What is Real Property Gain Tax (RPGT) Malaysia?
Real Property Gain Tax (RPGT) is a form of Capital Gain Tax in Malaysia levied by the Inland Revenue (LHDN), that homeowners and businesses have to pay when disposing of their property in Malaysia. Means that if one day you decide to sell your house, you have to pay taxes on the profit (gains) if you have any. Take note: tax is on the profit where the resale price is higher than the purchase price, NOT property transacted price!
If you sell your house with loss you don't have to pay any RPGT because you are not making any profit, else if you made profit you need to make sure you pay the RPGT within 60 days of the sale.
RPGT is classified into 3 tiers:
Individuals (Citizens & Permanent Residents)
Individuals (Non-Citizens/Foreigners)
Companies
Following is the RPGT rates effective from January 2022:
Disposal | Citizens / PR | Non-Citizens | Companies |
From 1st to 3rd Year | 30% | 30% | 30% |
On 4th Year | 20% | 30% | 20% |
On 5th Year | 15% | 30% | 15% |
6th Year and Beyond | 0% | 10% | 10% |
How to calculate RPGT, and how does it impact you?
You will be only taxed on the POSITIVE net capital gains, where disposal price deduct purchased price, deduct the miscellaneous charges such as stamp duty, legal fees, advertisement charges, real estate agency fees, etc.
Additionally, a waiver on the taxable amount is granted ONLY to Individuals. The holding period is from the date on the Sales And Purchase Agreement (SPA) until the disposal date.
For quick calculation, the formula is as follow:
Chargeable Gain = Disposal Price - Purchased Price - Miscellaneous Costs
Net Chargeable Gain = Chargeable Gain - Exemption Waiver (RM10,000 or 10% of Chargeable Gain, whichever is higher)
Tax payable = RPGT Rate (based on holding period) * Net Chargeable Gain
Real world scenario:
If you had purchased a house 5 years ago at RM500,000, and you are selling it now. The market value of the house is now RM700,000. To calculate the Chargeable Gain, deduct the price RM700,000 by the original purchase price RM500,000 and any miscellaneous cost. Let's say miscellaneous cost for this scenario is RM10,000 from lawyer fees. So the calculation goes as follows:
Chargeable Gain = Disposal Price - Purchased Price - Miscellaneous Costs
= RM700,000 - RM500,000 - RM10,000
= RM190,000
Next, let's find out how much would be the Net Chargeable Gain.
Net Chargeable Gain = Chargeable Gain - Exemption Waiver (RM10,000 or 10% of Chargeable Gain, whichever is higher)
= RM190,000 - RM190,000 x 10%)
=RM171,000
Tax Payable = Net Chargeable Gain x RPGT Rate (based on holding period)
= RM171,000 x 5%
= RM8,550
For this scenario, if you owned this house for 5 years, you'll need to pay an RPGT of 5% over the net chargeable gain. So instead of getting profit RM200,000, you are actually earning RM191,450 by disposing this house.
Allowable Miscellaneous Cost / Expenses for RPGT 2022
Any incidental costs incurred in disposing of the property can be deducted from chargeable gain to calculate RPGT:
Legal fees, accounting fees, surveyor's fees, etc.
Real estate agency fees (sales commission)
Administrative fees
Repair or renovation to maintain or upgrade the property (with original official receipt from supplier)
Cost of preserving or defending one's title to, or to a right over the asset
Cost of advertising to make the disposal
Allowable Loss for RPGT 2022
If you are disposing more than one house in the assessment year, any loss incurred from a single transaction can be offset against another transaction, which generates a chargeable gain, as long as both the transactions fall under the same assessment year.
For example:
House A is losing (-RM50,000); while House B is gaining RM100,000. Loss from disposing of House A can be offset against gain from disposing of House B, hence Chargeable Gain for House B is RM50,000 instead of RM100,000.
RPGT base year amendment to 2013
During Budget 2020, an RPGT amendment was made to provide some relief to house sellers - the calculation of property gain tax of units purchased before year 2013, the Government will use the market price on 1st January 2013 as the initial point of valuation. Previously, the base year was set at 1 January 2000. As RPGT is charged on the profit made from the sale, a later base rate would mean a lower calculated profit, thus reducing the property seller's tax burden.
Exemptions
RPGT 2022 Exemptions
Under Budget 2022, Finance Minister announced that the Government will no longer impose RPGT for property disposals by individuals comprising Malaysian Citizens and PR starting from the sixth year, effective from 1 January 2022.
When to pay RPGT in Malaysia?
For locals and PR who sell off property, their lawyers will retain 3% of the property's selling price / disposal price when the purchaser pays the first deposit to buy the property for the purpose of RPGT payment. For non-citizens and foreigners, this retention rate is 7%.
Your solicitor will make the payment with necessary forms to Inland Revenue (LHDN) within sixty (60) days from the date of the Sale and Purchase Agreement to meet the RPGT payable.
How to file RPGT in Malaysia?
Most transactions are handled by a solicitor and lawyer will file RPGT on behalf of house seller. However if you wish to file RPGT yourself can obtain the necessary forms from the nearest LHDN branch or download them from LHDN's website.
STEP 1: Complete the Disposal of Real Property (CKHT 1A) form, your Sales and Purchase Agreement (SPA) form and other documents supporting the RPGT deductions you plan to make.
STEP 2: Fill out the Notification under Section 27 in the RPGTA 1976 (CKHT 3) form - to apply for RPGT exemptions.
STEP 3: Get your property purchaser to complete the Acquisition of Real Property (CKHT 4) form that usually comes hand in hand with a copy of the SPA.
STEP 4: Submit all forms and supporting documents to the nearest LHDN branch within 60 days of the sale.
You can get the forms from any LHDN branch or download them from the LHDN website.
What's the consequence of late payment of RPGT?
Any payments after 60 days may have penalty on the seller. The penalty is 10% of the amount payable as RPGT.