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Real Property Gain Tax (RPGT)

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Real Property Gain Tax (RPGT) is a tax imposed on the profit gained from the sale of property. Learn all about RPGT and its implications in our comprehensive guide

Buying and selling property is a major investment for many people, and it's important to understand the tax implications involved. Real Property Gain Tax (RPGT) is one such tax that comes into play when you sell a property in Malaysia. In this blog, we'll explain what RPGT is, how it works, and what you need to know to ensure you're paying the right amount of tax.

What is RPGT?

Real Property Gain Tax (RPGT) is a tax on the profit gained from the sale of a property in Malaysia. The tax is applied to any gain made on the sale of property, including land, buildings, and any fixtures attached to the property. RPGT is a form of capital gains tax, and it is calculated based on the difference between the purchase price and the sale price of the property.

How does RPGT work?

RPGT is calculated based on a sliding scale, which means that the tax rate increases as the profit on the sale increases. The tax rate is also affected by how long you've owned the property, with lower rates for properties held for longer periods of time.

For individuals, the RPGT rate starts at 30% for properties sold within the first 3 years of ownership. After 3 years, the rate drops to 20% for properties sold in the fourth year, 15% for properties sold in the fifth year, and no RPGT imposed for properties sold in the sixth year and beyond. It's important to note that RPGT only applies to gains made on the sale of property. If you sell a property at a loss, you won't be subject to RPGT.

When is RPGT payable?

RPGT is payable within 60 days of the sale of the property. The responsibility of paying RPGT falls on the seller, and failure to pay the tax can result in penalties and fines.

Are there any exemptions or reliefs available?

There are a few exemptions and reliefs available for RPGT in certain circumstances. For example, properties inherited from a deceased estate are exempt from RPGT. Additionally, properties sold between spouses or family members are also exempt from RPGT.

There are also reliefs available for properties sold under certain conditions, such as the disposal of low-cost houses, houses for disabled persons, and properties affected by natural disasters.

It's important to note that these exemptions and reliefs have specific criteria that must be met in order to qualify, so it's always best to consult with a tax professional to ensure you're eligible.

Real property gain tax in Malaysia

In Malaysia, RPGT is applicable to individuals, companies, and organizations that dispose of real property. However, there are some exemptions that apply to certain categories of individuals or property. For instance, if you are a Malaysian citizen and you sell your home, you are exempt from RPGT if you have owned the property for more than five years.

How is RPGT calculated?

RPGT is calculated based on the gains made from the sale of real property. The formula used to calculate RPGT is as follows:

RPGT = (Chargeable Gain x RPGT Rate) – Exemption Amount

Chargeable gain is the profit you make from selling your property, while the RPGT rate is determined by the government. The exemption amount is the amount of money that is exempt from RPGT. This amount varies depending on the type of property being sold and the length of ownership.

Here are some key things to note about RPGT in Malaysia:

  • RPGT rates vary depending on the length of ownership and the type of property being sold. For example, individuals who sell property that they have owned for less than three years are subject to a 30% RPGT rate.
  • RPGT is usually paid by the seller of the property, but it can also be paid by the buyer in some cases.
  • If you are a foreigner selling property in Malaysia, you are subject to a higher RPGT rate than Malaysian citizens.

In summary, RPGT is a tax on the gain or profit made from the sale of real property in Malaysia. It is applicable to individuals, companies, and organizations that dispose of real property. RPGT rates vary depending on the length of ownership and the type of property being sold. While RPGT can be a complex tax, understanding how it is calculated can help you prepare for any potential liabilities when selling your property.

So, what exactly is the RPGT tax rate in Malaysia? Well, it depends on a few factors such as the type of property being sold and the duration of ownership. Let's break it down.

For individuals who are Malaysian citizens or permanent residents, the RPGT tax rate is as follows:

  • 30% for properties sold within 3 years of acquisition
  • 20% for properties sold in the 4th year of acquisition
  • 15% for properties sold in the 5th year of acquisition
  • No RPGT is imposed for properties sold after 6 years of acquisition

It's important to note that there are a few exemptions to the RPGT tax. For instance, if the property being sold is the seller's only residential property, they are entitled to an exemption of up to RM10,000 or 10% of the chargeable gain, whichever is higher. Additionally, if the property is transferred between family members, there is no RPGT imposed.

It's also worth mentioning that the RPGT tax rate may change in the future as it is subject to revisions by the government. As such, it's important to stay updated on any changes to avoid any unexpected surprises during the property sale process.

In conclusion, understanding the RPGT tax rate in Malaysia is crucial for anyone looking to sell a property. While it may seem daunting at first, with a little research and guidance, navigating the RPGT tax can be a breeze. Remember to always seek professional advice from a tax expert to ensure that you are complying with all the necessary regulations.

Penalty for RPGT in Malaysia

If you're a property owner in Malaysia, it's important to understand the Real Property Gains Tax (RPGT) and the penalties you may face if you don't comply with the regulations. Here's a breakdown of what you need to know:

  • RPGT is a tax that's imposed on the gains you make from the sale of a property in Malaysia.
  • The rate of RPGT varies depending on various factors, such as the length of time you've owned the property and whether you're a Malaysian citizen or a foreigner.

 

What are the RPGT penalties?

  • Failure to pay RPGT on time can result in penalties and fines.
  • The penalties for late payment of RPGT are calculated based on the amount of tax owed and the number of months the payment is overdue.
  • The penalty rates are as follows:
    • 1% per month or part of the month for the first 6 months
    • 2% per month or part of the month for the 7th to the 12th month
    • 3% per month or part of the month for the 13th month onwards
  • In addition to the penalty fees, there may be additional fines and interest charged on late RPGT payments.
  • Failure to pay RPGT can also result in legal action being taken against you, which could lead to even higher penalties and fines.

 

What should you do to avoid RPGT penalties?

  • To avoid RPGT penalties, it's important to understand your obligations as a property owner and ensure that you comply with the regulations.
  • If you're unsure about how to calculate and pay RPGT, you may want to seek the advice of a qualified accountant or tax professional.
  • It's also important to keep accurate records of your property transactions and to file your RPGT returns on time.

Therefore, Understanding RPGT and the penalties for non-compliance is important for property owners in Malaysia. By following the regulations and seeking professional advice when needed, you can avoid penalties and ensure that you comply with the law. Remember, it's always better to be proactive than to face penalties and fines down the road.

Conclusion

Real Property Gain Tax (RPGT) is an important tax to consider when buying or selling property in Malaysia. Understanding how it works and when it's payable can help you avoid penalties and fines, and ensure you're paying the right amount of tax. If you're unsure about RPGT or any other taxes related to property transactions, it's always best to consult with a tax professional who can provide guidance and advice.

Also, check:

Avoid These Mistakes When Selling Your Home in Malaysia


 

Category: Taxes