Property Malaysia: insight into RPGT in Malaysia

A 2021 insight into Real Property Gain Tax in Malaysia

As of 2021, the several updates regarding RGPT announced during PENJANA 2020 were gains from the disposal of residential properties after 1 June 2020 until 31 December 2021 will be exempted from RPGT.

Someone once said, “A person doesn’t know how much he has to be thankful for until he has to pay taxes on it.”

If you are a Malaysian, you will probably relate to this quote since you are probably familiar with Real Property Gains Tax or RPGT. Though there is no lack of rewards in the property business while investing, you cannot just escape tax and get your profit afterwards.

With that being said, a person looking to buy or put money into a property in Malaysia should have an in-depth understanding of RPGT, including knowing what it is, when it is applicable, how it is calculated and how it will be filed to pay.

Even if you know about it, understanding the procedure can be confusing at times, especially when it comes to the alterations of rates made by the Malaysian government.

Puzzled? Don’t worry. In this article, we will clear all your confusions before you step forward into the field of buying and selling properties.

What is RPGT?

Put, when a property is sold, a tax is chargeable on the profit gained from it, and the seller has to pay it to the Inland Revenue Board. This tax is called Real Property Gains Tax (RPGT). It is only applicable to the seller.

Whether it is from a Malaysian citizen to a foreign resident, an employed person to a retired officer – no matter who you are, you will be counted for RPGT when you sell a property in Malaysia at a profit.

How is RPGT calculated?

There is a simple formula of the RPGT payable.

RPGT = Chargeable Gain x RPGT Rate

Basically, the rate for this tax is applied when you get a net profit or chargeable gain after selling a property. If you subtracted the original price of the property when it was bought from the property’s price when it is sold, you would easily get the chargeable gain.

The formula is as such:

Chargeable gain = Sale Price – Purchase Price

Let’s say you purchased a house 12 year ago for RM500,000 and you want to sell it. The market price of the house is now RM700,000. To calculate the chargeable gain, we minus the price RM700,000 by the original purchase price RM500,000 and any miscellaneous cost, let’s say we incurred a miscellaneous cost of RM10,000 from lawyer fees.


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Are there any RPGT exemptions?

Yes. Thankfully there are few exemptions to be benefitted from for property owners. They can deduct their taxes. This is why they need to be acquainted with the proper way to do it.

  • The property owners can get a once in a lifetime exemption on gains that will arise when they dispose of their residential property.
  • There is an exemption on gains from the disposal of property between family members. For instance, between father and child, husband and wife or grandparents and grandchildren.
  • The third exemption is a waiver of 10 per cent of chargeable gains or RM 10,000 (one of the higher sums) per transaction.

How do you file to pay RPGT?

You will have to go through some steps to pay off your RPGT. The easiest way is as follows:

  • Fill out the Disposal of Real Property form, also known as the CKHT 1A form. The sale and purchase agreement should be attached with the form. If any other documents are supporting the calculation, they should also be included with the form.
  • When applying for the RGPT exemptions, you should also fill out a Notification under Section 27 RPGTA 1976 (CKHT 3) form.
  • The buyer’s Acquisition of Real Property (CKHT 4) form should also be filled out with a copy of the Sale and Purchase Agreement.
  • The last step is submitting the forms and all the necessary documents to the nearest IRB (LHDN) branch within 60 days of a sale.

You can get all the forms from any IRB (LHDN) branch or download them from IRB’s website. Your request will be processed, and you will also be notified.

 

RPGT Exemption Order 2020 

Such exemption granted are as followed:

1. the disposer must be an individual who is a Malaysian citizen and is the sole or joint owner of the property to be disposed of;
2. the property disposed of must be a ‘residential property, namely a house, a condominium unit, an apartment or flat in Malaysia, and includes a service apartment and a small office home office (SOHO) which is used only as a dwelling house;
3. the residential property which is being disposed of is not acquired by way of:

  • transfer between spouses; or
  • a gift between spouses, parent and child, or grandparent and grandchild where the donor is a citizen; and

4. the SPA for the disposal of the residential property is executed on or after 1 June 2020 but not later than 31 December 2021 and is duly stamped not later than 31 January 2022.

So now you know how to file for RPGT. It isn’t as complicated as some people make it out to be. Good citizens always pay their taxes. Happy taxing!

Rahnama Haque wrote this article.

If you wish to read this article in Chinese, please click here.


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