This document provides an overview of Real Property Gains Tax (RPGT) in Malaysia. Some key points: - RPGT is a tax on capital gains from the disposal of real property in Malaysia, including residential/commercial properties and land. The tax is computed based on the difference between the disposal price and acquisition price. - RPGT rates range from 0-10% depending on the holding period, with longer holding periods subject to lower rates. - Various exemptions are available, including for gains below RM10,000 and disposal of a private residence. - The acquisition date generally coincides with the disposal date between parties. Losses can be carried forward indefinitely except for shares in real property companies.

1. 4.0 REAL PROPERTY GAIN TAX
By the end of the lesson, student should be able:
4.1 Understand the meaning of RPGT
4.2 Understand chargeability of RPGT
4.3 Understand the treatment of gift
4.4 Explain date of disposal and date of acquisition

2. What is RPGT?
RPGT is a tax on capital gains imposed on
the disposal of a chargeable asset and this
includes real property. It is governed by
the Real Property Gains Tax Act 1976.

3. • The Real Property Gain Tax (exemption) Order
2007 exempted all persons from the
provisions of RPGT Act 1976 with regards to
any disposal of chargeable assets from 1 April
2007 to 31 December 2009.
• Real Property Gains Tax (RPGT) was
reintroduced effective 1 January 2010 after a
lapse of 2 years and 9 months.

4. Who is covered?
• It applies to both tax resident and non-
resident persons who transact in real property
situated in Malaysia and shares in real
property companies.
• Person includes a company, a partnership, a
body of person and corporation sole.

5. What is real property?
• It is land situated in Malaysia or any interest,
option or right in or such land situated in
Malaysia.

6. What is the definition of land?
• Section 2 of RPGTA defines land as:
i. The surface of the earth all substances
forming that surface.
ii. The earth below the surface and substances
therein.
iii. Building on land and anything attached to
land or permanently fastened to anything
attached to land.

7. iv. Standing timber, trees, crops and vegetarian
grown on land.
v. Land covered with water.

8. The real property include:
• Any landed property in Malaysia such as
residential properties (apartments,
condominium and houses), commercial
properties (factories, office buildings, shop
houses) and land.

9. How is RPGT computed?
• In simple terms, RPGT is computed on the
capital gains on the disposal of a chargeable
asset, that is, the differential between the
disposal price and the acquisition price of the
real property.
(Disposal price – Acquisition price) x RPGT rate = RPGT

10. How is the disposal price determined?
• Disposal Price (Paragraph 5 schedule 2):
Amount of sale consideration in money or
money’s worth.
LESS:
i. The amount of any expenditure wholly and
exclusively incurred on the asset at any time
after its acquisition for the purpose of
enhancing or preserving the value of the
asset.

11. ii. The amount of any expenditure wholly and
exclusively incurred on the asset at any time
after its acquisition in establishing,
preserving or defending the owner’s title to,
or a right over the asset.
iii. The incidental costs to the person of making
the disposal of the chargeable asset.

12. • Incidental cost (Paragraph 6(1) & (2) schedule
2 consist of:
i. Fees, commission or remuneration paid for
the professional services of any surveyor,
valuer, accountant, agent or legal adviser.
ii. Cost of transfer. Eg: stamp duty.
iii. Cost of advertising to find a buyer.

13. CALCULATION FOR DISPOSAL PRICE
RM
Consideration received xx
Less: Permitted expenses:
Enhancement cost (x)
Legal fess in defending
title
(x)
Less: Incidental cost:
Commission (x)
Legal fees (x)
Advertisement (x)
Disposal price xx

14. Permitted expenses refer to any expenses
incurred wholly and exclusively on the asset
after its acquisition for the purpose of enhancing
or preserving its value and expenses incurred in
established and defending title or right over the
asset.

15. Melly Sdn Bhd disposed of an asset in 2010 for
consideration of RM1 million. The disposal price
is arrived as follows:
RM RM
Consideration received 1,000,000
Deduct:
Cost of renovation 200,000
Legal expenses 30,000
Incidental expenses 10,000 (240,000)
Disposal price 760,000

16. Exercise 1:
Winner Sdn Bhd disposed of an asset in 2011
for a consideration of RM850,000. The company
incurred expenses as follows:
Alteration and extensions RM85,000
Legal expenses for protection RM25,000
of title of asset
Incidental expenses RM 6,000
Quit rent and assessment year RM 2,500
2010 & 2011

17. Answer:
RM RM
Consideration received 850,000
Deduct:
Alteration & extension 85,000
Legal expenses 25,000
Incidental expenses 6,000 (116,000)
Disposal price 734,000

18. How is the acquisition price determined?
Acquisition price (Paragraph 4 Schedule 2)
Acquisition of an asset is the purchase
consideration plus any incidental costs (or
permitted expenses) which include:
i. Fees, commission or remuneration paid for the
professional services of any surveyor, valuer,
accountant, agent, architect or legal adviser

19. ii. Cost of transfer (eg: stamp duty)
iii. Other incidental costs (example advertising cost
to find a seller)
iv. Interest paid on capital employed to acquire the
asset where a claim for such an expenses has not
been made under the ITA

20. From 1 January 2010, the interest paid to finance
the acquisition of a chargeable asset will no longer
be regarded as an incidental cost to the acquisition
price of chargeable asset.

21. In addition, the following may be deducted in
arriving at the acquisition price:
i. Compensation for damages, injury, destruction,
risk of depreciation
ii. Receipt under a policy of insurance for damages
to the property
iii. Deposit forfeited in respect of the property

22. CALCULATION FOR ACQUISITION PRICE
RM
Consideration paid xx
Plus: Incidental costs:
Interest(applicable only prior to 1
January 2010
x
Stamp duty x
Legal fees and professional fess x
Advertisement x
Commission x
Less: Recoveries:
Insurance compensation (x)
Compensation for damages (x)
Deposit forfeited (x)
Acquisition price xx

23. Example 2:
Biji Saga Sdn Bhd acquired an asset in 2010 for a
consideration of RM6,000,000. The acquisition
price, taking into consideration incidental costs and
deductions, is computed as follows:

24. RM RM
Consideration paid 6,000,000
Add:
Incidental costs 24,000
Professional fee 108,000
6,132,000
Deduct : Capital receipt
Compensation damages 72,500
Insurance 143,000
Deposit forfeited 300,000 (515,500)
Acquisition price 5,616,500

25. Exercise 2:
Pn Hartini bought the terrace house for RM450,000
at Bandar Baru Bangi. Payment was paid on
20 August 2009. The house was transferred to her on
10 February 2010. Purchase of agreement made on
1 October 2010. Other cost incurred by Pn Hartini
were as follows:

26. Stamp duty 4,500
Legal fees 20,000
Cost of extension 60,000
On January 2010 Pn Hartini received RM40,600 from
developer as compensation for damages and
received RM10,200 from insurance company for that
damages. On September 2012, Pn Hartini received
RM5,000 from an intended buyer who called off
deal, thus forfeiting her deposit.

27. Answer:
RM RM
Consideration paid 450,000
Add:
Legal fees 20,000
Stamp duty 4,500
474,500
Deduct : Capital receipt
Compensation for damages 40,600
Insurance 10,200
Deposits forfeited 5,000 (55,800)
Acquisition price 418,700

28. How is the RPGT rate determined?
The rate of tax on RPGT is based on the holding
period of the chargeable asset.
The rate ranges from 30 per cent down to 5 per
cent. There is an in-built exemption mechanism in
the legislation which effectively brings the rate
down to 5 per cent for all current disposal
chargeable to RPGT.

29. Effective from 1 January 2012, gains from the
disposal of residential and commercial properties
are taxed between 0% and 10% depending on the
holding period of real properties as follows:
Holding Period RPGT Rates
Companies Individual
(Citizen & PR)
Individual(No
n-Citizen)
Up to 2 years 10% 10% 10%
Exceeding 2 until 5
years
5% 5% 5%
Exceeding 5 years 0% 0% 0%

30. RPGT Rates as per the RPGTA since the year 1995
has been as follows :
Disposal in the 1st year 30%
Disposal in the 2nd year 30%
Disposal in the 3rd year 20%
Disposal in the 4rd year 15%
Disposal in the 5th year 5%
Disposal in the 6th year and beyond 0%

31. Evolution of RPGT
A tax on property was introduced in 1974 under
the Land Speculation Tax Act. This was
subsequently replaced with the Real Property
Gains Tax Act in November 1975. Although in
existence since the mid-70s, the Government
pro-actively adjusted the rates of the RPGT through
the years to cater to the property market
conditions.

32. It’s natural for the most people to react to the
reintroduction of RPGT, having enjoyed full
exemption for a few years previously, however,
compared to the original rates of RPGT which
range up to 30%, the recent hike of up to 10% is
actually quite mild.

33. Exemption from RPGT
RPGT exemptions currently available are as
follows:
-Gain in respect of any disposal of a chargeable
asset from 1 April 2007 until 31 December 2009.
-Gain in respect of any disposal of a chargeable
asset on or after 1 January 2010 where the
disposal is made after 5 years from the date of
the acquisition of the chargeable asset;

34. RM10,000 or 10% of the chargeable gain,
whichever is greater accruing to an individual
in respect of a disposal of a chargeable asset;
- Gain accruing to an individual who is a
citizen or permanent resident of Malaysia in
respect of the disposal of one private
residence;

35. - Gain accruing to a wife who is a citizen or
permanent resident of Malaysia but whose
husband is neither a citizen nor a permanent
resident, in respect of the disposal of one
private residence owned by the wife; and
- Gain accruing to the Government, State
Government or a local authority.

36. How to determine the acquisition date?
Generally, the acquisition date of the acquirer
coincides with the disposal date of the
disposer.

37. When is the disposal date?
Disposal date is the date of the agreement for
disposal of the asset. Where there is no
agreement, disposal date is the date of
completion of the disposal, i.e. the earlier of:
• Date of transfer of ownership of the asset by
the disposer, or
• Date when the whole amount of consideration
is received by the disposer

38. Treatment of losses on disposal
Unutilized losses can be carried forward
indefinitely except losses arising from the
disposal of shares in a real property company.

39. Transactions in which the disposal price is
deemed equal to acquisition price (i.e. “No
gain no loss” transaction) – per Para 3 Sch 2 of
the RPGT Act 1976:
a) Devolution of a deceased person’s assets
to his trustee or legatee.
b) Transfer between spouses.

40. c) Transfer of assets owned by an individual, his wife
or by an individual jointly with his wife or with a
connected person to a company controlled by the
individual, his wife or by an individual jointly with his
wife or with a connected person, for a consideration
consisting substantially (more than 75%) of shares in
that company.
d) Transfer between an individual and a nominee who
has no vested interest in the assets.

41. e) Transfer by way of security in or over an
asset.
f) Gift to the Government, local authority or
charity exempt from income tax.
g) Disposal due to compulsory acquisition.
h) Disposal of chargeable assets pursuant to
an approved financing scheme which is in
accordance with Syariah principle, where such
disposal will not be required for conventional
financing schemes.

42. Gifts – per Sch Para 12 of the RPGT Act 1976
Gifts between husband and wife, parent and
child or grandparent and grandchild are
deemed to be “No gain no loss” transaction.

43. Example:
Mr Tan transferred a house to his daughter
Susan on 25 Feb 2008 when its market price
was RM650,000. The incidental costs for the
transferred amounted to RM5,000 the house
was acquired by Mr Tan on 1 Mac 2004 for
RM300,000.

44. Answer:
Disposal price by Mr Tan is
deemed (300,000 + 5,000) 305,000
Less: acquisition price +
incidental expenses
(300,000 + 5,000) (305,000)
Chargeable gain NIL
Susan’s acquisition price is RM305,000. This
sum is the disposal price of Mr Tan.

45. Where the asset is acquired as a gift on
death, the recipient is deemed to acquire the
asset at its market value as at the date of
transfer or ownership of the asset to the
recipient.

46. Private residence exemption
Malaysian citizens or permanent resident
individuals are given RPGT exemption on
disposal of one residential property. This is a
“once in a life time” exemption and must be
fulfilled in order to get the exemption:
1) Individual must be a citizen or permanent
resident of Malaysia.

47. 2) Real property must be a residential
property or part of the building is used for
residence (eg : shophouse)
3) Residential building is occupied or rented
or fit for occupation
4) Residential property is owned by such
individual or spouse of the individual; or
5) Disposer had not elected for the
exemption prior to this as the exemption is
only available once in a lifetime.

48. EXERCISE:
On 12 Mac 2009, Tiffany signed a sale and
purchase agreement to acquire a piece of land
for RM250,000. She made full payment of the
purchase price on 10 June 2009 and took
possession of the land on 11 June 2009, the
title to the land was transferred to her on 10
September 2009.

49. She then set up an organic farm on this piece
of land. Her expenditure was as follows:
Stamp duty 4,000
Legal fees on acquisition 1,980
Drainage and irrigation system 13,500
Farm building 22,800
Fencing 5,600
Legal fees to defend his title to 27,000
the land

50. On 8 February 2011, she disposed of the
organic farm for RM677,000. Her expenditure
on disposal was as follows:
Real estate agent’s fees 16,500
Advertisement for sale 2,500
Valuation fees 1,000
Tiffany informed you that she has a RPGT loss
relief brought forward from 31 Mac 2007
amounting to RM4,945

51. You are required to compute the RPGT liability
of Tiffany in respect of the disposal of organic
farm.