Student are able to :
- identify the nature and incidences of real property gains tax
- explain the basis of assessment for real property gains tax
- identify important elements in property gains tax calculation
- calculate the tax according to appropriate rates.
- explain an appeal, relief and exemption (if any) available to the taxes
Introduction
TAXATION IN MALAYSIA
system of compulsory contributions levied (dikenakan 征收 ) by a government or other qualified public body on people, corporations, and property, in order to fund public expenditure.
Generated by the federal government, state government and local municipalities /authorities.
The Federal Government
i) Inland Revenue Board [IRB]
ii) Royal Malaysian Customs[Custom]
State Government
i) Land and District Offices for each states
Local municipalities / authorities
i) Dewan Bandaraya
ii) Majlis Bandaraya
iii) Majlis Perbandaran, Majlis Daerah
Fundamental Of Taxation
- Government designates tax base [income, property holdings, or a given commodity]
- applies tax-rate structure to the base
- collects tax from stipulated legal tax payers [tax = tax base multiplied by the applicable rate]
RPGT
Nature and Incidences
- governed by the Real Property Gain Tax Act 1976.
- levied by the Inland Revenue Board (IRB) on ‘chargeable gains’ accruing on the disposal of any ‘chargeable asset’ by a ‘chargeable person’.
- Chargeable gains arising from the disposal of real property situated in Malaysia or of interest, options or other rights in or over such land as well as the disposal of shares in real property companies.
- paid by the owner of the property at the event of disposal of property.
- April 2007 to Dec 2009 – Property Gains not subject to Real Property Gains Tax.
- Jan 1, 2010 re-impose Real Property Gains Tax for gains arising from property disposal.
REAL PROPERTY GAINS TAX ACT 1976
- came into force on 7 November 1975.
- intended to curb speculation on land
- provide for the imposition, assessment and collection of a tax on gains derived from the disposal of real property and matters incidental thereto
- was exempted from 1st April 2007 to 31 December 2009
EXPLANATION OF TERMS
- Chargeable person - every person, whether or not resident in Malaysia for a year of assessment, shall be chargeable with RPGT in respect of a chargeable gain accruing to him in that year on the disposal of any chargeable asset.
- Chargeable gains - gains derived from the disposal of any land situated in Malaysia or any interest, option or other right in or over such land or the disposal of shares in a 'real property company' is subject to Real Property Gains Tax.
- Disposal, sell, convey, assign, transfer, settle or alienate whether by agreement or by force of law which fall under chargeable asset.
- Chargeable asset - refers real property and shares in real property companies. Real property is defined as any land situated in Malaysia and any interest, option or other right in or over such land
- Disposal price - arrived at by deducting permitted expenses and incidental costs from the consideration amount (i.e. money received, or market value of payment in kind)
- Acquisition price - derived by adding 'incidental costs' to and deducting 'recoveries' from the amount or value of the consideration in money or monies worth paid given or the acquisition of the asset
- Date of acquisition – deemed to be the date of disposal by the disposer to him.
- Date of disposal – shall be the date of the agreement for disposal, if any; or the date of completion of the disposal if there is no agreement
- Allowable loss - a loss suffered on the disposal of a chargeable assets where the acquisition price of real property exceeds the disposal price
Paragraph 16 of the Schedule 2 of the RPGT Act has provides situation for conditional contracts. If contract for disposal of an asset is conditional upon the approval by the Government or State Government or an authority or committee appointed by the Government or a State Government, then the date of disposal shall be the date of such approval or if the approval itself is conditional then the date of disposal shall be the date when the last of all such conditions is satisfied.
RPGT RATES
In the budget 2010, The Malaysia Government has proposed to re-impose 5% real property gains tax (RPGT) for gains arising from property disposal with effective Jan 1 2010, irrespective of the year when the property is disposed.
The RPGT rate at 5% was imposed on gains from the disposal of residential and commercial properties within 5 years from 1 January 2010.
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RPGT EXEMPTION
Three circumstances where the property owner is exempted from the RGPT
- one unit of residential property once in a lifetime by an individual, Schedule 3 RPGT Act 1976
- gains from disposal of property between parents and children, husband and wife, grandparents and grandchildren;
- Exemption up to RM10,000 or 10% of the net gains, whichever is higher, is given to an individual.
For disposal of properties commencing from 1 January 2012 and continue to be available.
The following disposal of real property which do not fall under Real Property tax Act 1976 :
- Transferring ownership from husband to wife (wives) or vice versa.
- Inheritance of real property from deceased.
- Transfer of ownership from an individual to a company where he or she has shares in the company.
- Transfer of an asset as collateral for loan.
- Compulsory acquisition by Government under any law.
- Disposal of assets as charity.
RPGT RELIEF
- No RPGT is payable if the acquisition price of real property exceeds the disposal price. The disposer is said to have an allowable loss.
- The allowable loss will be multiplied the RPGT rate to loss relief. The loss relief can be carried forward to future years of assessment to be set off against the RPGT payable on property disposed of in future years until the loss relief fully utilized.
- The loss relief not applied retrospectively to the previous disposal. The sequence of the disposal is therefore crucial.
- Allowable loss relief shall be allowed in respect of the following accrued:
ii) If the disposal price is equal to the acquisition price.
Allowable loss
Section 7(4) reads:
‘Where there is an allowable loss in respect of a disposal, such allowable loss shall be allowed as a reduction to reduce the total chargeable gain of a person for a year of assessment in which the disposal was made.’
Section 7(5) of the RPGT Act
any allowable loss is absorbed after the exemption under Schedule 4 – ie the greater of 10% or RM10,000.
RPGT calculation
Find out the
a) acquisition price = Purchase price + Miscellaneous fee ( Legal, Stamp duty ... )
b) disposal price = Selling Price + Miscellaneous fee ( Agent Fees ) + Enhancement cost ( Renovation )
c) Chargeable gain = disposal price - acquisition price
d) Exempted 10%
d) Net Chargeable Gain
e) RPGT Payable = Net chargeable gain x %
PERMITTED EXPENSES refer to
- expenses wholly and exclusively incurred in enhancing or preserving the value of the chargeable asset; and
- expenses wholly and exclusively incurred in establishing, preserving or defending the title to the chargeable asset
INCIDENTAL COST consists of
- fees, commission or remuneration paid for the professional services of a surveyor, valuer, accountant, etc
- costs of transfer including stamp duty;
- costs of advertisement for a buyer
TO CALCULATE ACQUISITION PRICE
CONSIDERATION PAID RM XXX
Add INCIDENTAL COST RM XXX
RM XXX
Less RECOVERIES (RMXXX)
ACQUISITION PRICE RM XXX
INCIDENTAL COST consists of
fees, commission or remuneration paid for the professional services of a surveyor, valuer, accountant, etc
costs of transfer including stamp duty;
costs of advertisement for a seller
Recoveries refer to :
compensation received for damage, destruction, dissipation or depreciation of the chargeable asset
receipts under an insurance policy
deposits forfeited in respect of any intended disposal
TO CALCULATE REAL PROPERTY GAINS TAX
DISPOSAL PRICE RM XXX
Less ACQUISITION PRICE (RM XX)
CHARGEABLE GAINS RM XXX
Less EXEMPTION* (RM XX)
CHARGEABLE GAINS TO BE TAXED RM XXX
multiply RPGT RATE x%
RM XXX
Exemption is under Para 2, Sche 4 Exemption. This is for individuals only. 10% of chargeable gain or RM10,000,
whichever is HIGHER
RPGT CALCULATION
