Real Property Gains Tax in Malaysia – How is it calculated?
Last week, SaveMoney.my explained the basics of Real Property Gains Tax in Malaysia. This week we’ll cover how to calculate what you have to pay.
How is RPGT calculated?
The bad news is that if you are disposing of a property at a significant gain, you are likely to be taxed for it. But here is the good news; you will only be taxed on your net capital gains as opposed to the gross capital gain. Gross capital gains are calculated simply by subtracting the purchase price from the selling price.
As we have previously mentioned, you are allowed to subtract certain expenses from your gross capital gain to calculate the net capital gain, including legal and administrative fees, real estate fees, and maintenance or upgrading expenditures. The maximum allowable deduction here is the larger of RM10,000 or 10% of the capital gain.
Generally, the dates which are used to determine the RPGT tax rates are dependent on the date when the property was acquired and date when property was disposed of; i.e. the dates of the respective Sale and Purchase Agreements. The same applies for properties under construction, i.e. the purchase date is determined as the date on the Sale and Purchase Agreement, when you agreed to buy the property and not the property completion date.
On 1 January 2012, the government introduced a tax incentive which essentially states:
1) If you sell off your property in 2 years or less and make a net capital gain, you will be taxed at 10%.
2) If you sell off your property in 3 – 5 years following the purchase, you will be taxed at 5%; and
3) No tax will be incurred if you sell off your property after the 5th year.
So SaveMoney.my’s advice is: if you want to save money by not having to pay RPGT, all you have to do is sell your property after the 5th year!
Since September 2012, RPGT rates changed in the Budget 2013 announcement. Supposedly to curb property speculation, RPGT has been increased to 15% for properties disposed within 2 years of purchase and 10% for properties sold between 2-5 years of purchase. The 0% RPGT for properties older than 5 years was maintained.
Below is a table showing the evolution of the RPGT rates in Malaysia, the relevant tax brackets for each time period (take your net capital gain and multiply it with the corresponding tax percentage subject to the property holding period):
*Hann Liew is the Founder and Editor-in-Chief of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.
