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Real Property Gain Tax

What is a Real Property Gain Tax?

The Real Property Gain Tax (RPGT) is a form of Capital Gain Tax levied by the Inland Revenue Board or the Lembaga Hasil Dalam Negeri (LHDN). To put it simply, it is a tax on the net profit from the sale of your land or property.

RPGT is generally classified into 3 categories:

  • Individuals (Citizens & Permanent Residents)
  • Individuals (Non-Citizens/Foreigners)
  • Companies

Before 2019, Malaysian citizens or permanent residents who dispose of his or her property within the first five years of acquiring it is subject to RPGT. And with the new RPGT rates announced in the Malaysian Budget 2019, Malaysian citizens will now be charged 5% in property taxes after the 5th year as well, whereas it used to be 0%.

Non-citizens and companies on the other hand, will be charged 10% RPGT when they dispose of their property after more than five years from purchasing it.

The new rates are as follows:

RPGT Rates Individuals (Citizens & Permanent Residents) Individuals (Non-citizens/Foreigners) Companies
Disposal in the 1st year 30% 30% 30%
Disposal in the 2nd year 30% 30% 30%
Disposal in the 3rd year 30% 30% 30%
Disposal in the 4th year 20% 30% 20%
Disposal in the 5th year 15% 30% 15%
Disposal in the 6th year onwards 5% 10% 10%

 

Exemptions

There is a bit of good news here as property owners may benefit from the exemptions offered under RPGT. They are:

  1. A once in a lifetime exemption on gains arising from the disposal of one residential property
  2. Exemption on gains from the disposal of property between family members (between parents and children, husband and wife, grandparents and grandchildren)
  3. Waiver exemption that is equivalent to 10 percent of chargeable gains or RM 10,000 (whichever is higher) per transaction is not taxable

 

Allowable Expenses

An allowable expense is any incidental costs incurred in disposing of the property (as follows) can be deducted from chargeable gain to calculate RPGT:

  • Legal fees, accounting fees, surveyor’s fee, etc.
  • Real estate fees (sales commission)
  • Administrative fees
  • Repair or renovation to maintain or upgrade the property – such as interior design like IKEA furniture to decorate your house
  • Cost of preserving or defending one’s title to, or to a right over the asset
  • Cost of advertising to make the disposal

 

Allowable Loss

RPGT is supplemented by allowable loss. This means a loss is made after the disposal of a property. Tax relief shall be provided if the disposal price is less than the acquisition price or if the disposal price is equal to the acquisition price.

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