Real Property Gain Tax Calculation 2014

During the recent budget 2014 announcement, effective from 1st Jan 2014, 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%.

Real Property Chargeable Gains are gains derived from disposal, sell, convey, assign, transfer, settle or alienate whether by agreement or by force of law which fall under chargeable asset. All chargeable assets must be made during the year of assessment and all particulars must be furnished to the Inland Revenue Board of Malaysia as requested.

Here is the format of RPGT computation

Example to Illustrate the Calculation of Real Property Gain Tax Payable

Mr Tan bought a double storey terrace house directly from a property developer on 1st Jun 2011 at a price of RM 400,000 and sold his property on 1st Jan 2013 at RM 600,000 (this property is sold within two (2) years from the date of purchase).

The computation of RPGT is as follows :-

A) Disposal Price = Consideration received – Incidental cost – Permitted expenses

B) Acquisition Price = Consideration paid + Incidental cost

C) Chargeable gain = Disposal price – Acquisition price

D) Net chargeable to be taxed = Chargeable gain – exemption for individual (RM 10,000 or 10% of the chargeable gain whichever is higher)

Let say the total incidental costs plus the permitted expenses during disposal of the property was RM 40,000 and RM 15,000 for incidental cost involved during the acquisition stage.

Disposal price = RM 600,000 – RM 40,000 = RM 560,000

Acquisition price = RM 400,000 + RM 15,000 = RM 415,000

Therefore the chargeable gain = RM 560,000 – RM 415,000 = RM 145,000

Net chargeable gain to be taxed = RM 145,000 – RM 14,500 = RM 130,500

Mr Tan sold his property within 2 years from the date of acquisition, so the tax imposed on RPGT was 30%

Tax payable = RM 130,500 x 30% = RM 39,150.00

Exemption from RPGT

There are three circumstances where the property seller is exempted from paying RGPT.

      The level of exemption is RM10,000 or 10% of the chargeable gains, which ever is the higher
      Gifts between parent and child, husband and wife, grandparent and grandchild; and
      Disposal of a residential property once in a lifetime.