There are many properties available for sale in Malaysia. Whether or not it is for investment purpose or own stay purpose, it is essential to check on your financial eligibility. You can use a house loan calculator to check if you can afford to buy a house, or another house by showing you the estimate monthly house loan repayment. If you are a property investor, it is essential for you to know what the Real Property Gain Tax (RPGT) is. This article will guide you through what you need to know about RPGT.
What is RPGT
First of all, real property gain tax is also known as Real Property Gains Tax (RPGT). It is charged on gains from the disposal or sale of real properties or shares in Real Property Companies. RPGT can be understood as capital gains tax levied by Inland Revenue. RPGT is a tax imposed from the disposal of properties in Malaysia.
This includes to both commercial properties and residential properties, estates, and empty lands. The RPGT can be classified into 3 categories, namely: (i) individuals (citizens & permanent residents); (ii) individuals (non-citizens or foreigners); and (iii) companies. The new RPGT rates effective 1 January 2019 are as follows:
| RPGT rates | Individuals (citizens & permanent residents) | Individuals (non-citizens or foreigners) | Comp-anies |
| 1st year | 30% | 30% | 30% |
| 2nd year | 30% | 30% | 30% |
| 3rd year | 30% | 30% | 30% |
| 4th year | 20% | 30% | 20% |
| 5th year | 15% | 30% | 15% |
| 6th year & beyond | 5% | 10% | 10% |
RPGT rates
The formula to calculate the amount of RPGT is:
RPGT payable = Net chargeable gain x RPGT rate
The RPGT rates are based on the number of years you have owned your property. The RPGT rates have made some changes.
Previously:
| Year | RPGT rate |
| Below 3 | 30% |
| 4 | 20% |
| 5 | 15% |
| 6 and beyond | 0% |
Effective 1 January 2019:
| Year | RPGT rate |
| Below 3 | 30% |
| 4 | 20% |
| 5 | 15% |
| 6 and beyond | 5% |
Chargeable Gain
The chargeable gain can be calculated based on this formula:
Chargeable gain = Final sales proceeds – final purchase costs
The final sales proceeds are calculated by deducting the allowable selling costs of property from the agreed selling price of property. The costs include: renovation and incidental costs, such as stamp duty, legal fees, advertisement fees, real estate agent’s commission.
As for the final purchase costs, it is calculated by adding up all the allowable purchasing costs of property from the agreed purchasing price of property. The costs include: valuation fees, legal fees, stamp duties and real estate agent’s commissions.
RPGT Exemptions
personal residence
You will be entitled for a RPGT exemption after you disposed a residential property for once in your lifetime. Therefore, it is advisable to fully utilize the once in a lifetime exemption for higher priced property instead of lower priced property to fully maximise your total amount of tax savings.
10% of chargeable gain or RM10,000.00
If you have decided not to use your once in a lifetime RPGT exemption, you may then use an RPGT exemption where the sum is more than RM10,000.00, or 10% of the chargeable gain.
For example, if the chrgeable gain for your property is RM250,000.00, the RPGT exemption will be RM25,000.00 (10% of RM250,000.00), where it is higher than RM10,000.00. Therefore, the net chargeable gain will be RM225,000.00 (RM250,000.00 – RM25,000.00) instead.
Transfer of ownership as gift
This will only be applicable to property owners who wish to transfer the ownership of their properties as gift to the members of their family, where it is only applicable to husband and wife, children and parents, grandchildren and grandparents only.
Allowable Losses
According the RPGT guideline, the seller is allowed to minus allowable losses if he or she disposes the property within five years after he or she purchased the property from the net chargeable gain. Allowance losses refer to when the property’s final sales proceeds is lower than the final purchase costs.
For example, if you sold a property with a loss of RM20,000.00 2 years ago, you are allowed to offset RM20,000.00 in the allowable loss against the net chargeable gain of RM225,000.00. Therefore, the final chargable gain will be RM205.000.00 (RM225,000.00 – RM20,000.00).
The final chargeable gain can be calculated based on this formula:
Final chargeable gain = Net chargeable gain – allowable losses
In conclusion, the imposement of RPGT has its own pros and cons, with lesser impact on genuine buyers as compared to property investors. It is entirely up to you to decide whether it has more pros than cons or vice versa. Real estate investors and homeowners across Malaysia should learn more about RPGT and its implications to property owners before deciding whether to buy and sell a house.
Does the RPGT also apply to MM2H applicants