TAX517
TOPIC 6
REAL PROPERTY GAIN TAXES
AND REAL PROPERTY
COMPANY
LEARNING
OUTCOME
Ability to:
• Compute Real Property Gain Tax (RPGT) for
individual.
• Identify the situations for No Gain No Loss
• Compute the RPGT for disposal of shares of Real
Property Company (RPC)
RPGT
RIMBERIO CO
EXEMPTION FROM RPGT
A) NO GAIN NO LOSS (DP=AP)
In a transaction where the disposal price is deemed to be equal to the acquisition price,
there is no chargeable gain or allowable loss to the disposer. Among the transactions
are:
SITUATION 1 (Para 12 Sch 2)
Transfer of real property or gift among : - parents and child, (PC)
- grandparent and grandchildren, (GG)
- husband and wife.
IMPLICATIONS TO DONOR (disposer):
• No Gain No Loss situation (NGNL)
• Disposal price deemed equal to acquisition price
• Not liable to any RPGT
IMPLICATIONS TO BENEFICIARY (acquirer):
• Deemed to have acquired the real property at the acquisition price paid by the donor
plus all improvement and permitted expenses incurred by donor on the real
property.
BUDGET 2017 (EFFECTIVE 1.1.2017) –
AMENDMENT TO PARA 12 SCH 2
• At the point of transfer wef 1.1.2019, NGNL situation would
= No Gain No Loss be extended to all holding period (not
• At the point of disposal longer resticted to period < 5 years)
= subject to RPGT
Refer to Example 36.9
(pg 681)
A) NO GAIN NO LOSS (DP=AP)
SITUATION 2 (Para 3(a) Sch 2)
Devolution of assets from a deceased person to executor or beneficiaries (transfer to
beneficiaries)
• On his executor or legatee under a will or to his trustee of the trust created under
a will
• For the legatee receiving RP under the will – deemed to have acquired the RP at
the date of transfer of the RP from the executor
• DP = AP
• AP (executor) = MV (Date of death) – Capital Receipts
• AP (beneficiaries) = MV (Date of transfer) – Capital Receipts
• Legatee received RP in lieu of money legacy - deemed to have acquired the RP at
the date of transfer of the RP from the executor. AP will be MV(date of transfer) or
money legacy (w.i.l)
Refer to Example 36.14 (pg 690)
A) NO GAIN NO LOSS (DP=AP)
SITUATION 3 (Para 3(b) Sch 2)
Individual transfers real property :
• between spouses
• transfer of asset owned by individual (connected person) to a controlled company for
a consideration of at least 75% of shares issued by the company and the balance in
money payment (25%)
Connected person (para 23 Sch 2) - A person is connected with an individual if that
person is the individual’s husband or wife or is a relative (child, brother or sister) (or the
husband or wife of a relative) of the individual or of the individual’s husband or wife
Family Controlled company – controlled by the individual (or by his wife or his relatives or
jointly-connected person) & must be Malaysian citizen
A) NO GAIN NO LOSS (DP=AP)
SITUATION 3 (Para 3(b) Sch 2)
However, the disposal of shares is subjected to RPGT (para 3(b) shares is a chargeable
asset under para 34 sch 2:
• AP of Real Property by controlled company
AP (R/Property) = AP (Transferor) + PE (Transferor)
2. AP of share by individual
AP (Share) = AP(real property) + PE (real property)
– cash received from controlled company
(*existing shares are not chargeable assets)
Apportionment of disposal price:
para 3(b) shares/Total shares held in controlled company x disposal price
Refer to Example 36.10 (pg 683)
B) PRIVATE RESIDENCE EXEMPTION
• RPGT exemption on disposal of ONE residential property.
• Known as “once in a life time” exemption and must be exercised during
submission of return to IRB
• Conditions must be fulfilled:
⚬ Individual is a Malaysian citizen/permanent resident of Malaysia
⚬ Real property must be a residential property or part is used for
residence
⚬ Residential building is occupied/rented/fit for occupation
⚬ Disposer not elected for the exemption prior to this exemption: only
available once in a life time
• W.e.f 1.10.2005, both husband and wife can have a claim of private
residence exemption individually Refer to Example 36.12
• The taxpayer has to apply for a declaration form for RPGT exemption (pg 686)
under sec 8 of RPGTA 1976
C) SCH 4 EXEMPTION
C) SCH 4 EXEMPTION (PART DISPOSAL)
Sch 4 exemption also applicable to part disposal of land:
A x C
B
Where A is part of area chargeable assetdisposed)
B is total area of chargeable asset
C is RM10,000 or 10% of chargeable gain (w.i.h)
wef 31.12.2015, the component C is redefined to mean RM10,000
The amended Sch 4 exemption now would be; Refer to Example 36.6
a). A x C (RM10,000) or (pg 676)
B
b). 10% of chargeable gain
Whichever is higher
RIMBERIO CO
THANK YOU
