By now, most of us have a broad picture of Belanjawan 2019, its highlights, and perhaps, have an opinion or two on who might be its victors and victims.
Personally, I am more interested in the property segment of the Budget as I am a property investor myself. From it, I have learnt the government is focusing on encouraging Rakyat who is in the low and middle income bracket and first-time homebuyers to purchase a property themselves. It is a positive move towards a higher home ownership rate among Malaysians in the future.
Among the measured announced, there is one, to me, that stood out the most. It is the imposition of 5% Real Property Gain Tax (RPGT) for gains received from disposal of properties after the fifth year of owning them. I believe, it impacts a lot more on long-term property investors over short-term speculators who gain from flipping properties. Ouch!
Regardless of what we think about it, good or bad, RPGT is now a concern to all property investors in Malaysia, myself included. I have downloaded the LHDN’s RPGT Guidelines and studied it. The document is only made available in Malay. No English translation is provided by LHDN at the point of writing.
In this article, I’ll summarize my findings from the RPGT Guideline. This writings would be confined to individual property investors who are either a citizen or a Permanent Resident (PR) of Malaysia. Therefore, here are 5 things you need to know about RPGT in Malaysia.
#1: What’s RPGT?
RPGT is a tax imposed on gains derived from disposal of properties in Malaysia. It includes both residential and commercial properties, estates, and empty plot of lands.
For example, if you bought an apartment for RM 250,000 and decided to sell it for RM 500,000, the profit of RM 250,000 is chargeable under RPGT. However, the formula to calculate your final amount of RPGT is not that straightforward. For a start, the formula is:
RPGT Payable = Net Chargeable Gain x RPGT Rate
#2: Rates of RPGT
The RPGT rates applicable is based on the number of years you own your piece of property. Previously, the RPGT rates are as followed:
Year | Below 3 | 4 | 5 | 6 and Beyond |
| RPGT Rate | 30% | 20% | 15% | 0% |
Starting on 1 January 2019, the RPGT rates would be revised to:
Year | Below 3 | 4 | 5 | 6 and Beyond |
| RPGT Rate | 30% | 20% | 15% | 5% |
#3: Chargeable Gain
Chargeable gain is calculated based on the formula:
Chargeable Gain = Final Sales Proceeds – Final Purchase Costs
Final Sales Proceeds:
Let us start with the final sales proceeds. It is calculated by deducting allowable selling costs of the property from the agreed selling price of the property itself. These costs include renovation costs, legal fees, real estate agent’s commission and advertising fees incurred to sell the property.
From the example above, you sold your apartment for RM 500,000. You paid a total of RM 10,000 in commission to your agent for selling the property. Hence, your final sales proceeds would be RM 490,000.
Final Purchase Costs:
Meanwhile, the final purchase costs of your property is calculated by adding up allowable purchasing costs of the property from the agreed buying price of the property itself. These costs include stamp duties, valuation fees, legal fees, and real estate agent’s commission in relations to the purchase of your property.
From above, you bought the apartment for RM 250,000. In total, you have paid a total of RM 10,000 in allowable costs for the purchase of your property. Thus, your final purchase costs would be RM 260,000.
Thus, your chargeable gain is RM 230,000 (RM 490,000 – RM 260,000).
#4: RPGT Exemptions
There are several RPGT exemptions available for us to take advantage of which include:
Exemption 1: Personal Residence
You are entitled for a RPGT exemption after disposing a residential property for once in your lifetime. Please use it wisely. It is advisable to utilize this once in a lifetime exemption on higher priced properties over lower priced properties to maximize your amount of tax savings.
If you decide to utilize it, you are not liable to pay RPGT on the chargeable gain of RM 230,000.
Exemption 2: RM 10,000 or 10% of Chargeable Gain
If you decide not to utilize the once in your lifetime RPGT exemption, then, you may utilize a RPGT exemption where the sum is higher of RM 10,000 or 10% of your chargeable gain.
In your case where the chargeable gain is RM 230,000, your RPGT exemption is RM 23,000 (10% of RM 23,000) as it is higher than RM 10,000. Hence, your net chargeable gain is RM 207,000 (RM 230,000 – RM 23,000).
Net Chargeable Gain
= Chargeable Gain – Higher of RM 10,000 or 10% of Chargeable Gain
Exemption 3: Transfer of Ownership as a Gift
This is applicable to property owners who intend to transfer ownership of their properties as a gift to their family members. It is confined to husband and wife, parents and children, and grandparents and grandchildren only.
#5: Allowable Losses
Allowance losses occurred when the final sales proceeds of a property is lower than the seller’s final purchase costs. According to the RPGT Guideline, a seller is allowed to deduct allowable losses if he disposes his property within 5 years after he purchased the property from his net chargeable gain.
For instance, if you have sold another property at a loss of RM 20,000, let’s say two years ago, you can offset the RM 20,000 in allowable loss against your net chargeable gain of RM 207,000. Thus, your final chargeable gain is RM 187,000 (RM 207,000 – RM 20,000).
Final Chargeable Gain
= Net Chargeable Gain – Allowable Losses (If any)
Conclusion:
Starting in 1 January 2019, RPGT would be a reality to all homeowners and real estate investors across Malaysia. I think, it is helpful for us to learn about RPGT and its implications to us as property owners. Thus, I would leave you with two materials which are helpful for you to get familiarised with RPGT.
Link:
79 replies to "5% Hike in Real Property Gain Tax (RPGT) in Malaysia 2019"
it is stated that RGPT is exempted for one residential property in your lifetime. i sold 2 residential properties about 15 years ago for less than 200k well before the exemption ruling came about. Now i want to sell a property for more than RM400k. Am I entitled for the RGPT exemption?
I think you can still utilise it once in your lifetime. Let your lawyer know.
if transfer from parents to children there is no rpgt how about children to parent transfer?
My late father bought a terrace link house some 50 years ago. I was told it was around RM18K. Years later, when I was like 11/12 yo, my father got a solicitor to transferred this said property to me 50% and my late mother 50%.
Some 7 years ago, my late mother transferred her portion to my siblings, sister 25% and brother 25%.
Now, we wanted to sell the said property.
In this almost 50 yo property, we still got rpgt to pay? How does this calculate?
20 yrs ago, my father bought a house under an Sdn Berhad, naming me the Director, with the intention to start a trading business, However, the Sdn Berhad Company has been
domain ( inactive ), my dad passed 10 years later.
After his death, the following 2 years, I continued paying the Accountant his monthly fees,
till the Accountant passed & the office was no longer operating.
I now am contemplating to sell the house – please advice my next cause of actions.
Hello, if the property i am buying at RM200,000 will the rpgt still applied of or when it hits RM 200,001? Please help
Does the RPGT exemption apply if joint owner ( husband & wife , both citizens ) ?
Thank you Sirs.
Hi Ian. Thanks for the informative article. If I sell a property below rm200k, within 2 years from the purchase SPA date. Do I need to pay 30% RPGT? Or it will be exempted because value under 200k?
What is the tax difference if an aged owner sells a property after 20 years ownership vs sell later by child who inherits this property but is no longer is citizen?
Hi, I bought an apartment 15 years ago for 500k renovations cost 200k , furnishing and fittings 100k. Total cost 800k. Selling at 1M. Will RPGT apply minus ALL expenses and differential sum to tax is 200k (1M – 800k) ?? Thank you for your time.
Hi Ian,
Is transfer fee can be calculated into Final Sales Proceed in order to deduct the RPGT?
What if the property is jointly owned by husband (non-Malaysian) and wife (Malaysian)?
If we are both non-resident, can the property be considered a PPOR?
eg. if we sell a double storey house at RM500,000 on after year 6, purchase cost price is RM250,000, after pay 5% x (250,000 gain )of RGPT =RM12,500 at year march 2019
Did a person still subjected or need to declare to personal Tax income on year 2010 of RM250,000 income of year 2019?
please advice?
Does the mortgage interest (house loan interest) can be reduce in RPGT?
Thank you very much for such a clear explanation and illustration.
My late father passed away in 2013, his children then transferred his estate to their names in 2014 according to his will . The children later sold this estate in early 2019.
Can we consider this as transfer of ownership as gift and get exemption for RPGT ?
If i acquired a property in 1999 at rm90,300 and sell.at rm280k in 2019. Am i subjected to rpgt. I was told that if your acquision price is below 200k you ecempted.
For “Final Purchase Costs” you wrote that both legal fees and stamp duties can be offset.
Are these applicable on just the SPA or also for the loan documentation ?
Thanks for your kind knowledge sharing.
How do I go about checking if I am entitle for the full tax exemption, as I simply can’t remember where I hv been selling several properties in past 35 years .
Am facing same problem as above, pls advise me how do I go for checking whether I am entitled for a RPGT exemption after disposing a residential property for once in your lifetime.
Question on 10K or 10% of Chargeable Gain Exemption:
1. is it applicable to the disposal of agricultural land?
2. disposal of property owned by a real property company?
3. same as case 2 but company is winding down, hence all shareholders will cash out.
In general, what are the rules for this exemption to be applicable?
Do I need to apply to the govt. for a once in a lifetime rpgt exemption or will the real property agent do it for me when I sell my only and first house?
It is handled by the lawyer who facilitate your Sales and Purchase agreement.
What about this link? http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20169%20-%20diluluskan%20TPPUU%2029_10_2015.pdf
is this outdated?
Also is there RPGT Tax exemption if the ownership is transferred amongst siblings?
Does the new RPGT take effect on properties bought after the new tax or does it also affect those properties bought under the old tax scheme?
It applies to properties purchase prior to 2019 new RPGT law
Hi. I sold my 15 years old house in 2013. Even though with profit but no RPGT because of the age of the house (> 5 years old). Now, I am planning to sell my another house soon. Do I still entitle to this “once in lifetime free RPGT” thingy? Thanks.
If you have never used the “once in a lifetime free RPGT”, I believe you can still use it.
Thank you.
Very informative and educative. Great effort.
I have a small question. for Exemption 2: RM 10,000 or 10% of Chargeable Gain, is this once in a lifetime exemption or is eligible for each transaction?
I believe it applies every time.
Hi ! May I know whether the cost of additional purchase of a car park which has a separate S&P for it , can be deducted from the gross chargeable gain ? Is it allowable ?
Not sure. Consult lawyer and tax consultant.
Thanks for your helpful article . I am a senior citizen who has just sold my property. The S&P was signed on last week of December but will be stamped only in 2019 partly due to the holidays . Will I be charged the 5% RPGT ?
I believe it follows the S&P date. If it is before 1 Jan 2019, it should follow the old law
I would like to know if transfer of the house from parent to children as a gift after 2018, does it incur RGPT? Thanks
gift has no RPGT
How much of RPGT need to be paid if the property is under names of a Malaysian and non-Malaysian?
Please check with lawyer. I think the non-Malaysian will need to pay RGPT for his/her portion of ownership.
What if the property in under name of a Malaysian and a non-citizen? How many percent of RPGT should be paid if the property is sold after 5 years ?
If sdn bhd signed spa n sell ind.lot (lease hold) in Dec2018. Completion date is in feb2019. Do i pay 5% or 10% for rpgt.
Hi Ian..i just sold my house and the SPA is dated on 17th Dec 2018
My house is individual title with consent
Is it true that property with consent tho d SPA is dated this year rpgt is applicable?
Not sure though. Please check with lawyer
The new RPGT hike, will it affect the REIT’s industry?
Not much effect on REIT since they don’t trade properties frequently.
Hi, thanks for the good explanation and illustration. Can you also explain in the case of inherited properties sold within and beyond 5 years? What are the conditions and RPGT rate and calculation? Are there any exemption?
Well done Ian on your blog site.
Since we are nearing the end of 2018, will LHDN take the signing date of SPA or stamping date to enforce the new RPGT rates.
My question:-
1) Does it mean if I sell my property in 2019, I need to pay 5% RGPT eventhough its more than 5 years?
2) Will I be exempted from RGPT becoz this is disposal of one residential property once in a lifetime?
1) Yes! U have to pay 5 % starting from 2019 no matter how many years your property is !
2) One in a life time , if you use it , you don’t need to pay any money to tax dept .
But pls use it wisely !
Hi Simon, first and foremost, I’m not a lawyer. As for the once-in-a-lifetime exemption, I am quoting from Page 23 of the Garis Panduan Cukai Keuntungan Harta Tanah. Please refer to Note 10.2 (a). Please enlighten all if I have, in anyway, misquote or written the article above in a misleading way. Thanks. Ian.
My lawyer just told me that the once in a lifetime exemption is not in the RGPT Act schedule of exemptions. His legal assistant also checked with the local (Ipoh) LHDN officers and none can confirm the once in lifetime exemption. Please can you give me the legal provision for this lifetime exemption?
Question on RGPT. My mum left an old bungalow in PJ for me and siblings and I am administrator. We plan to sell the house. The profit should be around RM2m or as the house was bought over 20 years ago. Is it still possible to claim exemption for RM230,000 for my mum who is not around to make the claim ??
Thanks
My father has 1 pc of plantation land (20 acres) which more than 35 years. last time he bought only RM10K per acre so the total value is RM200K
If he dispose RM130k acre in 2019. The RPGT is 5% of RM2.6 million for 20 acres?
Seek for your advise
Yes . it taxed you all the way to your father’s acquisition date more than 35 years ago.. Very painful and unfair.
Tell LGE the finance minister who implemented the policy.
Market value at 01_01_2000 would apply
One question, my father passed away without and will. The house is under his name and my uncle. Now I am the administrator of the house, with my uncle’s name in it 50-50 sharing. LA already obtained from the court. We just sold the house but my name haven’t transfer yet. My uncle’s name in it is more than 10 years but I as a administrator only 3 years plus. In this case what is the percentages of the gain tax I have to pay?
Another question…Are Soho units entitled to the once in @ lifetime RPGT exemption coz it’s under commercial but can be used as residence as well. Thank you
Hi The Final purchase cost can add in renovation cost or not? like expenses to do the plaster ceiling, kitchen cabinets?
I believe the answer is yes.
RPGT is exempted for properties of price below RM200k. Is this referring to the Purchased Price (then) or the Selling Price (now)?
If I have a property under joint name & also a property under my own name. If I sell the property under joint name, the two joint names are eligible for once a lifetime exemption right? But if I choose to sell the one under my own name , is the joint owner entitled to her exemption & I am not?
I believe, she is entitled and you may not be. Best to check with your tax advisor. 🙂 Ian.
Thank you for your reply
Thanks for the article, is helpful!
How do you think the 5% RPGT will really affect the property market in 2019? Will prices go even higher as sellers would try to price in the 5%, or it will drive rental market more
I think, the impact of RPGT would be temporary until all of us get used to it. In the short run, it may discourage people from selling their property and encourage people to hold onto them. Ian.
It follows the SPA date, Ian.
I’m selling off my 6 year old property now whereby the SPA is dated Nov, 2018. The completion date is in Feb 2019, am I still be liable for 5%?
Hi, can we reduce the chargeable gain with the bank interest that we had paid? Interest paid is also part of the cost.
Hi Thian, the answer, I believe, is nope. Bank interest is not included as an expense that can be used to deduct chargeable gain of disposal of a property. Regards, Ian.
This impacts property sold after 1/1/2019. But what if, I’m in process of selling 8 year old property now where SPA is dated 2018. In instance that entire process only completes in Jan 2019, am I still be liable for 5%?
It follows the SPA date
Thank you for such a comprehensive article!
I’m guessing a lot of property investors will try to sell off their 6+ years by year end then before RPGT kicks in.
Thank you for your sharing in RPGT. Can i say that if i sell my property in the 6th year, my tax payable is not needed. This is because RPGT is 5% of chargeable gain but I also entitle for an exemption of higher of 10k or 10% of my chargeable gain. The exemption of 10% is still higher than 5% tax?
Hi Jane … Thanks for the feedback. Sorry to disappoint. The answer is only not needed if you choose to use your once-in-your-lifetime exemption on the property. However, if you choose not to, then, the computation is: (1) calculate your net chargeable gain, let’s say RM 200,000. (2) deduct 10% from it, let’s say RM 20,000. As RM 20,000 is higher, so we use RM 20,000. Thus, your final chargeable gain is RM 180,000 (3) If you sell your property on the 6th year onwards, the RPGT applicable is 5% of RM 180,000 which is RM 9,000. Regards, Ian.
Hi, my mom bought a property in year 1994. On 1/1/2013, she transferred the property to me. Therefore, there is no SPA involved. I’m planning to sell off the property in year 2019. With the new RGPT rate of 5%, how is LHDN will be calculating my Purchase Cost?
Thanks for the sharing and effort Ian! Appreciate that.
I got a question, does this 5% RPGT only take effect for those who purchase or invest property starting from 2019? What about those that who purchased or invested before 2019. Does this RPGT comes into effect?
Thanks Alex. I believe it applies to anyone regardless of when you purchased your property, before or after 2019. Ian.
It’s quite painful, if I’m selling a 10 yrs old landed property at 800k which I bought it at 400k. The tax gain on 400k x 5% = rm20,000. ?
Yes its very painful. Thats why we need to change this blood sucking government. They dont deserve my vote.