What is Real Property Gains Tax (RPGT) In Malaysia?
The Real Property Gains Tax (RPGT) is a tax on profit from selling all chargeable assets such as houses, commercial buildings, farms, and vacant land. It is imposed on gains realised from the disposal of property owned for less than five years. The tax is calculated based on the profit made between the selling price of the property and the original purchase price, also known as chargeable gain.
Basis of Taxation
The Inland Revenue Board of Malaysia (LHDN) governs the Real Property Gains Tax (RPGT) under the Real Property Gains Tax Act 1976 (RPGTA 1976). RPGTA was introduced on 7 November 1975 to replace the Land Speculation Tax Act 1974. The intended purpose of RPGT is to restrict the speculative activity of the real estate industry.
"Property speculation occurs when investors purchase property to earn a large profit by selling it at a higher price. This speculative activity can often lead to instability in the housing market and make housing unaffordable for those who need it."
RPGT Rates 2022
The following is the RPGT rates effective from January 2022:
| Disposal | Malaysians / PR | Non-Malaysians | Companies |
|---|---|---|---|
| 1st Year | 30% | 30% | 30% |
| 2nd Year | 30% | 30% | 30% |
| 3rd Year | 30% | 30% | 30% |
| 4th Year | 20% | 30% | 20% |
| 5th Year | 15% | 30% | 15% |
| 6th Year and Over | 0% | 10% | 10% |
How to calculate Real Property Gains Tax (RPGT) In Malaysia?
| Malaysians / PR | Non - Malaysians | Companies | |
|---|---|---|---|
| Property Purchase Price | RM500,000 | RM500,000 | RM500,000 |
| Property Sale Price | RM600,000 | RM600,000 | RM600,000 |
| Net Chargeable Gain | RM100,000 | RM100,000 | RM100,000 |
| Year of Disposable / RPGT | 5th Year / 15% | 5th Year / 30% | 5th Year / 15% |
| RPGT Payable | RM15,000 | RM30,000 | RM15,000 |
Sample RPGT calculation chart
We have simplified the RPGT calculation into this formula:
Gross Chargeable Gain = Disposal Price - Purchased Price
Net Chargeable Gain = Gross Chargeable Gain - RPGT Exemption
RPGT payable = Net Chargeable Gain x RPGT Rate (based on holding period)
Balance Capital Gain = Net Chargeable Gain - RPGT payable
Assume you purchased your property 5 years ago for RM500,000, but you want to sell it now because your family has expanded, and you need the money to buy your next home. The township of the property has matured a little, making the current market value of your property to be RM600,000. That’s great! But you’ll have to pay RPGT for selling it within the first 5 years of purchasing it.
Gross Chargeable Gain = Disposal Price - Purchased Price
= RM600,000 - RM500,000
= RM100,000
With the increase in property market value, your property will be able to fetch you RM100,000 extra from capital appreciation which will then be calculated as the chargeable gain.
Net Chargeable Gain = Gross Chargeable Gain - Allowable Expenses (if any) - RPGT Exemption (if any) - Allowable Loss (if any)
= RM100,000
After deducting from your exemption, you are left with a net chargeable gain of RM100,000. It’s time to calculate your tax payable.
RPGT payable = Net Chargeable Gain x RPGT Rate (based on holding period)
= RM100,000 x 15% (5 years)
= RM15,000
Based on 5 years of RPGT rate, you’re charged a 15% on your net chargeable amounting to RM15,000.
Balance Capital Gain = Net Chargeable Gain - RPGT payable
= RM100,000 - RM15,000
= RM85,000
Lastly, you still retained a balance on a capital gain of RM85,000 after deducting your RPGT payable. Awesome! That’s something extra you got from buying the right property
RPGT Exemption
1. Once-in-a-lifetime exemption
This once-in-a-lifetime exemption amounts to RM10,000 or 10% of the chargeable gain, whichever is greater and only applies to Malaysian citizens and permanent residents. It also specifies that it is only relevant to residential property such as a house, condominium unit, apartment, or flat in Malaysia and includes a service apartment and small office home office (SOHO).
2. Transfer within the family
Similar to MOT Transfer of Love and Affection, RPGT has an exemption for property transferred within the family, between husband and wife, parent and child, or grandparent and grandchild. The transfer between siblings is excluded. This privilege provides a 100% exemption on the chargeable gain and is only limited to Malaysian citizens and permanent residents.
3. Disposal of low-cost residential homes of RM200,000
The disposal of low or medium-cost homes priced or valued below RM200,000 is exempted from RPGT. This RPGT exemption only applies to Malaysian citizens.
Allowable Loss
The term 'allowable loss' refers to a situation where an owner sells more than one property in the same tax year, whereby if you sell a property for less than you paid for it, you can use that loss to offset any profit you made on another sale.
For example, if you own 2 properties which are Property A and Property B. Property A, you made a capital gain of RM100,000, but Property B, you made a loss of RM10,000, then your total RPGT payable will be RM90,000.
How convenient, right?
Allowable Expenses
Allowable expenses are any additional costs associated with disposing of the property (such as the following) that can be deducted from the chargeable gain to calculate RPGT:
Legal fees, accounting fees, valuation fee
Agent fees (sales commission)
Administrative fees
Maintenance or renovation of the property
Cost of advertising to make the disposal
Important reminder: Keep your transactional receipts! Otherwise, it won't be easy to justify your allowable expenses to LHDN, and you may not be able to redeem them.
