.

• Chargeable person need not be resident.

• A chargeable person includes a company, partnership,

limited liability partnership, body of persons and a
corporate sole.

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 ACQUISITION PRICE (PARA 4, SCH 2)
Acquisition price comprise of:
1. Consideration paid wholly & exclusively for the acquisition of real
property
2. Incidental costs (or permitted expenses) includes stamp duty,
legal fees, tax agent fees, remuneration paid to land valuation
purposes and advertising cost for seeking a seller.
(Legal fees on the loan agreement to finance the acquisition and
interest cost (WEF 1 jan 2010) are NOT an incidental cost)

In addition the following expenses may be deducted in arriving at

the acquisition price:
3. Compensation for damages, injury, destruction, risk of
depreciation;
4. Receipts under a policy of insurance for damages to the property
5. Deposits forfeited in respect of the property
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 ACQUISITION PRICE (PARA 4, SCH 2)
RM
Consideration paid XX
Add: Incidental cost of purchase
 stamp duty X
 legal fees X
 tax agent fees X
 land valuation fees X
 advertisement cost seeking seller X
 interest expense on acquisition of real - X
property
Less: XX
• compensation received for damages X
• insurance recoveries for damages X
• deposit forfeited on disposal of real property X (X)
Acquisition Price XX

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 Example A
A semi detached house was acquired by Izzat in 2013 with the
consideration paid amounted RM232,000. Izzat also incurred
legal fee and stamp duty, RM2,500 for the acquisition of the
house. He also paid RM3,000 as commission to agent and
RM1,500 as cost of advertising to acquire the house. In 2015, he
received RM15,000 as insurance money for damage to house.
Compute the acquisition price for Izzat if he plan to sell the
house in 2017.

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 Answer

Consideration paid RM232,000

Add:
Legal fee and stamp duty, RM2,500
commission to agent RM3,000
cost of advertising RM1,500
RM239,000
Less:
Insurance money (RM15,000)
Acquisition Price RM224,000

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 DISPOSAL PRICE
• It comprises consideration received for the disposal of real
property.
• The consideration received will be reduced by the following
components:
– Capital expenditure for the enhancement of the real
property. This would refer to renovation cost and cost of
construction of building on the land;
– Legal fees in establishing, preserving or defending the title of
the land; and
– Incidental cost of disposal of real property. This would include
brokerage fees, valuation fees, legal fees, and advertisement
cost to seek a buyer of the property.

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 Example B
Cont.….
Izzat disposed the house in 2017 with the consideration received
amounted RM432,000. He incurred RM82,500 for the extension
of the house. He also paid RM7,000 as legal expenses to defend
title to land. He also incurred RM3,000 for agent fee and
RM2,250 for advertising in order to dispose the house. Compute
the disposal price.

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 Example
Consideration received RM432,000
Less:
1) Permitted Expenses
Extension of the house RM82,500
Legal expenses to defend title RM7,000

2) Incidental Cost
Agent fee RM3,000
Advertisement to find buyer RM2,250
Disposal price RM337,250

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 DATE of Disposal and Acquisition
(Para 15 Sch 2)
 The disposal date  acquisition date to the purchaser
 Refer to the date of the written agreement notwithstanding
the money consideration has not been received.
 If there is no written agreement, the disposal date shall be
the date of completion of the disposal of the asset, which is
the earlier of:
a. the date on which the ownership of the disposed asset is
transferred by the disposer; or
b. the date on which the disposer has received the whole
amount (100% consideration) or value of the
consideration for the transfer.

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 DATE of Disposal and Acquisition
(Para 15 Sch 2)

 Conditional contract
(a) The date the contract was made; or
(b) The date when all the condition satisfied.

 Disposal of deceased person’s asset - The executor or

trustee is deemed to have acquired the asset on the date
of death of the deceased at the market value.

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 Example
SSB acquired a rubber estate on 10/3/2014 for RM4m. The
company has entered into an agreement with Rama on
15/2/2016 to dispose the land to him for RM8m subject to an
undertaking by the company to procure the conversion of land to
commercial use. On 2/6/2017, State land office approved the
conversion of land. The market value of the land had increased
substantially to RM16m. Ascertain the date of disposal by SSB.

Answer:
Date of disposal is 15/2/2016 although the disposal subject to a
condition, the consideration for the sale did not depend on the
value of the land at the time when the condition was satisfied.

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 CHARGEABLE GAINS
• RPGT was payable on the chargeable gains which is the
difference between the disposal price and the acquisition
price of a real property

• The tax is imposed at scale rates based on the holding period

of the asset prior to disposal.

• The holding period is measured from the date of acquisition

of the property up to the disposal date

Example (refer Example A & B)

Compute the chargeable
Chargeable gain (if any).
gain: RM337,250 – 224,000 = RM113,250

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 CHARGEABLE GAINS
Rates of Real Property Taxes (schedule 5 RPGT Act)
Year Effective from 1 January 2014 onwards
Disposal within the Companies Individuals & Non citizen
following period non-corporate and Non
after acquisition entities resident
Within three years 30% 30% 30%
In the forth year 20% 20% 30%
In the fifth year 15% 15% 30%
In the sixth year & 5% Nil 5%
thereafter

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 EXEMPTIONS TO INDIVIDUAL
(SCH 4 EXEMPTION)
 An individual will be given an exemption equal to RM10,000
or 10% of the chargeable gain, whichever is greater (WEF
2010) ; need NOT to be a Malaysian Citizen

 The Sch 4 exemption will be deducted against chargeable

gain and the remaining balance of such chargeable gain
would be subjected to be taxed at 30%, 20%, 15% and 5%.

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 EXEMPTIONS TO INDIVIDUAL
(SCH 4 EXEMPTION)
RM
Disposal Price X
Less: Acquisition Price (X)
Chargeable Gain (A) X
Less: Sch 4 Exemption
(10% of A or RM10,000) which is greater (X)
XX
RGPT rate based on holding period (30%, 20%, 15% or 5%)
RGPT payable XX

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 Example
Alfie purchased a shop house on 24.02.2013 at a price of
RM240,000 on sold that shop house on 04.02.2017 at the
value of RM300,000. Compute the real property gains tax
(if any).

Holding period?  3 year ++

 Disposed in 4th year
 Tax rate 20%

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Answer:
RM
Sale proceed 300,000
less: acquisition price 240,000
gain from disposal 60,000
less:
exemption under para 2, sch 4:
RM10K @ 10% gain from disposal(RM6,000) (10,000)
chargeable gain 50,000
RPGT charged:50,000 x 20% RM10,000

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 EXEMPTIONS
1. An individual who is a Malaysian citizen or a permanent
resident will be given an once-in-a-lifetime exemption on any
chargeable gain arising from the disposal of his/her private
residence if he/she elects in writing for the exemption to apply
to that private residence. The following conditions must be
fulfilled:
– The individual must be a citizen/permanent resident of Malaysia;
– The real property must be a residential property part or part of the
building is used for residence;
– The residential building is occupied/ rented/ fit for occupation;
– The disposer had not elected for the exemption prior to this as the
exemption is only available once in a life time.

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2. Transactions in which the disposal price is deemed equal to
acquisition price (i.e. “No gain no loss” transactions) —Para 3 Sch
2 of the RPGT Act 1976:
• Devolution of a deceased person’s assets to his trustee or legatee.
• Transfer between spouses.
• 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.
• Transfer between an individual and a nominee who has no vested interest
in the assets.
• Transfer by way of security in or over an asset.
• Gifts to the Government, local authority or charity exempt from income
tax.
• Disposal due to compulsory acquisition.
• Disposal of chargeable assets pursuant to an approved financing scheme
which is in accordance with Syariah principles, where such disposal will not
be required for conventional financing schemes.
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3. Gifts —Para 12, Sch 2 of the RPGT Act 1976: Gifts between
husband and wife, parent and child or grandparent and
grandchild are deemed to be “No gain no loss” transactions.

4. Transfers between companies —Para 17, Sch 2 of the RPGT Act

1976:
• Transfers within the same group to bring about greater efficiency and for a
consideration consisting substantially of shares in the transferee company.
• Transfers between companies for the purposes of reorganization,
reconstruction or amalgamation where the transferee company is being
restructured to comply with the Government’s policy on capital
participation in industry.
• Assets distributed by a liquidator under a scheme of reorganization,
reconstruction or amalgamation where the transferee company is being
restructured to comply with the Government’s policy on capital
participation in industry.

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 ALLOWABLE LOSS
 Arise when disposal price is LESS than the acquisition price
 WEF 1 January 2010;
 A relief is given to an allowable loss by deducting it from
the total chargeable gains for the year of the loss
 Any amount that cannot be set off due to insufficient of
chargeable gains can be carried forward and offset in
future years until it is fully utilized
 Format:
Chargeable gain XXX
(-) Sch 4 exemption (XX)
(-) Allowable loss (XX)
XXX
RPGT rate %
RPGT payable XXX

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 LOSS RELIEF
 Given by way of a deduction against total RPGT tax assessed
for the YA which the disposal occurred.
 If there is NO RPGT tax payable for that year, it will be
carried forward to set off against future RPGT payable.
 Format:

Chargeable gain XXX

(-) Allowable loss (XX)
XXX
RPGT rate %
RPGT payable XXX
(-) loss relief (XX)
Net RPGT payable XXX

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THANK YOU

Q&A

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