RPGT

A lot of people are currently having a cautious approach when purchasing property especially for investment purpose as the government declared an increased in the Real Property Gain Tax ("RPGT") in budget 2014. RPGT is a form of capital gain tax that is imposed on the disposal of property in Malaysia. It was suspended temporarily in 2008-2009 and reintroduced in 2010. In 2014, RPGT was increased for the 5th straight year since 2009.

RPGT rates
Historical rate on RPGT for all; individuals, foreigners and companies (except for the period of 2014) are as follows:-

	1995-       1997	2008-2009	2010	2011-       2012	2013	2014
1st year	30%	0%	5%	10%	15%	30%
2nd year	30%	0%	5%	10%	15%	30%
3rd year	20%	0%	5%	5%	10%	30%
4th year	15%	0%	5%	5%	10%	20%
5th year	5%	0%	5%	5%	10%	15%
6th year onward	0%	0%	0%	0%	0%	0%

2014 RPGT rate

The rate that for RPGT through out the years for different categories has remain the same until the budget for 2014 has been announced. Generally there had been an increased in the RPGT for each categories with different rate. The following is the rates as of 2014:-

Disposal	Indivduals
	Citizen	Non      Citizen	Companies
<=3 years	30%	30%	30%
<=4 years	20%	30%	20%
<=5 years	15%	30%	15%
>5 years	0%	5%	5%

Calculation for RPGT

 Generally, you would only be taxed on the positive net capital gaines which is disposal price less the purchase price. However Like tax computation, there are some allowable expenses that would not be calculated in. This is the same for the tax computation for RPGT. Deduction such as stamp duty, legal fees, advertisement charges and renovations (only certain type of renovation) is allowed to be added in to the cost (therefore the gap between the purchase price and selling price decreased). 

Selling price - [Cost of purchasing the house + additional cost (renovation, maintenance, legal fees, advertising cost (including agent fees) and etc)]= Taxable amount 

Taxable amount - (higher of 10k or 10% of taxable amount) x rate above= RPGT

Ps: Please keep those bill as prove. 

Exemption

This is the part that everyone would look into and try to see if there is anyway that they can have a better tax planning. However these tax exemption are only for residence and Permanent Residence (PR) and not applicable to foreigners. This are a few things that you can look into

1. RPGT exemption on gains from disposal of one residential property once in a lifetime to individuals (only applicable to residence only) . In other words every one got one chance to not be tax on the capital gain. (Please use this once in a lifetime opportunity wisely!! if the couple is married wife and husband each get one chance each. provided that the party have not elected to use this right) This right should be declared before selling the property.

2. Exemption on gains arising from the disposal of real property between family members. Please be cautious that only certain relationship applies.  PARENTS TO CHILDREN, HUSBAND TO WIFE AND GRANDPARENTS TO GRANDCHILDREN. However the tax might be require to be paid by the children (the child may inherent the ORIGINAL cost price of the house that the parents paid before and tax is "transferred" to the child). This is known as "no gain no loss" transaction.

The last exemption is applicable to foreigners as well as local and PR.

3. For all properties that has been sold, RPGT exemption of up to RM10k or 10% of the net gains (whichever is higher) from the disposal of real property by individuals.

Conclusion

In my opinion this RPGT in the long run is good in a sense that the property prices would be stabilised (as people would not make a quick buck out of the property market) and benefit genuine buyers. However prices of the property market would increased in 2014 as the seller now would have to take RPGT into consideration of the profit margin.

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