TAX517

TOPIC 6

REAL PROPERTY GAIN TAXES

AND REAL PROPERTY
COMPANY
 LEARNING
OUTCOME

Ability to:
• Compute Real Property Gain Tax (RPGT) for
individual.
• Identify the situations for No Gain No Loss
• Compute the RPGT for disposal of shares of Real
Property Company (RPC)
RPGT
 TAX517

WHAT IS REAL PROPERTY

GAIN TAX (RPGT)?
• Tax on capital gains imposed on the disposal of a
chargeable asset ; which includes real property and
shares in real property companies [RPC] situated in
Malaysia.
• Territorial concept – not apply to disposal of land overseas
• Governed by Real Property Gains Tax Act 1976.
• For disposal of landed property – there is possibility of ITA
1967 or RPGT (depends on type of land – S/T or L/T).
• ITA 1967 and RPGT are mutually exclusive. RPGT is
favorable if the holding period is over 2 years
 HISTORY OF RPGT
• Real property Gains Tax Act 1976 was legislated on 7 November 1975.
• RPGT was reintroduced with effect 1 January 2010.
• From 1 April 2007 until 31 December 2009, all disposal of real properties and shares in RPC are
exempted from RPGT [P.U. (A) 146/2007].
• [P.U. (A) 486/2009] – the exemption has been withdrawn with effect from 1 January 2010 (all chargeable
assets will be taxable under RPGTA)
 WHAT IS REAL PROPERTY
Define in Section 2 of the Act as any land situated in Malaysia or any interest, option or
other right in over such land. Land is further defined as:
• the surface of the earth;
• the earth below the surfaces and substances therein;
• buildings on land anything attached to the building;
• standing timber, trees, crops and vegetation grown on land;
• land covered by water.
SCOPE OF CHARGE – S 3
3 elements must exist:
 CHARGEABLE
PERSON – S 6
• Every person whether or not resident in
Malaysia for a year of assessment shall be
chargeable with the tax in respect of a
chargeable gain accruing to him in that year on
the disposal of any chargeable asset
• Person include:
• Company
• Partnership
• Limited liability partnership
• Body of person; and
• Corporation sole (sole proprietor)
 CHARGEABLE GAIN – S 7
Where a chargeable asset is disposed of:
1.Chargeable gain – Disposal price > Acquisition price
2.Allowable loss – Disposal price < Acquisition price
3.No Gain No Loss – Disposal price = Acquisition price

• Disposal - ‘Sell, convey/transfer legal rights, transfer of asset,

settle or alienate/ to destroy whether by agreement or by
force of law’.
RPGT would be imposed
• Acquisition - acquire by way of purchase, grant, exchange, gift,
where there exist chargeable settlement or otherwise.
gain upon disposal of real • However, where a land acquired resulted from a partition of sub-
property. division by the land owners, that would not constitute an acquisition or
disposal of asset
ACQUISITION PRICE – PARA 4, SCH 2

3 elements must exist:

ACQUISITION PRICE – PARA 4, SCH 2

Example 36.1 - page

670
DISPOSAL PRICE - PARA 5, SCH 2

Example 36.2 - page 672

DISPOSAL PRICE DEEMED AT
MARKET VALUE – PARA 9, SCH 2
In order to prevent loss of revenue to Government, the RPGT Act
provides that DP shd be deemed as MV (DP = MV) under the
following circumstances:
• A bargain not an arm’s length(conflict of interest) or gift (>5
years)
• 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 s25(2) applies.
DP would be substituted with MV (if higher) if any of the event (1) to
(6) took place.
 DISPOSAL DATE &
ACQUISITION DATE
D.O.D of disposer (seller) = D.O.A of the asset by the acquirer
(purchaser/buyer)
• Disposal date (D.O.D) – para 15, Sch 2
⚬ Refer to the date of written agreement (with written agreement)
• Disposal date = date of such written agreement regardless that the money
consideration has not been received (Example 36.3 - page 673)
⚬ If there is no agreement, then the date of completion of disposal will
become the D.O.D (without written agreement)
• Date of completion of disposal refer to:
⚬ the date of transfer ownership; or
⚬ the date on which the whole of the consideration is paid (whichever is
earlier)
 Conditional contract
• W.e.f 2.9.2006, D.O.D for conditional contract remains at the agreement date,
notwithstanding with the consideration varies with the contract’s condition – to
prevent the taxpayer from prolonging the holding period.
• However, if the S&P agreement requires approval of:
⚬ government/state government or
⚬ authority or committee appointed by government (eg. Securities Commission) (up to
31.12.2017 only),
• the D.O.D – the date of such approval/ the last of all the conditions is satisfied(conditional)
 D.O.D ON SPECIFIC CASES
– PARA 15A SCH 2
1.Gift of asset on death, D.O.D - date of transfer of ownership of the asset to the
recipient

2.Legatee (inheritor) accepts an asset in place of a money legacy, D.O.D - date of

transfer of ownership of the asset to the legatee

3.An asset of a deceased person is transferred to a legatee by his executor

(irrespective of whether he himself is the legatee or not) or by the trustee of a
trust created under his will, D.O.D - date of transfer of ownership of the asset to
the legatee
 ALLOWABLE LOSS
• Arise when Disposal price < Acquisition price
• No RPGT is payable, but still need to submit RPGT tax return to IRB within 60 days of the
disposal
• To ensure allowable loss can be carried forward to set off against future CG.
• Sec 7(4) – when there are > 1 disposal of real property in a YA, allowable loss from one
transaction may be set off against total chargeable gain from other transactions
• WEF 1/1/2010, allowable loss from the disposal of real property would be allowed to be c/f to
be set off against CG from future disposal either in the same YA or following YAs until it is
fully utilised
RPGT COMPUTATION
 RATE OF RPGT (SCH 5)
wef 1.1.2022, the RPGT rate on the disposal of real property has been revised

PART I OF SCH 5
Part I of Sch 5 applies to the following persons:
• Malaysian citizen individual
• Permanent resident in Malaysia
• Estate of deceased person (executor) whi is Malaysian citizen ore permanent resident
• Limited liability partnership
• Partnership

The tax rate would be as follows :

Holding period of property RPGT rate (%)
Less than 3 years 30%
In the 4th year 20%
In the 5th year 15%
In the 6th year and thereafter 0%
from the acquisition date of the property
 RATE OF RPGT (SCH 5)
• In October 2021, the government announced during Budget 2022 that,
effective January 1, 2022, RPGT will no longer be imposed on property
disposals by individual owners starting from the 6th year. This means that the
RPGT rate for property disposals in the 6th and subsequent years after
acquisition will be reduced from 5% to 0%, effective from 1 Jan 2022.

• There were no changes to the company tax rate – companies will still have to
pay a 10% RPGT for property disposals.
 RATE OF RPGT (SCH 5)
wef 1.1.2022, the RPGT rate on the disposal of real property has been revised

PART II OF SCH 5
Part II of Sch 5 applies to the following category of persons:
• company incorporated in Malaysia
• trustee of a trust
• society registered under the Societies Act 1966
This take effect from 1.1.2021. Prior to that, only applies to company and trustee of trust

The tax rate would be as follows :

Holding period of property RPGT rate (%)
Less than 3 years 30%
In the 4th year 20%
In the 5th year 15%
In the 6th year and thereafter 10%
from the acquisition date of the property
 RATE OF RPGT (SCH 5)
wef 1.1.2022, the RPGT rate on the disposal of real property has been revised

PART III OF SCH 5

Part III of Sch 5, RPGT Act 1976 imposes tax in disposal of real properties by foreign entities
comprises:
• Non-Malaysian citizen individual
• Not a permanent resident individual
• executor of the estate of a deceased person who is non-citizen or not permanent resident
• company not incorporated in Malaysia (foreign company)
This take effect from 1.1.2020. Prior to this, it applies only no 1 and 3

The tax rate would be as follows :

Holding period of property RPGT rate (%)
Less than 5 year 30%
In the 6th year and thereafter 10%
from the acquisition date of the property
THANK YOU