104 | JENNIFER CHANG
Real Property Gains Tax (RPGT) & the Property Owner The 2012 Budget unveiled on 7 October 2011 included a revision of the Real Property Gains Tax (RPGT) rate from the 5% to 10% as part of the Government’s efforts to curb property speculation. The increase was recently gazetted and took effect from 1 January 2012 onwards. Jennifer Chang studies the impact of this move on property purchasers. The rate of 10% applies to gains on properties held and disposed within two years while gains on properties held and disposed between two and five years will be levied a 5% RPGT rate and disposals after five years continue to be exempted from RPGT. RPGT is a form of capital gains tax that is chargeable on gains arising from the disposal of real property, which is defined as: • Any land situated in Malaysia and any interest, option or other right in or over such land; or • Shares in a real property company. Anyone disposing of real property in Malaysia - whether a resident or non-resident - will be charged RPGT on the gains.
Evolution of RPGT A tax on property was introduced in 1974 under the Land Speculation Tax Act. This was subsequently replaced with the Real Property Gains Tax Act in November 1975. Although in existence since the mid70s, the Government pro-actively adjusted the rates of the RPGT through the years to cater to the property market conditions. It’s natural for most people to react to the reintroduction of RPGT, having enjoyed full exemption for a few years previously, however, compared to the original rates of RPGT which range up to 30%, the recent hike of up to 10% is actually quite mild.
Broaden tax base
Curb property speculation
Land Speculation Tax Act
1974
5% RPGT or Nil RPGT if disposal after 5 years
Real Property Gains Tax Act
Nov 1975
1 Jun 2003 to 31 May 2004 [No RPGT]
Disposal within 2 years Disposal in 3rd year Disposal in 4th year Disposal in 5th year Disposal after 5th year *For Malaysian individuals only
Curb property specualation
1 Apr 2007 to 31 Dec 2009 [No RPGT] 30% 20% 15% 5% 0*
10%, 5% or Nil RPGT
1 Jan 2012