Real Property Gains Tax And Its History

In the National Budget 2022 announcement, the Malaysian government unveiled a new change to the Real Property Gains Tax (RPGT) by abolishing the 5% RPGT from the sixth year onwards and thereafter for individuals who are Malaysian citizens and permanent residents.

To recap, in the years between 2019 and 2021, a 5% RPGT was applied to all Malaysian and permanent resident individuals who sold their property from the sixth year and thereafter.  

First introduced in 1976 and only implemented nearly two decades later in 1995, the RPGT is a way for the government to limit property speculation and prevent a potential property bubble. It is also one of the most important property-related taxes that has been contributing significant revenue to the country over the past decades.

However, do you know what is RPGT and how is it related to you as a property owner?

RPGT is a tax on the profit of selling a property. In another word, it is a payable tax by the seller of a property when he or she made a profit from reselling the property.

By implementing the RPGT, it will discourage property speculation when property speculators attempt to buy low and sell high – making a large and quick return on their investment. 

The new adjustment of RPGT, which took effect from January 1, 2022, has certainly excited the secondary property market and was expected to encourage more property transaction activities in the market as the asset disposal cost has been reduced.

Under the new rate, if the disposal of property happens in the 1^st, 2^nd, and 3^rd year of owning the property, the individual Malaysian seller will be charged 30% RPGT, and 20% in the 4^th year, as well 15% in the 5^th year. There will be no tax if the disposal happens in the 6^th year and beyond. (Please refer to the chart below)

Here are some facts that you may not be aware of about the RPGT:

1. The property acquisition and disposal dates are based on the date of the Sales and Purchase Agreement.
2. The base year of RPGT has been amended to 2013 during the tabling of Budget 2020. It is also meaning that the government will use the market price on January 1, 2013, as the initial point of valuation.
3. The formula of RPGT payable is RPGT rate x net chargeable gains. Net chargeable gains are the sum after minus allowable expense, RPGT exemption, and allowable loss.
4. Any payment of RPGT after 60 days is considered late payment and the penalty is 10% of the amount payable as RPGT.
5. Usually, the lawyer handling the property name of the transfer will make the RPGT payment with the last 3% payment retained on behalf of the seller. However, individuals can obtain the necessary forms and do the payment from the LHDN branch.

RPGT 2022: Malaysian Individual