During the tabling of the Budget 2014 on 25th Oct 2013, Prime Minister Datuk Seri Najib Abdul Razak announced on the revision of the real property gain tax (RPGT).
For gains on properties disposed within the holding period for the first three years, the RPGT rate is increased to 30% to individual and companies as well.
For property holding within the holding period up to four and five years, the RPGT rates were increased to 20% and 15% respectively. For properties disposed in the sixth year or thereafter, no RPGT is imposed on citizens or permanent residents whereas companies are taxed at 5%.
For non-citizens, the RPGT is imposed at a flat rate of 30% for properties disposed within the holding period up to 5 years, and for disposals in the sixth year and thereafter, RPGT rate is imposed at 5%
This new RPGT rate will come into effect from 1st Jan 2014.
The newly imposed rate is even stricter than the pre-2007 rates. (see the table below for comparison)
The increase in Real Property Gains Tax (RPGT) will surely dampen speculation activities in the long run but it is unlikely to stop house prices from escalating. One of the main reason for the escalating price of properties is the fact that construction costs have been increasing rapidly. While our government has mentioned that residential properties will be exempted from the Government Service Tax (GST) which will come into force on 1st April 2015 at a rate of 6%, it doesn’t mean that the cost of supplying such homes are free from GST. The developers still have to pay the GST, on nearly all materials required to construct homes which could further increase the cost of construction substantially.
Here is the format of RPGT computation