PROPERTY TAXATION

REAL PROPERTY GAIN TAX

CEA 1043
CONTENTS

1. Nature and incidence

2. Chargeable gains and allowance losses
3. Assessment
4. Exemption
Nature And Incidence of Real Property Gains Tax
(RPGT) Act 1976

Brief History of RPGT Act 1976

The RPGT Act 1976 was legislated to replace Land

Speculation Tax Act 1974.

The Land Speculation Tax Act 1974, came in effect

on 6 December 1973 with the aim of curbing land
speculation activities and to control rising prices in
Malaysia.
The Land Speculation Act 1974 created a lot of
uncertainty among taxpayers. With a rate of tax as
high as 50% on disposals occurring within 2 years of
acquisition of the asset, it had the effect of deterring
genuine disposals of property as well as speculative
activities.

It was repealed with effect from 7 November 1975.

The repealed of Land Speculation Tax Act was a

welcome move.
Scope of RPGT Act 1976

RPGT Act 1976 has to overcome the limitation of

Land Speculation Tax Act. To keep abreast of
changes in the economic conditions of the country,
the RPGT Act has been amended a number of times,
particularly the tax rates.

Malaysia has only a limited scope tax on capital gain.

Real Property Gains Tax Act 1976 is a tax on capital

gains on the disposal of real property and shares in
Real Property Company in Malaysia.
The tax is chargeable on gains from the disposal and
a loss on disposal of real property is an allowable
loss.

The Real Property Gains Tax Act 1976 [Act 169]

came in effect from 7 November 1975 to tax gains on
disposal on or after that date of real property situated
in Malaysia.

For real property gains, there is no possibility of an

overlap between income tax and RPGT as the latter
is only levied in situation where income tax is not
applicable.
A case of “double taxation”, i.e. a transaction
resulting in the taxpayer being liable to both taxes in
respect of same gain does not arise.

This evident from the definition of gain for the

purposes of RPGT which exclude gain or profit
chargeable with or exempted from income tax”.

The Income Tax Act 1967 (also known as Principle

Act) takes precedence over the RPGT Act 1976 and
it applies only to gains that are “income” in nature.
Section 2 of RPGT Act 1976

Real Property

Any land situated in Malaysia and any interest, option

or other rights in or over such land

Asset

Includes any interest or right in or over an asset

Land

As defined under section 5 NLC

Scope of Charge

The IRB can only impose RPGT on the taxpayer if he

is entirely within the ambit of the charging section.
Otherwise, no tax can be levied.

The power to charge is found in section 3 of RPGT

Act.

Section 3 reads as follows:

“Taxation of chargeable gains;-

1) A tax, to be called RPGT, shall be charged in

accordance with this Act in respect of chargeable
gain accruing on the disposal of any real property.
2) The tax shall be charged on every Ringgit
Malaysia of the total amount of chargeable gains
accruing to a chargeable person in a year of
assessment in respect of each category of
disposal of chargeable assets.

Section 3, RPGT Act 1976 makes it clear that the tax

will be imposed if there are exist 3 elements:-

i. Chargeable gain;

ii. Disposal of real property; and

iii. Chargeable person.

The Meaning of Gain
“Gain” is defined in section 2 RPGT Act 1976 as :-

a) Gain other than gain or profit chargeable with or

exempted from income tax under the income tax law;
or

b) In the case of a unit trust, gain not treated as income

under the income tax law.

This definition reinforces the fact that RPGT is only

imposed if the transaction is not chargeable to income
tax or is exempted from income tax.

In short, Income Tax would take precedence over

RPGT.
ACQUIRE

Section 2 RPGT Act 1976 defines acquire as;

by way of purchase, grant, exchange, gift, settlement or

otherwise.

However, where a land acquired results from a partition

or sub-division by the land owners, that would not
constitute an acquisition for the purposes of the ACT.

DISPOSE

Section 2 RPGT Act 1976 define dispose as;

sell, convey, transfer, assign, settle or force of law.

Chargeable person - Schedule 1

Every person whether he is resident or not, dispose a

real property in Malaysia for a year of assessment is
chargeable on the gains accruing on the disposal

Person include a company, a partnership, a body of

persons and a corporation sole.

Thus chargeable persons include:-

i. Partnership.
ii. An incapacitated person
iii. Non-resident
iv. Ruler or Ruling chief
v. Company
vi. Hindu joint family
vii. Trustee
viii. The executor or administrator of a deceased
person
ix. Husband and wife, each spouse is chargeable to
tax separately but transfer of real property
between spouses are deemed to be a no gain
no loss situation.
Example 1:

Mr. A, who is a Malaysian resident disposed of a

property in Singapore on 27/10/2015. The gain from
the disposal amounted to RM500,000. The gains
were remitted to Malaysia.

Even though the disposer is a resident of Malaysia,

the asset disposed is situated in Singapore, not in
Malaysia. As the asset is situated in Singapore, it
doses not come under the preview of RPGT Act 1976
and hence not taxable.
 Example 2:-

Mr. B is a resident in Thailand. On 20/8/2016 he

disposed of a house in Kuala Lumpur. The gain from
the disposal amounted to RM300,000.

Will the gain accrued by Mr. B subjected to RPGT?

Year of assessment

Year of assessment refer to the calendar year when

the asset was disposed.

What is the year of assessment for the above two

examples?
Acquisition Date and Disposal Date

The ascertainment of acquisition date and disposal

date is crucial for RPGT purposes because the rate
applicable to the chargeable gain on disposal or real
property or allowable loss relief to be carried forward to
future years depend on the holding period.

The period is calculated by reference to the difference

between the disposal date and the acquisition date.
Acquisition Date

In general, the date of acquisition of a chargeable asset

is deemed to coincide with the date of the
corresponding disposal. Consequently, it would be
determined in the same way as for the disposal date.

Disposal date

a. With written agreement - The date of such

agreement

b. With no written agreement – the date of completion

of the disposal of the asset.
 i. The date on which the ownership of the asset
disposed of is transferred by the disposer; or

ii. The date on which the disposer has received

the whole amount or value of the consideration
for the transfer.

Chargeable Gains

Chargeable gain is the excess of the disposal price

over the acquisition price of the asset.

The imposition of RPGT arises if there exists a

chargeable gain on disposal of real property.
Acquisition Price

Para 4 of Schedule 2 RPGT Act 1976 includes / defines

acquisition price as:-

The amount or value of the consideration in money or

money’s worth given by or on behalf of the owner
wholly and exclusively for the acquisition of the asset
(together with the incidental costs to him of the
acquisition) less:-

a. Any sum received by him by way of compensation

for any kind of damage or injury to the asset or for
the destruction or dissipation of the asset or for
any depreciation or risk of depreciation of the
asset;
 b. Any sum received by him under a policy of
insurance for any kind of damage or injury to or
the loss, destruction or depreciation of the asset;
and

c. Any sum forfeited to him as a deposit made in

connection with an intended transfer of the asset.

Should the sums received by the owner [(a) + (b) + (c)]

be more than the consideration paid (incidental
expenses included), the excess is treated as a
chargeable gain accruing to the owner at the time when
he receives the sums and his acquisition price is nii.
 DETERMINATION OF ACQUISITION PRICE RM RM

(a) Consideration paid in money or money’s worth 50,000

Incidental costs (e.g. legal fee, stamp duty,

(b) advertisements and 3,500
estate agent, interest)

Less 53,500

(aa) Compensation for damage 2,000

(bb) Insurance compensation 10,000

(cc) Forfeiture of deposit 500

(12,500)

Acquisition Price 41,000

If the sum of (aa), (bb) and (cc) had been greater than
RM53,500, then the excess would have been treated
as a chargeable gain accruing to the owner at the time
when he received the sums.
Incidental Costs

Para 6 of Schedule 2 :-

Shall consist of expenditure wholly and exclusively

incurred by the disposer for the purposes of the
acquisition of the disposal, being-

a) Fees, commission or remuneration paid for the

professional services of any surveyor, valuer,
accountant, agent or legal adviser;

b) Costs of transfer (including stamp duty);

c) Costs of advertisement to find a seller and any
interest paid on capital employed to acquire the
asset; and

d) In the case of disposal, the cost of advertising to find

a buyer and costs reasonably incurred in making any
valuation or in ascertaining MV.
The Determination of Disposal Price

The disposal price of real property is the second

element in deciding whether there is any RPGT tax
liabilities to be paid by the chargeable person upon any
disposal of real estate.

Disposal Price

Para 5, Schedule 2 defines disposal price as:-

The amount or value of the consideration in money or

money’s worth for the disposal of the asset less:-

a) The amount of any expenditure wholly and

exclusively incurred on the asset at any time after its
 acquisition by or on behalf of the disposer for the
purpose of enhancing or preserving the value of the
asset, being expenditure reflected in the state or
nature of the asset at the time of the disposal;

b) The amount of any expenditure wholly and

exclusively incurred at any time after his acquisition
of the asset by the disposer in establishing,
preserving or defending his title to, or to a right over,
the asset; and

c) The incidental costs to the disposer of making the

disposal.
Determination of Disposal Price Example
RM RM

Consideration received in money 90,000

Less

(a) Enhancement costs 21,000

(b) Legal fees in defending land title 5,000

(c) Incidental costs 4,000

(e.g. advertisement, brokerage)

(30,000)

Disposal
Price 60,000
Consideration

The price fixed for the disposal of an asset may be

expressed as a sum in money or it may be expressed
otherwise, for example as a number of shares in a
particular company to be given as consideration for
acquiring the asset.

Enhancement expenditure

In accounting terms, land and buildings are considered

as two assets. However for RPGT purposes, the land
together with any buildings constructed on it are treated
as one chargeable asset.
Therefore, the cost of expenditure to enhance the value
of the land and it will be deducted from the
consideration received on disposal to arrive at the
disposal price for the asset.

Expenditure on defending the title to the asset

Legal fees incurred in defending the land title qualify for

deduction under RPGT.

Incidental cost

The incidental costs of the disposal of an asset

comprise expenditure wholly and exclusively incurred
by the disposer for the purposes of the disposal, being;
a. Fees, commission or remuneration paid for the
professional services of any surveyor, valuer,
accountant, agent or legal adviser;

b. Costs of transfer (including stamp duty);

c. The cost of advertising to find a buyer; and

d. The costs reasonably incurred for the purposes in

making any valuation or in ascertaining MV.
Circumstances in which the disposal price is
deemed to be equal to Market Value

The RPGT Act specifies as number of situations in

which the disposal of an asset is deemed to take place
at Market Value.

Where this applies, the actual consideration will be

ignored.

In the same way, an acquisition will be deemed to take

place at Market Value where the specified
circumstances apply.

a. By a bargain not at arm’s length or by way of gift

A disposal, or acquisition, made otherwise than by way

of bargain made at arms length is one of the
circumstances in which the asset is deemed to have
been disposed of, or acquired, at Market Value.

Two situations are specified in which a transaction is

always deemed to be otherwise:-
1. 
An acquisition

or disposal by way of gift
2.
An acquisition in a transaction between connected
person.
Mr. A has alienated a condominium unit in Subang
Jaya as a gift to Mr. B as at 1.1.2016. As the transfer is
to be treated as being otherwise than by way of a
bargain made at arm’s length, both the disposal price
for Mr A and the acquisition price for Mr B must be the
Market Value of the condominium as at 1.1.2016.
b. Where he acquires or disposes of the asset wholly
or partially:-

i. For a consideration that cannot be valued; or

ii. In connection with his own or another’s loss of

office or employment or diminution of
emolument; or

iii. In consideration for or recognition of his or

another’s services or past services in any
office or employment or of any other service
rendered or to be rendered by him or another.
Example 1: In 1.1.2016, Mr. A from KL transferred a
condominium unit in Penang to his lady friend, Miss B,
in consideration that she would occupy the unit and
keep it ready for him on his visits to Penang.

It is not a gift because there is a consideration, but the

consideration cannot be valued.

Therefore the disposal price for Mr. A, and acquisition

price for Miss B, would be the MV of the condominium
as at 1.1.2016.
Example 2: Mr A has worked for SBC Sdn Bhd for 10
years. In view of the recession, Mr. A’s services was
terminated by his employer with a compensation sum
of RM300,000. The company however, because of
cash flow difficulties, transferred to him a piece of land
in Sepang worth RM300,000 in satisfaction of his right
to the compensation money.

The disposal price and acquisition price would be the

MV of the land at the date of the transfer.
C. Exchange

Where an asset is disposed of by being, exchange for

another asset the MV of the asset received by the
disposer shall be taken as the consideration for the
disposal.

Provided that, if the asset received by the disposer has

no MV, the DG may take the MV of the asset disposed
of as the consideration for the disposal.

Example 3: Mr A transfers his Bangsar Condominium

to Mr B in return for Mr B’s rest house in Kuala
Selangor.

The disposal price for the Bangsar Condominium will

be the MV of the rest house.
Example 4: the situation is the same but Mr A
exchanges it for a Da Vincci painting. As such, the MV
of the Da Vincci painting would be the disposal price for
the Bangsar Condominium.

Example 5: Mr. A gives his shop house in Shah Alam to

Mr B in return for his giving up his job in Saudi Arabia.

As such, the forfeiture has no MV. The LHDN may take

the MV of the shop house as the consideration for the
disposal.
D. Related Parties / Persons

As asset acquired in a transaction made between

related persons is treated as being otherwise than by
way of a bargain made at arm’s length.

As such the MV would be substituted for the

consideration for the acquisition.

The meaning of related person is wide enough to

embrace a wide combination of relationships, either for
individuals or companies.
i. Individuals

A person is related with an individual if that person

is the individual’s husband or wife or is a relative of
the individual or of the individual’s husband or wife.

ii. Trust and other persons

iii. Persons involved with partnership

iv. Companies with companies

v. Company with other persons

vi. Cross relationship between individuals and

company
How to determine Chargeable Gain

The chargeable gain is calculated by comparing the

disposal price and the acquisition price, after both have
been adjusted for any additional costs and extraneous
receipts. An excess of the disposal price over the
acquisition price results in a chargeable gain.

The whole chargeable gain or allowable loss is deemed to

accrue at the date of disposal, regardless of whether is
payable by installments or not.
Example:

PH Holding purchase rubber plantation land on 1.1.2000

for RM1.6 million. On 1.6.2000, PH Holding entered into
an agreement to sell the plantation land to KFB for RM2
million and KFB paid a deposit of RM200,000.

Subsequently, the buyer was unable to raise loans to

complete the purchase and the sale cancelled with the
deposit being forfeited.

Finally, by sale and purchase agreement entered into on

1.1.2004, PH Holding was able to sell the land to ABC
Agency for RM2.00 million. Of this sum 10% was to be
paid by way of deposit on signing the agreement and the
balance by two equal installments after one year and two
years respectively.
Determine the date of disposal and the accrual of the
chargeable gain and compute the RPGT payable.

The date of the disposal, and the date of accrual of the

chargeable gain is 1.1.2004. The fact that part of the
sale consideration is payable by installments is
irrelevant. Although there was an earlier disposal on
1.1.2000, it is treated as not having happened on
subsequent sale.
 RM RM

Consideration paid 1,600,000

Less : Deposit forfeited (200,000)

Acquisition price 1,400,000

The CG is computed as follows:

Disposal price 1.1.2004 2,000,000

less Acquisition price 1.1.2000 1,400,000

Chargeable Gain 600,000

RPGT (Disposal in fourth year) 90,000

RM600,000 x 15%
Allowable Loss
An allowable loss would arise when the disposal price
is less than the acquisition price.
Loss Relief
Tax relief for an allowable loss is ascertained by taking
the amount of the allowable loss and multiplying it by
the rate of tax (depending on the period of ownership of
the chargeable asset) that would have applied if it had
been a chargeable gain.
This loss relief is given by way of a deduction against
the total RPGT tax assessed for year of assessment in
which the disposal occurred. If there is no total tax for
that year, it is carried forward for off-set against future
RPGT payable.

The tax relief for an allowable loss may be carried

forward indefinitely but it cannot be carried back.
REAL PROPERTY GAIN TAX RATE FOR
INDIVIDUAL
- Malaysian Citizen or Permanent Resident

1995- 2008- 2010 2011 2012 2013 2014

2007 2009
1st year 30% Nil 5% 10% 10% 15% 30%
2nd year 30% Nil 5% 10% 10% 15% 30%
3rd year 20% Nil 5% 5% 5% 10% 30%
4th year 15% Nil 5% 5% 5% 10% 20%
5th year 5% Nil 5% 5% 5% 10% 15%
ThereafterNil Nil nil nil nil Nil Nil
Disposal by non - citizen or non – permanent resident
From 1995-2007 Rate
Disposal within 5 years from the date of acquisition 30%
Thereafter 5%
From 2008-2009 Nil
From 2010-2011
Disposal within 5 years from the date of acquisition 5%
Thereafter Nil
From 2012
Disposal within 2 years from the date of acquisition 10%
Disposal after 2 years but within 5 years from the date of 5%
acquisition
Disposal after 5 years from the date of acquisition Nil
From 2013
Disposal within 2 years from the date of acquisition 15%
Disposal after 2 years but within 5 years from the date of 10%
acquisition
Disposal after 5 years from the date of acquisition Nil
From 2014
Disposal within 5 years from the date of acquisition 30%
Disposal after 5 years from the date of acquisition 5%
Disposal by company

2008- 2010- 2012 2013 2014

2009 2011
1st year Nil 5% 10% 15% 30%
2nd year Nil 5% 10% 15% 30%
3rd year Nil 5% 5% 10% 30%
4th year Nil 5% 5% 10% 20%
5th year Nil 5% 5% 10% 15%
thereafter Nil Nil Nil Nil 5%
Disposal RM RM Note

Consideration received XX Date of disposal

a. Cost of enhancing/preserving value Permitted

Less of asset XX expenses

b. established, preserve or defend Permitted

title/right to asset Xx expenses

Permitted
c. Incidental costs of disposal Xx expenses

Disposal Price XXX

Acquisitio
n

Consideration paid Xx Date acquisition

Add Incidental costs Xx

xx

Less a. Compensation received xx

b. Insurance recoveries xx

c. Deposit (forfeited) received Xx

Acquisition
Price XXX

Chargeable Gain/(allowable loss) Xx (xx)

Exemption : greater pf 10% or Apply to

RM5,000 individual

Gain subject to RPGT xx

Disposal within :
2thyrs @30 ; 3rd yr @ 20%; 4th yr @15%;
5 yr @ 5%;
After 5th yr @5% or 0% (company 5%
others 0%)

RPGT payable XX
- RPGT loss relief b/f (if any) (XX)
- Net RPGT payable XX
RRGT EXEMPTION are available in the following
circumstances:

1. An individual will be given an exemption,

equal to RM10,000 or 10% of the chargeable
gain, whichever was greater. Prior to 2010, the
exemption was equal to RM5,000 or 10% of the
chargeable gain, whichever was greater.

2. An individual who is a Malaysian citizen or

permanent resident will be given a once-in-a-
lifetime exemption on any chargeable gain
arising from the disposal of his/her private
residence if he/she elects in writing for the
exemption to apply to that residence
3. The disposal of an asset as a result of
compulsory acquisition under any law

4. Transaction in which disposal price is deemed

equal to acquisition price i.e. no gain no loss
transaction – para 3 schedule 2 RPGT 1976;

a. Devolution of a deceased person’s assets to

his trustee or legatee
b. Transfer between spouse
c. Transfer of assets owned by;
i. an individual,
ii. his wife or
iii. by an individual jointly with his wife or
with a connected person to a company
controlled by ;
 c1. the individual
c2. his wife or
c3. the individual jointly with his wife or
connected person

for a consideration consisting substantial (more

than 75%) shares in that company

5. Gifts

Gifts between
i. husband and wife
ii. parents and child
iii. grandparents and grand child
provided the donor must be a citizen of
Malaysia
6. Transfer between companies

a. Transfers within the same group to bring

about greater efficiency and for a
consideration consisting substantial of
shares in the transferee company

b. Transfers between companies for the

purpose of reorganization, reconstruction
or amalgamation where the transferee
company is being restructured to comply
with the government policy on capital
participation in industry
 c. Asset distributed by liquidator under a
scheme of reorganization, reconstruction,
or amalgamation where the transferee
company is being restructured to comply
with the government’s policy on capital
participation in industry.

7. Disposal made after 5 years from the date of

acquisition by persons other than companies,
non citizen and non resident.
SUBMISSION OF RPGT FORM TO LHDN

1. Within 60 days after the date of disposal

2. Copy of stamped sale and purchase

3. agreement for the disposal and acquisition of

the asset

4. Copy of stamped transfer of securities form

(form32A) for the acquisition of RPC shares
and allotment of share form (form 24) for the
acquisition of RPC shares

5. Copy of title / memorandum of transfer (KTN

14A)
6. Receipts and invoice for expenses / incidental
costs

7. The acquirer is required to remit an amount

equivalent to 3% of the total consideration or
the whole sum of cash consideration,
whichever is less, within 60 days after the
disposal date to LHDN

8. If the disposal is not liable to RPGT, the

disposer may fill up the form CKHT3 so that
3% remittance need not be made.

9. Any payment after 60 days may attract a

penalty payable by the seller. The penalty is
10% of the amount payable as RPGT.