What is RPGT?

What is RPGT?
RPGT is a tax on capital gains imposed on the disposal of a chargeable asset and this includes real property and shares in real
property companies. It is governed by the Real Property Gains Tax Act 1976.

Who is covered?It applies to both tax resident and nonresident persons who transact in real property situated in Malaysia and shares in real property companies.

What is real property?
It is land situated in Malaysia or any interest, option or right in or over such land situated in Malaysia.

What is the definition of land?
Land for RPGT purposes includes:
(i) the surface of the earth and all substances forming that surface;
(ii) the earth below the surface and substances therein;
(iii)buildings on land and anything attached to land or permanently fastened to anything attached to land;
(iv) standing timber, trees, crops and vegetation grown on land; and
(v) land covered with water.

How is RPGT computed?
In simple terms, RPGT is computed on the capital gains arising on the disposal of a chargeable asset, that is, the differential between the disposal price and the acquisition price of the real property.

Simply put:
(Disposal price - acquisition price) x RPGT rate = RPGT

The determination of the disposal price and acquisition price is set out below.

How is the disposal price determined?
The disposal price is arrived at as follows:

Consideration received xx

Less : Permitted expenses :
Enhancement cost (x)
Legal fees in defending title (x)

Less : Incidental costs :
Commission (x)
Legal fees (x)
Advertisement (x)
--------
Disposal price xx
--------
Permitted expenses refer to any expenses incurred wholly and exclusively on the asset after its acquisition for the purpose of enhancing or preserving its value and expenses incurred in establishing and defending title to or right over the asset. Incidental cost comprise fees, commission or remuneration paid for the professional services of a surveyor, valuer, accountant or lawyer, cost of transfer (e.g. stamp duty) and cost of advertisement to find a buyer.

How is the acquisition price determined?
The following sets out how acquisition price is determined:

Consideration paid Xx

Plus : Incidental costs :
Interest (applicable only prior to 1 January 2010) X
Stamp duty X
Legal fees and professional fees X
Advertisement X
Commission X

Less : Recoveries :
Insurance compensation (x)
Compensation for damage (x)
Deposit forfeited (x)
--------
Acquisition price Xx
---------

Incidental costs comprise fees, commission or remuneration paid for the professional services of a surveyor, valuer,
accountant or lawyer, cost of transfer (e.g. stamp duty), cost of advertisement to find a seller.

Recoveries refer to receipts under an insurance policy, deposits forfeited in respect of any intended disposal and compensation received for damage, destruction or depreciation of the chargeable asset.

How is the RPGT rate determined?
The rate of tax on RPGT is based on the holding period of the chargeable asset. The rate ranges from 30 per cent down to 5 per cent. There is an in-built exemption mechanism in the legislation which effectively brings the rate down to 5 per cent for all current disposals chargeable
to RPGT.

Exemptions from RPGT
RPGT exemptions currently available are as follows:
• Gain in respect of any disposal of a chargeable asset from 1 April 2007 until 31 December 2009
• Gain in respect of any disposal of a chargeable asset on or after 1 January 2010 where the disposal is made after 5
years from the date of the acquisition of the chargeable asset;
• RM10,000 or 10% of the chargeable gain, whichever is greater accruing to an individual in respect of a disposal of
a chargeable asset;
• Gain accruing to an individual who is a citizen or permanent resident of Malaysia in respect of the disposal of one private residence;
• Gain accruing to a wife who is a citizen or permanent resident of Malaysia but whose husband is neither a citizen nor a permanent resident, in respect of the disposal of one private residence owned by the wife; and
• Gains accruing to the Government, State Government or a local authority.

How to determine the acquisition date?
Generally, the acquisition date of the acquirer coincides with the disposal date of the disposer.

When is the disposal date?
Disposal date is the date of the agreement for disposal of the asset. Where there is no agreement, disposal date is the date
of completion of the disposal, i.e. the earlier of:
• date of transfer of ownership of the asset by the disposer, or
• date when the whole amount of consideration is received by the disposer.

Treatment of losses on disposal
Unutilised losses can be carried forward indefinitely except losses arising from the disposal of shares in a real property
company.

Retention of RPGT by the acquirer
With effect from 1 January 2010, the acquirer is required to retain either 2 per cent of the total value of consideration or
the whole of the monies, whichever is lesser, and remit the retention sum to the IRB within 60 days from the date of disposal.
In certain situations, the acquirer need not withhold the retention sum as the disposer can elect not to retain and remit the retention sum by completing the Form CKHT 3.