An increase of Real Property Gain Tax in the year 2019 & 2020 impacts a lot of property investors or property owners. Especially when you want to sell your property and have to oblige paying Real Property Gain Tax even after five years.
Regardless of what you think, let dive deep into this chapter and understand more about Real Property Gain Tax.
what is real property gain tax?
What is REAL PROPERTY GAIN TAX ( RPGT) 2020?
Real Property Gain Tax or in Malay is Cukai Keuntungan Harta Tanah (CKHT) is a tax imposed on gains derived from the disposal of properties in Malaysia. It includes both residential and commercial properties, estates, and an empty plot of lands.
Or in more subtle explanation, Real Property Gain Tax is a tax payable by an individual that selling their property with a profit.
For instance, if you bought a house for RM200,000 ten years ago and now you decided to sell the property with a purchase price of RM400,000. There will be a profit of RM200,000. And this RM200,000 is subject to a Real Property Gain Tax.
The Real Property Gain Tax rate will be based on which year you’re letting go of the property. The rates of Real Property Gain Tax is higher for the first five years. Therefore, it is not advisable to let go of the property within this period.
On the six years onwards, the Real Property Gain Tax rate is 5%. And in the past, this used to be 0%. Please refer to the table below for the latest Real Property Gain Tax rates.
Effective 1st January 2020, this is the REAL PROPERTY GAIN TAX ( RPGT) rate 2020.
Real property gain tax rates for year 2020
REAL PROPERTY GAIN TAX ( RPGT) CHANGES IN THE YEAR 2020
real property gain tax changes, market value based on 1st january 2013
As per the Budget 2020 announcement, the government had revised the RPGT imposed on the disposal of properties after five years, by individual citizens and permanent residents, by setting the market value on 1st January 2013 as the property acquisition price for properties acquired before the said date, compared to the current base year of 1st January 2000.
This means property owners will have lower tax payments, especially to those who bought the property before 1st January 2000.
For a clearer picture, take a look at below scenario as an example:
Real property gain tax calculation on the changes for year 2020
David bought a house in 1991 for RM160,000. In February 2020, he sold it for RM650,000.
Let’s assume that the market price on 1st January 2000 was RM350,000, while the market price for 1st January 2013 was RM500,000. The following is a calculation of RPGT without regard to other costs that are eligible for deduction.
Before Budget 2020:
RM650,000 – RM350,000 (based on market price on 1st January 2000) = RM300,000
RPGT = RM300,000 x 5% (RPGT Rate for 6th year onwards) = RM15,000
After Budget 2020:
RM650,000 – RM500,000 ( based on market price on 1st January 2013)= RM150,000
RPGT = RM150,000 x 5% (RPGT Rate for 6th year onwards) = RM7500
As you can see from the above example, David saved about RM7,500.
( RM15000 – RM7500 = RM7500 saving)
That’s a lot!
REAL PROPERTY GAIN TAX MALAYSIA2020 EXEMPTIONS
real property gain tax exemption
The good thing about Real Property Gain Tax is there is a Real Property Gain Tax exemption. This is great as we all can be benefit from this exemption.
Let’s check out the Real Property Gain Tax Exemption here.
10% of profits or RM10,000 per transaction (whichever is lower) is not taxable. Max capped at RM10k.
Any gains arising from the disposal of real property between family members (e.g., husband and wife; parents and children) are subject to an exemption.
A gain from the disposal of one private residential property once-in-a-lifetime to an individual is subject to an exemption. (please utilize this once in lifetime opportunity wisely).
Low cost, low-medium cost, and affordable housing priced below RM200,000 will be exempted from Real Property Gain Tax (RPGT).
REAL PROPERTY GAIN TAX MALAYSIA2020 CALCULATION
You have to follow four formulas and step by step on calculating the Real Property Gain Tax (RPGT) to understand its calculation.
calculation for real property gain tax – formula 1
Formula 1 :
Chargeable Gain = Final Sales Proceeds – Final Purchase Costs
Final Sales Proceeds:
The selling price of the property
Allowable selling cost – These costs include renovation costs, legal fees, real estate agent’s commission, and advertising fees incurredto sell the property.
You sold the property for RM600,000 and paid a total of RM20,000 commission to your agent and lawyer for selling and complete the property. Hence, your final sales proceeds would be RM580,000.
Final Purchase Costs:
Agreed buying price – Final purchase costs of your property
Allowable purchasing cost – These costs include stamp duties, valuation fees, legal fees, and real estate agent’s commission about the purchase of your property.
You bought the apartment for RM300,000. In total, you have paid a total of RM20,000 in allowable costs for the purchase of your property. Thus, your final purchase costs would be RM320,000.
Final Sales Proceeds RM580,000 – Final Purchase Costs RM320,000
= Chargeable Gain, RM260,000
Therefore, your Chargeable Gain is RM260,000.
calculation for real property gain tax – formula 2
Net Chargeable Gain = Chargeable Gain – Allowable Losses (If any)
Allowance losses occurred when the final sales proceeds of a property are lower than the seller’s final purchase costs. According to the RPGT Guideline, a seller is allowed to deduct allowable losses if he disposes his property within five years after he purchased the property from his net chargeable Gain.
For instance, if you have sold another property at a loss of RM 30,000, let’s say two years ago, you can offset the RM 30,000 in an allowable loss against your net chargeable Gain of RM 260,000. Thus, your net chargeable gain is RM 230,000 (RM 260,000 – RM 30,000).
real property gain tax calculation – formula 3
There is an exemption for 10% of net chargeable Gain or RM10,000 per transaction (whichever is lower and capped at maximum RM10k).
Net Chargeable gain, RM230,000 x 10% = RM23,000
Max exemption Amount is RM10,000.
Therefore, the Final Chargeable gain is RM230,000 – RM10,000 = RM220,000
real property gain tax calculation for year 2020
RPGT Payable = Net Chargeable Gain x RPGT Rate
RPGT Rate will be based on the year you dispose of the property.
Refer to the table below for your RPGT rate.
Real property gain tax rates for year 2020
If the dispose year is the sixth year, the rate is 5%
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