CHAP

TER
10
REAL PROPERTY GAIN TAXES

Zaimah A191 1
 INTRODUCTION
■ Real property gain tax (RPGT) was introduced in Malaysia on 7
November 1975 (RPGT Act 1976).
■ RPGT is charged on capital receipts of the disposal of Malaysian real
properties (land, residential units, commercial building or shop
houses).
■ There is a possibility of disposal of properties will be charged on
income tax or RPGT, depending on whether the land is short-term or
long-term investment.
■ Income tax will however takes precedent over RPGT. It is mutually
exclusive.
■ If gains/profits from disposal of real properties derived from trade
transaction (business income) – subject to income tax.

Zaimah A191 2
 DEFINITION OF REAL PROPERTY
■ RPGT Act 1976 defines real property as any land situated in
Malaysia and any interest, option or other right in or over
such land (i.e. land, houses such as bungalows, semi-d,
double-storey houses, apartments, condominiums etc.).

■ Therefore, RPGT does not apply to the disposal of real

property situated outside Malaysia.

Zaimah A191 3
 BASIS OF CHARGE
■ RPGT is charged on the chargeable gains arising from the
disposal of any real property situated in Malaysia by
individuals [citizens, permanent residents (PR), non-
citizens and non-permanent residents of Malaysia],
companies and other property owners.

Zaimah A191 4
 RPGT RATES
■ Wef 1 January 2019, RPGT rates:
Disposal Period Companies Individual Individual
(Non-citizen/
(citizen/PR)
non PR)
% % %

For disposal within 3 years 30 30 30

For disposal in the 4th year 20 20 30
For disposal in the 5th year 15 15 30
For disposal in the 6th and subsequent years 10 5* 10

*Budget 2019-RPGT exemption to Malaysian citizen disposed low cost, medium low and
affordable residential homes at the price of RM200,000 and below in the 6th and subsequent
years

Zaimah A191 5
 EXEMPTION OF RPGT
■ RPGT Act 1976 provides exemptions of RPGT to individuals and companies
under following circumstances:
INDIVIDUAL
1. Gains from the disposal of one residential property once in a lifetime to
individual (citizen or a PR);
2. Exemption up to RM10,000 or 10% of the net gains (whichever is higher)
3. Gains arising from the disposal of real property between family members
(e.g. husband and wife, parents and children, and grandparents and
grandchildren).
4. Transfer of assets which resulted in no gain no loss situation:
(a) Devolution of a deceased person’s assets to his trustee or legatee.
(b) Transfer between spouses.
(c) Etc

Zaimah A191 6
 EXEMPTION OF RPGT
COMPANIES
1. Transfer within the same group for greater efficiency and for a
consideration consisting substantially (more than 75%) of shares in the
transferee company.
2. Transfers between companies for the purposes of reorganisation,
reconstruction or amalgamation for any consideration but in connection
with a scheme whereby the transferee company is being restructured to
comply with government’s policy on capital participation in industry.
3. Assets distributed by a liquidator under a scheme of reorganisation,
reconstruction or amalgamation for any consideration but in connection
with a scheme whereby the transferee company is being restructured to
comply with government’s policy on capital participation in industry.
4. Etc (refer module/book)

Zaimah A191 7
 ACQUISITION PRICE (AP)
■ Acquisition price of real property comprises of:
a. Consideration paid wholly and exclusively for the acquisition
of real property; and
b. Incidental cost incurred on the acquisition of real property
which includes stamp duty, legal fees, tax agent fees,
remuneration paid to land surveyor or valuer of land
valuation purposes and advertising cost for seeking a seller
of required property.
Legal fees on the loan agreement to finance the acquisition of
real property is not an incidental cost

Zaimah A191 8
 ACQUISITION PRICE (AP)
■ The following capital receipts would reduce the acquisition price:

a. Compensation received for any kind of damage to the

real property;

b. Insurance recoveries for loss or damage to the real property;

c. Deposit forfeited in connection with an intended transfer of the

asset.

Zaimah A191 9
 COMPUTATION OF ACQUISITION PRICE (AP)
RM RM
Consideration paid XX
Add: Incidental cost of purchase
a. Stamp duty X

b. Legal fees X

c. Tax agent fees X

d. Land valuation fees X

e. Advertisement cost seeking seller X X

Less : Compensation received for damages (x)

: Insurance recoveries for damages (x)

: Deposit forfeited on disposal of real property (x) (X)

AP X

Zaimah A191 10
 AP: EXAMPLE 1
■ In 2017, Syamil acquired a bungalow for a consideration of
RM350,000. Other costs incurred by him were as follows:
– Stamp duty on transfer RM3,500
– Cost of extension to bungalow
– Interest on mortgage loan 50,000
■ In January 2019, Syamil 62,000 from a developer as
received
compensation for damage to his bungalow caused by piling work carried out
RM30,6
on the adjacent land. He also received 00 RM11,200 from the insurance
company for the said damage.
■ In September 2019, he received a forfeited deposit RM10,000 from a
potential buyer who call off the deal.

Zaimah A191 11
 AP: SOLUTION

■ The computation of Acquisition Price:

Consideration paid RM350,000

Stamp duty on transfer 3,500
353,500
Less:
Compensation received 30,600
Insurance recoveries 11,200
10,000
Deposit forfeited (51,800)
Acquisition Price RM301,700

Zaimah A191 12
 DISPOSAL PRICE (DP)
■ Disposal Price is the consideration received for the disposal of real
property, LESS:
a. Capital expenditure for the enhancement of the real property at the
time of the disposal, (renovation cost and cost of the construction of
building on the land);
b. Legal fees in establishing, preserving or defending the title of the
land; and
c. Incidental cost of the disposal of real property (brokerage fees,
valuation fees, legal fees and advertisement cost to seek buyer of the
property).

Zaimah A191 13
 COMPUTATION OF DISPOSAL
PRICE (DP)
Consideration received X
LESS:
a. Expenditure incurred for enhancing or preserving the value of (X)
asset
b. Expenditure incurred to defend the title of the asset (X)
c. Incidental cost of the disposal# (X) (X)

Disposal Price X

Zaimah A191 14
 COMPUTATION OF DISPOSAL
PRICE (DP)
 # Incidental cost of the disposal includes:
a. fees, commission or remuneration paid for the professional
services of any surveyor, valuer, accountant, agent or legal
adviser.
b. costs of transfer (including stamp duty).
c. cost of advertising to find a buyer and cost reasonably
incurred in making any valuation or in ascertaining market
value.

Zaimah A191 15
 DISPOSAL PRICE: EXAMPLE 2
 Using Example 1, Syamil sold his bungalow for RM500,000 on September
2019. The consideration was paid to him in October 2019. He incurred the
following expenditure in connection with the sale:

Valuation fees RM6,700

Cost of advertisement 1,300
Brokerage fees 12,500

Legal fees for defending the title 4,100

Zaimah A191 16
 DISPOSAL PRICE: SOLUTION
Consideration received RM500,000
Less: Permitted expenses:
Cost of extension to bungalow (Example 1)

50,000 (54,100)

Legal fees for defending the title 4,100

Valuation
Less: Incidental fees
costs of disposal: RM6,700
Cost of advertisement 1,300
Brokerage fees 12,500 (20,500)

Disposal Price RM425,400

Zaimah A191 17
 DISPOSAL PRICE DEEM AT MARKET VALUE
■ The disposal price would be deem as market value under the following
circumstances:
a. A bargain not at arm’s length or gift;
b. A disposal of real property for a consideration that
cannot be valued;
c. A disposal of real property in connection with loss of employment or
gratuity payment;
d. Transfer of real property for satisfaction of debt;
e. Lump sum disposal of real property and other assets;
f. Where anti-avoidance under S 25(2) applies

Zaimah A191 18
 DISPOSAL DATE AND ACQUISITION DATE
■ The disposal date of a seller would be the acquisition date to the purchaser.
■ The disposal date will vary accordingly with the existence of a
written agreement:
1. With Written Agreement
The disposal date and acquisition date is the date of written agreement (not
money received)
2. Without Written Agreement
Based on the date of completion of the disposal, which is earlier of:
a. The date the ownership is transferred; or
b. The date the disposer received the whole amount (100% consideration)

Zaimah A191 19
 CHARGEABLE GAIN

■ RPGT would only be imposed where there exists chargeable

gain upon disposal of real property (disposal price greater
than acquisition price)

■ Using example 1 and 2, chargeable gain for Syamil is the

difference between disposal price and acquisition price
[RM425,400 – RM301,700 = RM123,700]

Zaimah A191 20
 ALLOWABLE LOSS
■ Allowable loss would be arise when the disposal price is less than
the acquisition price.
■ The allowable loss can be carried forward to be set-off against
future
chargeable gain, till it is fully utilised.
■ Format:
RM
Chargeable gain (A) X
Less: Schedule 4 Exemption for individual
(x)
(10% of A (gain) or RM10,000 whichever is higher)

Less: allowable loss (c/f from 1.1.2012) (x)

X
RPGT rate 30%, 20%, 15% or 5%
RPGT payable xx

Zaimah A191 21
 DISPOSER’S RESPONSIBILITIES
■ The disposer need to submit the following within 60 days from the date of
the Sale and Purchase agreement:
1. Completed CKHT 1 Form;
2. Copies of stamped Sale and Purchase Agreement or Form 14A
(memorandum of transfer) to prove the acquisition and the disposal of the
property;
3. Copy of the title deed/grant (if any);
4. Copies of bills and receipts for expenses claimed.
(in case of companies or non-citizen and non-permanent resident individuals,
details not required if asset is disposed in the sixth or subsequent year from the
date of acquisition).

Zaimah A191 22
 ACQUIRER’S RESPONSIBILITIES
■ The acquirer need to submit the following within 60 days from the date of the
Sale and Purchase agreement:
1. Completed CKHT 2 Form (in duplicate);
2. Copies of stamped Sale and Purchase or Form 14A
(memorandum
Agreement of transfer) to prove the acquisition;
3. Copy of the title deed/grant (if any);
(Acquirer (or his solicitor) required to retain the whole of the consideration
monies or a sum not exceeding two percent (2%) of the total value of the
consideration whichever is the lower and remit the sum withheld to the Inland
Revenue Board of Malaysia (IRBM) within 60 days from the date of disposal. If
fails to do so, a penalty of 10% of that sum will be imposed).

Zaimah A191 23
 RPGT ADMINISTRATION
■ As received Form CKHT1, the IRBM will examine the case and ask for additional
information if necessary.
■ IRBM will issue a notice of RPGT assessment stating the amount of RPGT payable.
Payment must be made within 30 days from the notice date. Upon receiving the
payment, IRBM will issue a certificate of clearance. Taxpayers will be allowed to file
the RPGT returns electronically
■ Late payment penalty of 10% is charged on the unpaid RPGT. Failure to withhold
and pay 2% of the total RPGT will be penalized 10% on tax not paid.
■ Failure to submit RPGT return on time, the penalty is RM5,000 (max)
or imprisonment for 12 months (max) or both.
■ Under S14 and S15, if disposer provides incorrect notification (CKHT 3) to acquirer
resulting in no retention made, penalty will be charged at 10% of tax payable.

■ Refer Comprehensive Example – pg 226-228

Zaimah A191 24