[UPDATED] Real Property Gains Tax (RPGT) Act 2021 in Malaysia

Read on to understand what Real Property Gains Tax (RPGT) is, when it's applicable, relevant tax exemptions, and how to get the paperwork done. Bonus: Updated Budget 2020 and PENJANA!

What Is Real Property Gains Tax (RPGT)?

In Malaysia, Real Property Gains Tax (RPGT) is one of the most important property-related taxes and is chargeable on the profit gained from selling a property.

Who Pays RPGT?

Whether you’re a Malaysian citizen or foreign resident, RPGT applies to you as long as you’ve made profit gain from selling your properties in Malaysia.

However, it’s important to note that the government provides a tax relief when there's no profit made at all (selling price is equal to the original purchase price), or when a person suffers a loss from the property sold (selling price is lower than the original purchase price).

What if I don't gain anything from the sale of my property?

RPGT is supplemented by allowable loss. This means that a loss is made after the disposal of a property.

Tax relief shall be provided if the disposal price is less than the acquisition price or if the disposal price is equal to the acquisition price.

To know the amount payable for this tax, it is important that you know what's your chargeable gain – which is basically the amount arrived at, after deducting the property’s disposal price from its purchase price.

Bear in mind that an individual may only be taxed on the positive net capital gains, which is the amount you get after deducting the disposal price with the purchase price and miscellaneous charges (such as legal fees, administrative fees, advertisement charges and stamp duty).

The net chargeable gain would then be multiplied to the applicable RPGT rate.

Exemptions

There's a bit of good news here as property owners may benefit from the exemptions offered under RPGT. They are:

1. A once in a lifetime exemption on gains arising from the disposal of one residential property.

2. Exemption on gains from the disposal of property between family members (between parents and children, husband and wife, grandparents and grandchildren).

3. Waiver exemption that is equivalent to 10% of chargeable gains or RM10,000 (whichever is higher) per transaction is not taxable.

Due to the COVID-19 pandemic which hit Malaysian shores and brought about the Movement Control Order (MCO), the economy has suffered as a result.

To mitigate the effects of a prolonged lockdown and support business during these trying times, Prime Minister Tan Sri Muhyiddin Yassin announced in his speech on 5th June 2020 that there would be a Short-Term Economic Recovery Plan (PENJANA) put in place.

And in that plan: There would be an exemption for the disposal of properties! There are a few requirements to be met first though:

1. The "property" in question is referring to residential homes only.

2. The sale must be from 1st June 2020 to 31st December 2021.

3. This exemption is limited to the disposal of three units of residential homes per individual.

What Is Allowable Loss?

You might also hear the term ‘allowable loss’ when it comes to RPGT. It’s important to understand what this is in relation to your potential tax bill.

Allowable loss can apply in circumstances where more than one property is sold by the same owner in the same tax year.

If you lose money on one sale by selling for lower than when you bought the property, you can then use that loss to offset any profit on another sale made.

So if you sell a property at RM20,000 loss, but then sell another at RM100,000 gain, your total taxable amount is RM80,000.

Good news, you made a profit though!

An allowable loss can be rolled over into coming tax years, meaning you can offset that poor sales performance against any profits you make on future property sales.

What’s Allowable Expenses then?

It’s not just loss of profit from the sale that you can offset your tax bill, you’ll be delighted to know you’re also allowed some expenses.

Allowable expenses basically means the money you’ve spent improving or maintaining a property to retain/increase its value. That’s things like:

• Enhancement: Money you’ve spent on refurbishments, extensions, improvements work, etc. can all be offset against your sales profit. So if you spend RM20,000 adding an extension onto your landed property, that payment can be used to offset the taxable profit of your sale by RM20,000.

• Preservation: The same goes for preservation! Say your landed property is a heritage building for example, and you want to keep it looking good. You spend RM40,000 on specialist wood treatment to stop it from decaying, so that RM40,000 can be offset against the taxable profit from your sale.

One thing worth noting - the tax people really like to see receipts. If you can’t prove with clear evidence that you spent the money, they’re not going to let you offset it.

When to pay for RPGT?

After disposal of your property, you are required to submit the RPGT return within 60 days of the disposal date.

Make sure you don’t take longer than 60 days to file your RPGT too! For late payments, the consequence is an additional 10% penalty on top of everything else!

Source: https://www.propertyguru.com.my