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| Real Property Gains Tax ("RPGT") - Revised |
Contributed by Group Finance Division - Tax
There has been some confusion over RPGT (rates imposed, exemption, when to file RPGT returns, etc) after the Government made a few proposed amendments to the RPGT Act during the last Budget 2010 on 23 October 2009, and to change it not too long after, i.e. on 23 December 2009. It is hoped that this article will shed some light onto the matter and help readers to better understand the ‘new’ RPGT.
Part 1 of this article covers the rates of RPGT since 27 October 1995 and a summary of some of the changes which took effect from 1 January 2010.
1. What is Real Property Gains?
RPGT is charged on gains derived from the act to dispose, sell, convey, assign, transfer, settle or alienate whether by agreement or by force of law, of any real property. Some examples of real properties are house, condominium, land, shares in real property companies, etc.
2. Rate of RPGT
RPGT has been in force since 7 November 1975. However, for the purpose of this article, we have only listed out the rate of RPGT from 27 October 1995.
2.1 27 October 1995 to 31 March 2007
The RPGT rates are as follows:
Note: There was a one year window (1 June 2003 to 31 May 2004) where taxpayers were exempted from RPGT in respect of gains derived from the sale of chargeable assets.
2.2 1 April 2007 to 31 December 2009 - No RPGT
In a move to boost the construction and housing industries, the Government announced the abolition of RPGT in respect of agreement for sale of any real property signed on or after 1 April 2007. This move was lauded by all taxpayers, especially companies which used to have to pay RPGT of 5% on the gain arising form the sale of a real property which had been owned for more than 5 years. However, the "abolition" was implemented by way of Exemption Order which merely exempts all taxpayers from paying RPGT on the gain from sale of a real property. As a result, many people opined that it is only a temporary measure undertaken by the Government as RPGT can easily be reinstated by revoking the Exemption Order.
2.3 From 1 January 2010 - RPGT of 5% or 0%
The Prime Minister and Minister of Finance, YAB Dato’ Seri Najib Tun Razak announced during his 2010 Budget speech on 23 October 2009 that the Government has proposed to re-impose RPGT. The RPGT will be fixed at 5% on the gains from the disposal of real property effective from 1 January 2010, no matter how long the asset was held. However, the existing exemptions with regards to gifts between parent and child, husband and wife, grandparent and grandchild and disposal of a residential property once in a lifetime by an individual are not affected by this change.
Following feedback from taxpayers, the Government decided not to impose RPGT on gains derived from the sale of real property where the said property has been held for more than 5 years. The RPGT rates are now as follows:-
3. Summary of some of the changes which took effect from 1 January 2010
a) RPGT imposed at a flat rate of 5% (no RPGT if real property disposed of is held for more than 5 years);
b) The RPGT return is to be furnished to the tax authorities within 60 days (previously one month) from the date of disposal of the real property;
c) The exemption enjoyed by an individual is increased to RM10,000 (from RM5,000) or 10% of the chargeable gain, whichever is greater;
d) The acquirer is required to withhold 2% of the total consideration or the whole amount of the monetary consideration, whichever is lower and remit the amount to the tax authorities within 60 days from the date of disposal of the real property; and
e) Interest paid to finance the acquisition of the real property disposed of is not allowed as a deduction in the computation of chargeable gain
A detailed explanation of these changes will be covered in Part 2 in the next issue of Lion Today. |
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