Understanding Malaysia’s Real Property Gains Tax
Real Property Gains Tax (RPGT) in Malaysia is imposed on the chargeable gains from the disposal of real property. The applicable tax rate varies based on factors such as the duration of property ownership and the type of owner, whether a Malaysian resident or foreign investor. Understanding RPGT is essential for property sellers to accurately calculate their tax obligations and plan transactions effectively.
Liability for Real Property Gains Tax in Malaysia
RPGT is payable only if there is a profit gain from the disposal of real property. It applies to individuals, including Malaysian citizens, PRs, non-citizens, and foreigners, who must pay RPGT on any chargeable gain from property sales. However, no RPGT is levied if the disposal price is equal to or lower than the acquisition price.
For companies, RPGT generally does not apply to the sale of shares unless the company qualifies as a Real Property Company (RPC), where at least 75% of its tangible assets consist of real property or RPC shares. If a company disposes of property or shares, causing its RPC status to fall below the 75% threshold, the disposed shares lose their RPC classification and become subject to RPGT. Additionally, if real property is reclassified from fixed assets to current assets, it is treated as a disposal, with the RPGT calculated based on the market value at the reclassification date.
Amendments to the Real Property Gains Tax in Malaysia
Effective from 1 January 2022, Malaysia’s government, under Budget 2022, announced that no Real Property Gains Tax will be imposed on properties disposed of after the fifth year from the date the acquisition agreement is signed. In other words, the RPGT rate will be reduced from 5% to 0% for eligible transactions. However, this exemption applies exclusively to Malaysian citizens and permanent residents. Foreigners and companies will not benefit from this reduction, as their RPGT rate remains unchanged at 10%, reinforcing the government’s distinction in tax policies between residents and non-residents.
Disposal and Acquisition Price
The chargeable gain from property transactions is calculated as the difference between the disposal price and the acquisition price. The acquisition price includes the purchase consideration and any incidental costs such as professional fees for surveyors, property agents, and transfer costs like stamp duty. When computing the disposal price, certain permitted expenses and incidental costs, such as legal fees and advertisement costs for finding a buyer, are deductible from the payment received for the disposed assets.
Submitting Relevant Documents to Lembaga Hasil Dalam Negeri (LHDN)
There are various forms and additional documents required for matters related to Real Property Gains Tax. One key requirement is the submission of the Real Property Gains Tax Form, which must be completed and filed within 60 days from the date of asset disposal. The general rule for determining the disposal date is based on the date of the written agreement. However, if no written agreement is available, other relevant criteria will be considered to establish the disposal date.
Failure to submit the Real Property Gains Tax Form within the stipulated timeframe may result in penalties being imposed by the authorities. Timely submission is essential to ensure compliance with tax regulations and to avoid any legal or financial repercussions. Ensuring accurate documentation and meeting deadlines is crucial for individuals and businesses involved in property transactions.
Considering Allowable Losses
An allowable loss situation occurs when the disposal of property results in a loss rather than a profit. This loss can be offset against future gains from selling other properties, subject to specific terms and conditions.
Calculating Real Property Gains Tax in Malaysia
In Malaysia, the Real Property Gains Tax is calculated based on the chargeable gains from the sale of a property, with the applicable rate varying according to the duration of ownership. Effective from 1 January 2023, higher RPGT rates are imposed for properties held for shorter periods, incentivizing longer-term ownership.
| Disposal | Malaysian Citizens or Permanent Residents | Non-Malaysian citizens | Companies |
| Within first 3 years | 30% | 30% | 30% |
| Disposal in 4th year | 20% | 30% | 20% |
| Disposal in 5th year | 15% | 30% | 15% |
| Disposal in 6th year & beyond | 0% | 10% | 10% |
Guidelines for Filing and Paying Real Property Gains Tax in Malaysia
Both the disposer and acquirer must file Real Property Gains Tax forms. The disposer submits Form CKHT-1A, while the acquirer submits Form CKHT-2A. For exemptions, Form CKHT-3 is required. These forms can be filed manually by downloading, printing, and submitting them to the Inland Revenue Board of Malaysia (IRBM) or the nearest Hasil office. Alternatively, they can be filed online through the MyTax portal (https://mytax.hasil.gov.my/) within 60 days of the disposal date. After online submission, forms can be printed, saved, or reverified through the e-CKHT feature on the IRBM website.
RPGT payments can be made either online or offline. For online payments, taxpayers can use the MyTax portal or e-PCB. Offline payments are accepted at bank counters or POS Malaysia outlets. It is essential to prepare all supporting documents for submission to ensure a smooth filing process.
Exemptions for Real Property Gains Tax in Malaysia
Examples of exemptions from Real Property Gains Tax include the greater of RM10,000 or 10% of the chargeable gain for individuals, gains from the disposal of one private residence by Malaysian citizens or permanent residents, disposals related to the securitization of assets, and transfers of assets to Real Estate Investment Trusts (REITs) or Property Trust Funds, encouraging investment and promoting efficient asset management.
Premia TNC’s Assistance
In Malaysia, our tax services include comprehensive support for Real Property Gains Tax. Our professionals guide you through regulatory procedures, advise on permissible losses and exemptions, and ensure accurate and timely filing of RPGT forms. With our expertise, you can achieve RPGT compliance and avoid potential risks or penalties. Reach out to us for more assistance.
FAQs
Is it legal for a foreign corporation to acquire property in Malaysia?
A foreign firm can own property in Malaysia, but it must adhere to foreign ownership limitations and get the relevant approvals.
How is taxable income for RPGT determined in Malaysia?
In Malaysia, taxable income for RPGT is determined using the difference between the disposal and purchase prices and is subject to RPGT rates based on the number of years of ownership.
When is the Real Property Gains Tax in Malaysia due?
Real Property Gains Tax is normally owed within 60 days of the property or asset being sold, or before the sale if the seller is a non-resident. Late payment may result in interest and penalties.
What happened when I submitted my Real Property Gain Tax form exceeded the prescribed date?
An appeal can be submitted to LHDN. However, the appeal is subject to the approval of the authority.
How can I reduce the amount of RPGT due in Malaysia?
Allowable losses incurred as a result of the sale of a property or asset can be utilized to lower the amount of RPGT owed in Malaysia. These losses might be caused by a drop in the value of the property or asset, expenses for upgrades, or other circumstances.
When is Real Property Gains Tax payable?
RPGT is payable when a profit is made from the disposal of real property. No RPGT applies if the disposal price is equal to or lower than the acquisition price.
Do companies have to pay RPGT on share sales?
Companies are not subject to RPGT on share sales unless they qualify as a Real Property Company (RPC). If RPC status drops below 75% of tangible assets due to property or share disposals, those shares lose RPC classification and become subject to RPGT.
What exemptions are available for RPGT?
Exemptions include RM10,000 or 10% of chargeable gains for individuals, one private residence disposal for Malaysian citizens or PRs, and asset transfers to REITs or Property Trust Funds to encourage investments.
