Real Property Gains Tax (RPGT)

Tax on Real Property Gains (RPGT) is a tax imposed by the Inland Revenue Board (IRB) on chargeable gains arising from the sale of real property. The Real Property Gains Tax Act of 1976 (Act 169) provides for this tax. The tax is levied on the difference between the disposal price and the purchase price.

The holding period is from the date of the S&P agreement until the date of disposal. The capital gains tax (CGT) is a tax on capital gains, the profit realized on the sale of a non-inventory asset that was greater than the actual sale price. Capital gains are commonly realized from the sale of stocks, bonds, precious metals, and real estate. Capital gains taxes are not implemented in all countries, and most countries impose different rates of taxation on individuals and corporations. 

RPGT may be charged only if a profit is derived from the disposition of the property.

Accordingly, if the disposal price is lower than the acquisition price, there is no profit and therefore no RPGT is due. Additionally, if the disposal price is equal to the acquisition price, there is neither a gain nor a loss. The RPGT is therefore not payable. The purchaser’s solicitor is required to retain 3% of the purchase price from the deposit and remit the same to the Inland Revenue Board within sixty (60) days from the date of the sale and purchase agreement to pay the RPGT. For RPGT, there are exemptions available.

Among the exemptions are:

1) Exemption of gains resulting from the disposal of one residential property once in a lifetime for individuals 

2) Exemption on gains from the disposition of real property by family members

The transferee is considered to acquire the property at an acquisition price equal to the acquisition price paid by the transferor together with any permitted expenses incurred by the transferor in these instances. In addition to the above transfers, any transfer between family members is not eligible for exemption, such as a transfer between siblings.

3) Profits of 10% or RM10,000 per transaction (whichever is higher) are not taxed

According to the Budget 2019 announcement, the rates for RPGT haveincreased. Increasing taxes is part of the government’s commitment to long-term fiscal sustainability to enhance its commitment to long-term fiscal sustainability. Owners of real estate who wish to reduce their Real Property Gains Tax must sell their property after five years of ownership.