Real Property Gain Tax

1. Real Property Gain Tax • 1. Introduction • 2. Real property • 3. Acquisition price • 4. Capital receipt from real property • 5. Acquisition price from RP acquired prior 1 Jan 1970 • 6. Disposal price salmah muhamed 2006

2. Real Property Gain Tax • 7. Real property acquired prior to 1 Jan 1970 • 8. Disposal price deemed at market price • 9. Disposal date & acquisition date • 10. Conditional contract • 11. Chargeable gain • 12. Exemption to individuals • 13. Rate of RPGT salmah muhamed 2006

3. Real Property Gain Tax • 14. Allowable loss • 15. Loss relief • 16. Gift • 17. Individual transfer real property to family controlled company • 18. Private residence exemption • 19. Exemption for company salmah muhamed 2006

4. Real Property Gain Tax • 20. Deceased person • 21. Payment of tax salmah muhamed 2006

5. 1. Introduction • Legislated on 7 Nov 1975 • Territorial concept • YA on current calendar year salmah muhamed 2006

6. 2. Real property • Sec 2- real property defined as any land situated in Malaysia and any interest, option, or other right in or over such land. • Land include a) the surface of the earth and all substances forming that surface b) the earth below the surface and substances therein c) building on land & anything attached to land or permanently fasten to anything attached to land salmah muhamed 2006

7. d) standing timber, crops, & other vegetation growing on land e) land covered by water salmah muhamed 2006

8. 3. Acquisition price • comprise the following components a) consideration pd wholly & exclusively for the acquisition of RP b) incidental cost-stamp duty, legal fees, tax agent fees, remuneration pd to land surveyor or valuer and advertising cost for seeking a seller Legal fees on loan agreement to finance purchase- not incidental salmah muhamed 2006

9. 3.1 Interest cost as incidental cost • RP under construction- interest expense allowed (date of signing S&P to receipt of CF) • Completed unit of RP- not allowed salmah muhamed 2006

10. 4. Capital receipt from real property • Reduced acquisition price a) compensation for damages b) insurance recoveries for loss or damages c) deposit forfeited on aborted disposal salmah muhamed 2006

11. 5. Acquisition price for RP acquired prior 1 Jan 1970 • Market value at 1 Jan 1970 • Capital receipt on damages received prior to 1 Jan 1970 is disregarded • Capital receipt on damages received on or after 1 Jan 1970 would reduce acquisition price salmah muhamed 2006

12. 6 Disposal price (para 5 Sch 2) • Comprises consideration received and reduced by a) capital expenditure to enhance RP b) legal fees in establishing, preserving n defending the title c) incidental cost: brokerage, valuation, legal , advertisement cost salmah muhamed 2006

13. Real property acquired prior to 1 Jan 1970 • Any capital expenditure incurred to enhance the RP and legal fees for defending title incurred prior to 1 Jan 1970 would be excluded in determining the disposal price salmah muhamed 2006

14. 8.0 Disposal price deemed at market value • a) bargain not at arm’s length or gift • b) for a consideration that cannot be valued • c) in connection with loss of employment or gratuity payment • d) a transfer for satisfaction of debt • e) lump sum disposal of RP & other assets • f) where anti avoidance under S25(2) applies salmah muhamed 2006

15. Disposal date and acquisition date • A) with written agreement • B) without written agreement salmah muhamed 2006

16. 10. Conditional contracts • The acquisition date of the RP when the condition is satisfied salmah muhamed 2006

17. 11. Chargeable gain • Difference between disposal price and acquisition price salmah muhamed 2006

18. 12. Exemption to individuals • Exemption allowed: RM5,000 or 10% of the chargeable gain, whichever is higher salmah muhamed 2006

19. 13. RPGT rate • 14. Allowable loss must filed within a month to ensure the loss relief can be carried forward against future RPGT payable • 15. Loss relief allowable loss times rate of tax salmah muhamed 2006

20. 16. Gift • No gain no loss transaction • Within 5 years after date of acquisition • Donor- not liable to RPGT • Beneficiary- deemed acquired the RP at acquisition price paid by the donor plus any permitted expenses salmah muhamed 2006

21. 17. Individual transfer RP to family controlled company • No gain no loss if the consideration of transfer comprises at least 75% of shares and the balance in money payment • No RPGT on real property • Disposal of shares attract RPGT salmah muhamed 2006

22. 18. Private residence exemption • Available once a life time • Must satisfy cnditions 1) Citizen/PR 2) residential property 3) Building occupied or fit for occupation/rental 4) owned by individual/spouse 5) no prior disposal salmah muhamed 2006

23. 19. Exemption for companies • 17(1)(a) between co in same group for efficiency- no gain no loss, if at least 75% of consideration consist of shares and balance in money • 17(1)(b)- assets is transferred under scheme of reorganisation, reconstruction or amalagamation • 17(1)(c) – asset is distributed by a liquidator under scheme of reorganisation, reconstruction or amalagamation salmah muhamed 2006

24. 19. Exemption for companies • Transferor co- no gain no loss • Transferee co - acquisition price paid by transferor plus permitted expenses • withdrawal of para 17 approval - for purposes other than purposes allowed - transferee co ceased to be in the same group -transferee co ceased to be resident in M’sia salmah muhamed 2006

25. 20. Deceased person • Executor disposes of RP to third party • Legatee received RP under the will • Legatee received RP in lieu of money legacy salmah muhamed 2006

26. 21. Tax administration salmah muhamed 2006