2019 updated version

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REAL PROPERTY GAINS TAX (RPGT @ CKHT)
Introduction
- In a sale transaction, it is common that vendor
will make some profits from the sale of his
property.
- RPGT: ​Tax imposed on gains/profits made by a
vendor from a disposal/sale of a real property
(land and building).
- Governed by ​RPGT Act​.
- Under the RPGT Act​, the vendor will be
subjected to a tax on the chargeable gains
made from such disposal.
- i.e. If someone disposes of/sells a real property
with a profit, he will be subjected to tax on the
chargeable gains made from such disposal.
- The tax is chargeable to all categories of
property owners who are individuals (i.e.
citizens, permanent residents, non-citizens,
non-permanent residents) or companies.
- From 1 April 2097 to 31 December 2009, all
persons were exempted from paying ROFT for
disposal of assets.
- However, it was reintroduced effective 1
January 2010.
Illustration
- Ali purchased a unit of double-storey link house
(​chargeable asset​) from a developer on 1
September 2012 (​date of acquisition​) at
RM750,000 (​acquisition price​). Ali decided to
sell the house after he received vacant
possession from the developer.
- He paid RM20,000 as legal fee and
disbursement, RM20,000 for agent fee, and
RM1,000 for advertising the sale in a local
newspaper (​incidental expenses​). He also
spent the sum of RM55,000 for renovation of
the house (​permitted expenses​).
- On 11 November 2015 (​date of disposal​), Ali
sold the unit to Siti at RM990,000 (​disposal
price​).
- Ali (​chargeable person​) is making a profit of
RMXXXX (​chargeable gain​).
- Ali seeks your advice on the law on RPGT and
how much tax to be paid by him. Advise Ali.
Budget 2019
- In the Budget 2019 announcement, ​rates for
RPGT has been revised​.
- Before 2019: Any profit made by the vendor
from the disposal after 5 years from the date of
acquisition/purchase will not be subject to
RPGT, i.e. will not be taxed.
- After 2019: ​Effective 1 January 2019, any profit
made from a disposal of a property after 5
years is taxable at 5% for Malaysians and 10%
for foreigners and companies.
- Reason for increase: ​To reduce speculative
activities on housing prices and the real estate
market.
- The rate of RPGT on gains from the disposal of
real properties or shares in real property
companies in the sixth and subsequent years of
disposal are revised as follows:
1) Company, non-citizen, and
non-permanent resident individual:
Increased from 5% to 10%.
2) Malaysian citizen or permanent
resident: ​Increased from 0% to 5%.
- The increased tax rate does not apply to the
disposal of low cost, medium low and
affordable residential homes at valued below
RM200,000 by Malaysian citizens.
- i.e. Low cost, low-medium cost and affordable
housing priced below RM200,000 will be
exempted from RPGT.
- For disposal of a property acquired before 1
January 2000, the market value as at 1 January
2000 will be taken as the acquisition price for
purposes of calculating the RPGT.

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Understanding the RPGT Formula
1. Calculate the ​chargeable gain​.
- Disposal price - acquisition price = chargeable
gain.
- Disposal price: ​Selling price by the vendor to
the purchaser.
- Acquisition price: ​Price when the vendor
purchased the property.
2. Less ​incidental expenses and ​permitted
expenses​.
- In calculating the tax, the law allows the vendor
to exclude some costs incurred by him in the
purchase, such as legal fees and disbursement
and money spent by the vendor when he
wanted to sell the property, e.g. agent fee,
advertisement fee, known as ​incidental
expenses​. The vendor is also permitted to get
exemption for a renovation cost (​permitted
expenses​).
3. Less ​RM10,000 ​or ​10% of the chargeable
gain​, whichever is greater
- Another waiver exemption provided under the
law is ​RM10,000 ​or ​10% of the chargeable
gain​, whichever is greater, for each disposal of
a property by an individual.
4. Multiply by the ​relevant tax rate​.
- After these costs have been excluded from the
chargeable gain, determine the ​year of
disposal/tax rate ​so that the amount will be
multiplied by the relevant tax rate (refer table
below).
- It is the net chargeable gain to be paid by the
vendor.
Formulas
- Gross chargeable gains (GCG) = ​(Disposal
price - Incidental costs) - (Acquisition price +
Incidental cost)
- Net chargeable gains (NCG) = ​GCG - 10% of
GCG or RM10,000, whichever is greater
- RGPT = ​NCG x Rate of tax
Example question
- Ahmad bought a property from SDSB on 15
August 2011 at the purchase price of
RM350,000. Ahmad has to pay his solicitor's
bill of cost of RM10,000 (SPA) and RM7,000
(loan) and valuation report of RM1,000. He also
spent RM40,000 for renovation of the property.
- On 1 February 2016, Ahmad sold the property
to Latifah at the purchase price of RM500,000.
He paid RM700 for advertisement in looking for
the buyer and RM6,000 to his solicitor.
- Question: How much is the tax to be paid?
Answer
- Renovation + Incidental cost for disposal
(ICD)
- = RM40,000 + RM700 + RM6,000
- = RM46,700
- Incidental cost for acquisition (ICA)
- RM10,000 + RM7,000 + RM1,000 = RM18,000
- GCG
- (Disposal price - ICD) - (Acquisition price +
ICA)
- = (RM500,000 - RM46,690) - (RM350,000 +
RM18,000)
- = RM453,300 - RM368,000
- = RM85,300
- NCG
- = GCG - RM10,000 or 10% of the gain,
whichever is greater
- = RM85,300 - RM10,000
- = RM75,300
- RPGT
- = NCG x Rate of tax
- = RM75,300 x 15%
- = RM11,295

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RPGT rates prior to 1 January 2019
Date of disposal Citizens/Permanent
residents
Non-citizen
s
Companie
s
Within 3 years from the date of acquisition 30% 30% 30%
In the 4th year from the date of acquisition 20% 30% 30%
In the 5th year from the date of acquisition 15% 30% 30%
In the 6th year from the date of acquisition and
subsequent years
NIL 5% 5%
RPGT rates effective 1 January 2019
Date of disposal Citizens/Permanent
residents
Non-citizen
s
Companie
s
Within 3 years from the date of acquisition 30% 30% 30%
In the 4th year from the date of acquisition 20% 30% 20%
In the 5th year from the date of acquisition 15% 30% 15%
In the 6th year from the date of acquisition and
subsequent years
5% 10% 10%

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Imposition of tax
- S. 3 RPGT Act: ​A tax (RPGT) shall be charged
in respect of chargeable gain accruing on the
disposal of any real property.
- S. 4 RPGT Act: ​Tax shall be charged at the
appropriate rate specified in ​Schedule 5​.
- S. 6 RPGT Act: Every person, whether or not
resident in Malaysia, for a year of assessment,
shall be chargeable with the tax in respect of a
chargeable gain accruing to him in that year on
the disposal of any chargeable asset.
Three basic elements of imposition RPGT
- All these three elements must exist before
RPGT can be imposed:
1) There must be a chargeable person.
- Chargeable person: ​A person chargeable with
RPGT.
- 'Person’ - S. 2 RPGT Act: ​Includes a
company, partnership, body of persons and a
corporation sole.
- 'Chargeable persons’ - S. 6 Schedule 1
RPGT Act: ​Every chargeable person, a
resident or non-resident, executor, shall be
chargeable with the tax if a chargeable gain
accrues to him from a disposal of any
chargeable asset.
2) There must be a chargeable asset.
- ‘Chargeable asset’ - S. 3(1) RPGT Act: ​A real
property, if disposed, will have a chargeable
gain made by the disposer (vendor).
- 'Real property’ - S. 2 RPGT Act: ​Any land
situated in Malaysia and any interest, or other
right in or over such land (not as defined under
NLC).
- i.e. Refers to land situated in Malaysia and any
interest, option or other right in or over such
land.
- 'Land’ - S. 2 RPGT Act:
1. The surface of the earth and all
substances forming that surface.
2. The earth below the surface and
substances therein.
3. Buildings on land and anything
attached to the land or permanently
fastened to anything attached to the
land.
4. Standing timber, trees, crops and
other vegetation growing on land.
5. Land covered by water.
- Thus, real property includes any landed
property in Malaysia, e.g. residential properties
(houses, apartments, condominiums) and
commercial properties (factories, office building,
shophouses) and land.
3) There must be a chargeable gain.
- 'Chargeable gain' - S. 2 RPGT Act: Any
gains/profits accruing from a disposal of a
chargeable asset are chargeable under RPGT.
- S. 7(1)(a) RPGT Act: ​When a chargeable asset
is disposed and the disposal price exceeds the
acquisition price, there is a chargeable gain.
- Formula: disposal price - acquisition price.
- RPGT is only relevant if there is a chargeable
gain.
- There is chargeable gain if the disposal price
exceeds the acquisition price.
- There is an allowable loss if the disposal price
exceeds the acquisition price.
- S. 7(1)(c) RPGT Act: There is neither
chargeable gain nor allowable loss if the
disposal price is equal to the acquisition price.
- e.g. In a will, there is transfer of an asset by
executor of the deceased to the beneficiary,
and there is no sale and purchase taking place.
- In Malaysia, the primary legislation on taxation
is governed by the Income Tax Act 1967 (tax
on profits derived from trading and businesses,
petroleum, insurance premiums).
- Thus, 'gains’ under the RPGT Act covers only
gains which do not come within the ambit of the
Income Tax Act 1967.
- Para 14 Schedule 2 Stamp Act: Chargeable
gains or allowable loss are deemed to have
accrued whether the consideration is payable
by installments or in one lump sum.
- S. 7(4) RPGT: ​Allowable loss may be used to
reduce the total chargeable gain in a disposal.
- S. 7(1)(b) RPGT: ​Allowable loss exists when
the disposal price is less than the acquisition
price.

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Date of acquisition (the date the vendor purchased
the property)
- ‘Date of acquisition’ - Para 15(2) of Schedule
2 ​RPGT Act: ​The date when the disposer
(vendor) acquires/purchases the assets.
- The date of acquisition in a sub-sale is the date
of the SPA (Ali purchased the house).
- Para 15A, 15B and 16 RPGT Act: ​Where an
asset of a deceased person is disposed of by
the executor under his ​will to a third party, and
there is profit made, the date of acquisition is
taken as the ​date of death ​of the deceased.
- i.e. The executor shall be deemed to have
acquired the asset on the date of the death.
Acquisition price
- 'Acquisition price' - Para 4 Schedule 2 RPGT
Act: ​Purchase price paid by the vendor when
he previously purchased the asset.
- e.g. The price Ali paid when he purchased from
the developer.
- Para 19(1) Schedule 2 RPGT Act: For
property transferred under a ​will​, acquisition
price of an asset received by a beneficiary is
deemed to be equal to the market value
during the transfer of ownership from the
executor to the beneficiary.
- *So far pasal will ni tak pernah tanya dalam
exam.
Date of disposal
- 'Dispose’ - S. 2 RPGT Act: ​Sell, convey,
assign.
- The date of disposal = the date of agreement.
- If there is no agreement, then the date of
disposal shall be the date of completion of the
disposal ​(​'Completion of the disposal’ - Para
15(3) Schedule 2 RPGT Act​, e.g. oral
contract).
- Para 16 Schedule 2 RPGT Act: If the
agreement is subject to any condition or any
approval by any authority, the date of disposal
is the date when such condition or approval is
satisfied.
- e.g. Date of consent to transfer has been
obtained from the State Authority.
Disposal price
- The selling price stated in the SPA.
- However, there are expenses that can be
deducted from the chargeable gains:
1) Permitted expenses.
- Defined under​ Para 1 Schedule 2 RPGT Act.
- Incurred by the vendor to improve the value of
the asset after the acquisition (​Para 5(1)(a)
Schedule 2 RPGT Act​).
2) Incidental costs.
- Refers to the incidental costs related to the
acquisition process, e.g. legal fees and
disbursement, agent fee, etc.
- Para 6 Schedule 2 RPGT Act:
a) Fees, commission or remuneration
paid for the professional services of
any surveyor, valuer, accountant,
agent or legal advisor.
b) Costs for transfer (including stamp
duty).
c) In the case of an acquisition, the cost
of advertising to find a seller.
d) In the case of a disposal, the cost of
advertising to find a buyer and costs
reasonably incurred for the purposes
of this Act in making any valuation or
in ascertaining market value.

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Exemptions
1. S. 8 read together with Schedule 3 RPGT
Act: ​Disposal of a private residential by an
individual (citizen or permanent resident) is
given once in a lifetime exemption.
2. S. 9 read together with Schedule 4 RPGT
Act: ​Exemption of RM10,000 or 10% of the
gain, whichever is greater, for each disposal of
a property by an individual on the disposal of a
chargeable asset or where the chargeable
asset is partly disposed.
3. Para 14 Schedule 2 RPGT Act: ​When
disposal is made as a gift between parent and
child, husband and wife, grandparent and
grandchildren, donor shall be deemed to have
received no gain and suffered no loss on the
disposal of the asset.
4. RPGT (Exemption) Order 2018: ​Effective 1
January 2019, an individual who is a Malaysian
citizen is exempted from paying RPGT,
provided that:
a) The disposal is made in the 6th year
after the date of acquisition of such
chargeable asset or any year
thereafter.
b) The consideration for the disposal of
the chargeable asset is not more than
RM200,000.
- However, the order does not exempt an
individual from the requirement to file the
relevant RPGT form.