Updated: 27 Feb 2019
What is Real Property Gain Tax (RPGT)?
Real Property Gain Tax (RPGT) is a form of capital gains tax that the Malaysian government levies when a property is disposed / sold off. Hence this tax only applies to the property seller.
When an individual (citizen/permanent resident), company or foreigner purchases a property in Malaysia and later decides to sell it, he/she will be subjected to property tax on the profit/chargeable gains made from the sale of said property.
It was introduced in 1975 under the Real Property Gain Tax Act 1976. It is payable to the Inland Revenue Board of Malaysia (IRB)/Lembaga Hasil Dalam Negeri (LHDN).
You may choose to file it on your own or seek the service of a solicitor.
This article aims to shed some light in terms of calculating your RPGT and also some guidance on filing for RPGT.
Real Property Gain Tax Rates
The tax on Net Chargeable Gain (or net profit) from disposal of a property for:-
Citizen/PR of Malaysia is as follows:
1st to 3rd year at 30%
4th year at 20%
5th year at 15%
5 years and beyond, 5%
For Malaysian companies:
1st to 3rd year at 30%
4th year at 20%
5th year at 15%
5 years and beyond, at 10%
For Non-Citizen/Non-PR:
The taxed on net chargeable gain is as follows:
1st to 5th year at 30%.
5 years and beyond, at 10%.
Real Property Gain Tax Formula:
Chargeable Gain = Disposal Price – Purchase Price – Miscellaneous Charges
(Miscellaneous charges may include stamp duty, legal fees, advertisement charges, agent fees, etc. These miscellaneous charges can be tax deducted)
Net Chargeable Gain = Chargeable Gain – Exemption Waiver (RM10K or 10% of Chargeable Gain, whichever is higher)
Tax Payable = RPGT rate x Net Chargeable Gain
There are several exemptions from the RPGT
- Exemption on gains from disposal of one residential property once in a lifetime for Malaysian citizen or PR.
- Exemption on gains arising from the disposal of real property between family members (eg. husband and wife, parents and children, grandparents and grandchildren)
- Relief of either RM10K or 10% of your net chargeable gain (whichever amounts to a higher sum).
Example:
Mr Shaun is a citizen of Malaysia. He purchased a double storey house in Puchong Jaya for RM600K on 1st December 2013. He decided to sell his property and his sales and purchase agreement was signed at RM800K on 31st December 2018. His miscellaneous charges consist of legal charges, stamp duty and agent fees amounting to RM50K. Given that he had already used up his once in a lifetime exemption for RPGT, what will be his Real Property Gains Tax be?
Chargeable Gain
= RM 800K – RM 600K – RM 50K
= RM150K
Net Chargeable Gain
= RM 150K – RM 15K (10% of Net Chargeable Gain)
= RM 135K
Real Property Gain Tax
= RM135K x 15%
= RM 20.25K
How to file for RPGT (for individuals):
- Vendor/seller completes the CKHT 1A form (Disposal of Real Property). Include copy of Sales and Purchase Agreement and receipts of miscellaneous charges listed above for deductions.
- If the vendor/seller applies for one of the RPGT exemptions, then he/she will need to complete the CKHT 3 form (Notification under Section 27 RPGT Act 1976).
- Buyer completes the CKHT 2A form (Acquisition of Real Property).
- Submit items 1 to 3 to nearest IRB within 60 days of transfer agreement.
- Pay final RPGT within 30 days of the notice of assessment (Form K).
- If the disposal is not subjected to RPGT, you will receive a certificate of clearance (CKHT 5A)
How to file for RPGT (for companies):
- Vendor/seller completes the CKHT 1B form (Disposal of Shares in Real Property Company). Include copy of Sales and Purchase Agreement and receipts of miscellaneous charges listed above for tax deductions.
- Submit the CKHT 1B form and other supporting documents within 60 days of transfer agreement.
- Pay final RPGT within 30 days of the notice of assessment (Form K).
- If the disposal is not subjected to RPGT, you will receive a certificate of clearance (CKHT 5A)
(All forms can be downloaded from the LHDN website here. Forms are available only in the Malay language)
When to pay RPGT?
On selling your property, your lawyer actually retains 3% of the selling price from the deposit. This 3% will be sent to the LHDN within 60 days of Sales and Purchase Agreement execution. After 60 days, if the RPGT is found to be less than the 3%, IRB/LHDN will refund the excess to you. If RPGT is found to be more than the 3%, the outstanding must be paid within 30 days of the issuance of the notice of assessment. If you fail to make the payment within 30 days, you will be charged a penalty of 10% of your unpaid RPGT.
The government has adjusted these rates over the last few years since 2014 to curb property value speculation and reduce property flipping. Due to these taxes, this should be one of the considerations when you decide to sell your property. Knowing this will save you a lot of money! Related article: Key To Expanding Your Property Investment
Do you have personal tips or pointers for filing RPGT? Share them with us in the comments section below!
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About the Author
Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyors Malaysia, Member of Malaysia Institute of Estate Agents and Member of Business Valuers Association of Malaysia.
