Owning property can be either a liability or a great investment; either way, if you are planning to dispose of your property, you might be wondering if you will get taxed on the disposal of a property.
By Hann Liew
Owning property can be either a liability or a great investment; either way, if you are planning to dispose of your property (whether it is to cut your losses or to make a profit), you might be wondering if you will get taxed on the disposal of a property. To answer this, SaveMoney.my explains Real Property Gains Tax in Malaysia in this week’s guide.
What is Real Property Gains Tax (RPGT)?
Real Property Gains Tax is a form of tax levied by the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri) on net capital gains derived from the disposal of real property (which generally means any land and/or building).
Real Property Gains Tax is a form of tax levied by the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri) on net capital gains derived from the disposal of real property (which generally means any land and/or building).
What is your net capital gain? To calculate this, you are allowed to subtract certain expenses from the gross capital gain (don’t forget to keep the bills!) such as:
- Legal fees;
- Real estate fees (i.e. sales commission) incurred to sell the property (typically between 2% – 3% of the selling price);
- Administrative fees; and
- Expenditure incurred to maintain / upgrade the property. This can include upgrade works done to the property such as renovations and interior design works.
After this point, the maximum allowable deduction here is the larger of RM10,000 or 10% of the net capital gain.
Why do we have RPGT in Malaysia?
There are many reasons why RPGT is imposed. One of the more significant reasons why the government imposes this tax is to curb property speculation, and in turn to avoid property bubbles forming. However from time to time, the government may decide to increase or decrease RPGT to suit their agenda, e.g. they could reduce RPGT to encourage investments (this actually happened for a period of time between 1 April 2007 – 31 December 2009, wherein property transactions during this period were exempted from RPGT to spur investments), which is likely to happen if the economy needs stimulation.
There are many reasons why RPGT is imposed. One of the more significant reasons why the government imposes this tax is to curb property speculation, and in turn to avoid property bubbles forming. However from time to time, the government may decide to increase or decrease RPGT to suit their agenda, e.g. they could reduce RPGT to encourage investments (this actually happened for a period of time between 1 April 2007 – 31 December 2009, wherein property transactions during this period were exempted from RPGT to spur investments), which is likely to happen if the economy needs stimulation.
Another obvious reason is that RPGT is a source of revenue for the government.
When and where do you pay RPGT?
Given the nature of RPGT, i.e. it is a tax on capital gains from disposal of property, it can obviously only be paid after you have sold off the property. You are allowed a 60-day grace period, within this time you must settle the tax that you are meant to pay from your sale of property.
Given the nature of RPGT, i.e. it is a tax on capital gains from disposal of property, it can obviously only be paid after you have sold off the property. You are allowed a 60-day grace period, within this time you must settle the tax that you are meant to pay from your sale of property.
Your conveyancing lawyer or tax agent should be able to submit the relevant CHKTK form on your behalf and pay any dues to Lembaga Hasil Dalam Negeri (LHDN) from the proceeds of your property sale. However, it is always best to make sure, so do check with your lawyers or tax agents on this matter, rather than assuming and then getting into trouble!
Now if you are wondering just how RPGT is calculated, and how much you’ll have to pay, stay tuned for the next instalment of SaveMoney.my’s guide where we will show you just how to figure that out!
Hann Liew is the Founder and Editor-in-Chief of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.
http://www.freemalaysiatoday.com/category/leisure/2013/09/18/property-gains-tax-in-msia/
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