One of the measures to curb real estate speculative activities in the property sector as announced by the Malaysian Government in its budget 2012 on 7th October 2011 is the revision of RPGT rate. For properties held and disposed within 2 years, the RPGT rate is 10%. For properties held and disposed within a period exceeding 2 years and up to 5 years, the rate is 5%. Properties held and disposed after 5 years are not subject to RPGT. (refer picture below)
RPGT has been introduced in Malaysia at multi-tier rates since year 1995 up to 2007. It was suspended from 1st April 2007 to 31st December 2009 in a move to shore up the sluggish Malaysia property sector affected by the world financial crisis. In January 1, 2010, RPGT was reinstated at a single rate of 5% for all taxable gains (for all disposal within five years).
Effective January 1, 2012, property owners and investors who dispose off their property in Malaysia within five years will be subject to the revised RPGT rate on taxable capital gains for sale and purchase agreements signed on or after that date. For disposal of property whereby state consent is required, the date of disposal shall be the date when such conditions have been complied with but not the date of SPA. However, genuine property owner who disposes their property can apply for exemption of RPGT under the following circumstances ie. a) one-in-a-lifetime exemption for malaysian individuals, b) disposal by way of gift ie between parent and child, husband and wife etc.
Briefly, the computation of RPGT in Malaysia is as follows:-
A) Disposal Price ( LESS allowable expenditure ie. upgrading and improvement costs to maintain or enhance the value of the property and incidental expenditure such as legal fees and stamp duty, agent fees, administration charges etc)
B) Acquisition Price ( ADD incidental costs legal fees, agent fees, administration charges etc)
Taxable capital gains = A-B less RM10,000.00 exemption or 10% of the net gains, whichever is higher for an individual.
If there is capital gains arising from the disposal of a property after deducting allowance for capital gains exemption up to RM10,000.00 or 10% of the net gains, whichever is higher for an individual, the RPGT rate shall be 10% on taxable capital gains for disposal within two years and 5% on taxable capital gains for disposal exceeding second years but within fifth years.
In standard practice, A 2% retention sum of the disposal price will be retained by acquirer’s solicitor for RPGT purpose and filing of notification of disposal to Board of Inland Revenue of Malaysia is required within 60 days. Picture below shows a sample format of the RPGT also known as CKHT form issued by Board of Inland Revenue of Malaysia for your easy reference.
The revision of RPGT rate under the Budget 2012 is considered moderate and expected to have gradual impact on the property market in key urban areas in KL/Klang Valley, Penang Island and JB where bulk of the property investments and market activities are actively taking place. More here .