During the recent budget 2013 announcement, effective from 1st Jan 2013, the real property gain tax (RPGT) will be increased to 15% for any property held and disposed within two (2) years. For properties held and disposed within a period exceeding two year but not more than five years, the property tax increased from 5% to 10%, while properties held and disposed after five years are not subject to any real property gain tax.
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.
Example to Illustrate the Calculation of Real Property Gain Tax Payable
Example 1 – 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 ( LESS allowable expenditure ie. upgrading and improvement costs to maintain or enhance the value of the property and incidental expenditure such as legal fees and stamp duty, agent fees, administration charges etc)
B) Acquisition Price ( ADD incidental costs legal fees, agent fees, administration charges etc)
Let say the total incidental costs was RM 30,000
Gross profit = RM 600,000 – RM 400,000 = RM 200,000
Net profit = RM 200,000 – RM 30,000 = RM 170,000
He made RM 170,000 from the transaction and the gains are subject to 15% RPGT and the calculation will be as follows:
RM 170,000 (Property Gains) – RM 17,000 (Waived Exemption) = RM 153,000 (Taxable Gains)
RM 153,000 (Taxable Gains) x 15% (RPGT Rate) = RM 22,950.00 (RPGT Chargeable)
Thus, the RPGT chargeable to Mr Tan will be RM 22,950.00
Example 2 – Encik Hassan bought a double storey semi-detached house on 1st Dec 2010 at a price of RM 1,500,000 and sold his property on 1st Jan 2013 at RM 2,000,000 ( this property is sold more than two (2) years but less than five (5) years from the date of purchase).
Let say the total incidental costs was RM 100,000
Gross profit = RM 2,000,000 – RM 1,500,000 = RM 500,000
Net Profit = RM 500,000 – RM 100,000 = RM 400,000
In this transaction, Encik Hassan made a net profit of RM 400,000 and the gains are subject to 10% RPGT and the calculation is as follows :
RM 400,000 (Property Gains ) – RM 40,000 (Waived Exemption) = RM 350,000 (RPGT Chargeable)
RM 350,000 (Taxable Gains) x 10% (RPGT Rate) = RM 35,000.00 (RPGT Chargeable)
Thus, the Real Property Gain Tax imposed to Encik Hassan will be RM 35,000.00
Exemption from RPGT
There are three circumstances where the property seller is exempted from paying RGPT.
- The level of exemption is increased from RM5,000 to 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.