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Real Property Gain Tax (RPGT)

INTRODUCTION The first legislation to tax gains from the disposal of real property being introduced on 06 December 1973 though Land Speculation Tax Act (LSTA)[Act 126]. This Act provided a single tax rate of 50% on chargeable gains in respect of properties take place within two year from the date of acquisition and the disposal consideration was greater than RM 200,000. However, the legislation has been repealed by Real Property Gain Tax Act 1976 (RPGTA) effective from 7 November 1975. RPGTA provided only mechanism for taxing chargeable gains from real property or shares in a real property company. Whereby, property been disposed after 1 January 2007 has been grated to be weaving by The Minister of Finance [P.U. (A) 146/2007]. This means that, any property been disposed within the period 1 January 2007 to 31 December 2009 was excluded from the scope of charge by RPGTA. In addition, RPGTA been reactivated by new rules applied as enacted by [P.U. (A) 486/2009] starting from 1 January 2010. This means that the [P.U. (A) 146/2007] has been revoked by [P.U. (A) 486/2009].

Real Property Gain Tax Act 1976 [Act 169]:http://www.agc.gov.my/Akta/Vol.%204/Act%20169.pdf [P.U. (A) 146/2007](revoked) :http://synergymanagement.com.my/main/Act/RPGT/2007/REAL%20PROPERTY%20G AINS%20TAX%20%28EXEMPTION%29%20%28NO.%202%29%20ORDER%20200 7.pdf [P.U. (A) 486/2009]:http://www.adventconsulting.com.my/admin/Upload/99A46_Real_Property_Gains_Tax_ %28Exemption%29_%28No._2%29_Order_2009.pdf

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DEFINATIONS Section 2 of RPGTA 1976 chargeable gain has the meaning assigned by section 7; Sec.7 (1) Where a chargeable asset is disposed of, then (a) if the disposal price exceeds the acquisition price, there is a chargeable gain; (b) if the disposal price is less than the acquisition price, there is an allowable loss; and (c) if the disposal price is equal to the acquisition price, there is neither a chargeable gain nor an allowable loss. real property means any land situated in Malaysia and any interest, option or other right in or over such land; land includes (a) the surface of the earth and all substances forming that surface; (b) the earth below the surface and substances therein; (c) buildings on land and anything attached to land or permanently fastened to any thing attached to land (whether on or below the surface); (d) standing timber, trees, crops and other vegetation growing on land; and (e) land covered by water; shares means all or any of the following: (a) stock and shares in a company; (b) loan stock and debentures issued by a company or any other corporate body, wherever incorporated; (c) a members interest in a company not limited by shares whether or not it has a share capital; (d) any option or other right in, over or relating to shares as defined in paragraphs (a) to (c);

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EXAMPTION The Minister exempts any person from the application of Schedule 5 of the Act on the payment of tax on the chargeable gain in respect of any disposal of asset on or after 1 January 2010 where the disposal is made after 5 years of the subject propertys acquisition. FORMULAR APPLICATION The Minister exempts any person from the application of Schedule 5 of the Act on the payment of tax on the chargeable gain in respect of any disposal of asset on or after 1 January 2010 subject to the condition that the amount of chargeable gain shall be determined in accordance with the following formula: A B Where:A : is the amount of tax charged on the chargeable gain on the person at the appropriate tax rate reduced by the amount of tax charged on such chargeable gain at the rate of 5%. B : is the amount of tax charged on such chargeable gain at the appropriate tax rate. C : is the amount of such chargeable gain. xC

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RPGT Effective Tax Rate:Lets: Gain on chargeable property = Applicable tax rate = Where = ============== ============== Exemption formula:- 5% = (- 5%) - 5% x

Effective chargeable gain:(Chargeable Gain Exemption Allowance ) x Applicable Tax Rate

=( - 5% - 5% -5% - 5% -5% 5% x)x

= ( 1-

)xx

)xx

)xx

= =

)x

Note : =5% is not applicable