Real Property Gains Tax (RPGT) in Malaysia in 2022: How to Calculate?
Malaysians who sell their residential property between the 1st of June 2020 and the 31st of December 2021 will be exempt from paying RPGT. Meanwhile, beginning January 1, 2022, individuals who sell their properties in the sixth year will no longer be charged the 5% RPGT.
RPGT Exemptions 2022
Finance Minister Tengku Zafrul announced in the recent Budget 2022 that the government will no longer impose Real Property Gains Tax (RPGT) on property disposals by Malaysian citizens and permanent residents beginning in the sixth year. This means that the RPGT rate for property disposals in the sixth and subsequent years after acquisition will be reduced from 5% to 10%, effective January 1, 2022.
RPGT Exemptions 2021
In response to the COVID-19 outbreak, then-Prime Minister Tan Sri Muhyiddin Yassin announced a number of incentives during the PENJANA briefing on 5 June 2020 to help boost the property market and provide financial relief to homebuyers and homeowners. The reintroduction of the Home Ownership Campaign 2021 (HOC), which includes stamp duty exemptions as well as special RPGT 2021 exemptions, is one of them.
Only Malaysians, according to the announcement, will be exempt from paying the 5% (or higher) RPGT on the sale of a residential property between 1 June 2020 and 31 December 2021. The exemption is limited to the sale of three residential units per individual.
Other requirements for RPGT exemption include:
must be the sole or joint owner of the disposed-of property
The SPA for the sale of the property must be signed by December 31, 2021, and duly stamped by January 31, 2022.
The property being disposed of was not acquired through a transfer between spouses or through a gift between spouses, parents and children, or grandparents and grandchildren.
Aside from that, both local and foreign homeowners, as well as businesses, would need to familiarise themselves with the fundamentals of RPGT, particularly how to calculate the applicable rates and what exemptions are available for each of them.
Here's what you need to know.
What is Real Property Gains Tax (RPGT) Malaysia?
According to the Real Property Gains Tax Act 1976, RPGT is a type of Capital Gains Tax levied by the Inland Revenue Department in Malaysia. It is levied on the profit made from the sale of your land or real estate when the resale price is greater than the purchase price.
RPGT is generally classified into 3 tiers:
Individuals (Citizens & Permanent Residents)
When it was first enacted, the primary goal of RPGT was to limit speculative activity in the local property market. Its primary purpose was to generate revenue through taxation.
How much does RPGT cost in Malaysia?
RPGT was first implemented in 1995 and has undergone numerous changes since then. The most recent RPGT amendment, announced during Budget 2022 and implemented in January 2022, provides that Malaysians and permanent residents selling property in the sixth and subsequent years of ownership will no longer be subject to a 5% RPGT. Foreigners and corporations, on the other hand, will keep their RPGT rates at 10%.
Previously, Malaysians and permanent residents who sold their properties after the fifth year of ownership had to pay a 5% RPGT on the profits earned.
RPGT Exemption 2022
The new RPGT 2022 rates, effective January 1, are listed below.
Individuals (Citizens & PRs)
Individuals (Non-Citizens & Foreigners)
Disposal in 1st year
Disposal in 2nd year
Disposal in 3rd year
Disposal in 4th year
Disposal in 5th year
Disposal in 6th year and beyond
0% (Reduced from 5%)
Individuals, including Malaysian citizens and permanent residents, will no longer be subject to RPGT rates beginning January 1, 2022.
Who is responsible for RPGT?
If the disposal price of a property is equal to or less than the acquisition price, RPGT is not applicable. It is only levied if there is a profit gain from the sale of real estate.
Individuals (Citizens, PRs, Non-Citizens & Foreigners)
If any of the aforementioned parties sell their property for a profit, they must pay RPGT based on their chargeable gain.
Except for Real Property Companies (RPCs) whose core business is real estate, the sale of shares by companies is usually exempt from RPGT. An RPC company exists only if it has real property or RPC shares totaling at least 75% of its total tangible assets. However, if the company disposes of its shares or real property to the point where its RPC share percentage falls below 75% and it ceases to be an RPC, the disposed-of shares will no longer be RPCs and will be subject to the RPGT provision.
Furthermore, if a company reclassifies its real property from fixed to current asset (for example, trading stocks), it is considered a disposal of a chargeable asset and is subject to RPGT. Such assets will be sold at their market value on the date of reclassification.
NOTE: A property development company will be considered an RPC because real property includes development land in Malaysia. This is despite the fact that the development land is subject to income tax rather than RPGT.
RPGT exemptions for Individuals & Companies
1) A 10% profit exemption or RM10,000 per transaction (whichever is greater) for the four scenarios listed below:
Malaysian citizens & Permanent Residents
If a Malaysian citizen transfers an asset as a gift and the acquirers are either husband and wife, parent and children, or grandparents and grandchildren. This exemption does not apply to transfers made between siblings.
Once-in-a-lifetime exemption from chargeable gain on the sale of a single private residence by a Malaysian citizen.
When an asset is transferred to a company, the asset owner or the asset owner's spouse must be a Malaysian citizen. If the asset is owned jointly by two people, both must be Malaysian citizens in order to transfer it.
When selling their property, homeowners who own low or medium-cost housing priced or valued less than RM200,000 are exempt from RPGT.
Applicable for Companies
Exempted are 10% of profits or RM10,000 per transaction (whichever is greater).
Intercompany share transfers are exempt from RPGT in the following ways:
Allowable Expenses for RPGT 2022
To calculate RPGT, deduct any incidental costs incurred in disposing of the property (as follows) from the chargeable gain:
Legal fees, accounting fees, surveyor’s fee, etc.
Real estate fees (sales commission)
Repair or renovation to maintain or upgrade the property such as interior design such as IKEA furniture to redecorate your house
Cost of preserving or defending one’s title to, or to a right over the asset
Cost of advertising to make the disposal
What is the RPGT 2022 Allowable Loss?
If there is more than one real estate transaction in the assessment year, any loss incurred from one transaction can be offset against another transaction, resulting in a chargeable gain, as long as both transactions occur in the same year.
How do I find the RPGT years that apply to me?
For both completed and under-construction properties, the acquisition and disposal dates are based on the date of signing the Sales and Purchase Agreement (SPA).
Assume you inherited a property from a deceased relative or friend; when selling it (you will be known as the executor), as per the RPGT Act for deceased's estates:
Date of death of the deceased = Acquisition Date by the executor
The executor is in charge of selling or disposing of the estate before it is distributed to the beneficiaries. The executor's acquisition date is used to calculate the RPGT charged on the deceased person's estate.
2013 is the new base year for RPGT.
During the postponement of Budget 2020, an RPGT amendment was made to provide some relief to property sellers - it was announced that for the calculation of property gain tax on units purchased prior to 2013, the Government will use the market price on January 1st, 2013 as the initial point of valuation. The base year was previously set to January 1, 2000. Because RPGT is charged on the profit made from the sale, a lower calculated profit means a lower tax burden for the property seller.
In Malaysia, how do you calculate RPGT 2022?
The following formulas apply to Citizens, PRs, Non-Citizens, and Foreigners. Their RPGT rates will differ depending on their holding period and residency.
The RPGT is levied on Net Chargeable Gains.
Gross Chargeable Gain: Acquisition price – Disposal price
Net Chargeable Gain: Gross Chargeable Gain – Allowable Expense – RPGT Exemption – Allowable Loss
TAX PAYABLE = RPGT Rate (based on the number of years of property ownership) X Net Chargeable Gains
For example, suppose Adam and Hanis (both Malaysian citizens) paid RM300,000 for a condominium in Hartamas on January 4, 2013. With plans to start a family, they decided to upgrade to a larger place and sold the condominium for RM500,000 on January 20, 2019.
Gross Chargeable Gain: RM 500,000 – RM 300,000 = RM 200,000
*Assuming Adam has a RM30,000 Allowable Expense and a RM20,000 RPGT Exemption of 10% of profit (200,000 x 10%).
Net Chargeable Gain: RM 200,000 – RM 30,000 – RM 20,000 = RM 150,000
TAX PAYABLE = 5% RPGT x RM 150,000 = RM 7,500.
(The RPGT rate is based on the Budget 2019 for Individual Citizens disposal in the fifth year because the property holding period is five years.)
Acquisition Price: A/B x C, where A = number of shares held by the shareholder; B = total issued shares of the company C = the defined value of the real property at the date of acquisition of the chargeable asset
Gross Chargeable Gain: Disposal Price – Acquisition Price
Net chargeable Gain: Gross Chargeable Gain – Allowable Expense – RPGT Exemption –Allowable Loss
TAX PAYABLE = RPGT Rate (based on the number of years of property ownership) x Net Chargeable Gains
Synergy Sdn Bhd was formed on January 1, 2013, with Mr Andrews, Mr Brian, and Mr Tate each holding 100,000 shares. It was not an RPC at the time of its formation. However, on March 31, 2015, the company purchased its first and only real estate for RM 1.2 million. As a result, its total tangible assets, including real estate, increased to RM 1.5 million, converting it to an RPC.
Mr Andrews decided to sell his 100,000 shares to Mr Lodge for RM 1 million on January 31, 2019.
Acquisition Price: 100,000/300,000 x RM 1,200,000 = RM 400,000
Disposal Price: RM 1,000,000
Gross Chargeable Gain: RM 1,000,000 – RM 400,000 = RM 600,000
*Assuming Mr Andrews have Allowable Expense of RM 50,000, an RPGT Exemption of RM 600,00 ( 600,000 x 10%) and Allowable Loss of RM 35,000.
Net Chargeable Gain: RM 600,000 – RM 50,000 – RM 60,000 – RM 35,000 = RM 455,000
TAX PAYABLE = 30% RPGT X RM 455,000 = RM 136,500
(RPGT rate is based on Budget 2019 for Companies disposal in the 3rd year as the property holding period is 3 years)
When is RPGT due in Malaysia?
Locals and permanent residents who sell off property will have their lawyers retain 3% of the selling/disposal price when the purchaser pays the first deposit to buy the property for the purpose of RPGT payment. This retention rate is 7% for non-citizens and foreigners.
To meet the RPGT payable, your solicitor will make the payment to the Inland Revenue Board with the necessary forms within sixty (60) days of the date of the sale and purchase agreement.
In Malaysia, how do I file an RPGT?
Those who want to file their own RPGT can get the necessary forms from their local LHDN branch or download them from the IRB's website.
STEP 1: Fill out the Disposal of Real Property (CKHT 1A) form, as well as your Sales and Purchase Agreement (SPA) form and any other documents that support the RPGT deductions you intend to claim.
STEP 2: To apply for RPGT exemptions, complete the Notification under Section 27 of the RPGTA 1976 (CKHT 3) form.
STEP 3: Have your property buyer fill out the Acquisition of Real Property (CKHT 4) form, which usually comes with a copy of the SPA.
STEP 4: Within 60 days of the sale, submit all forms and supporting documents to the nearest LHDN branch.
What are the consequences of RPGT late payment?
Any payment received after 60 days may result in a penalty payable by the seller. The penalty is 10% of the RPGT amount owed.