12 BBTX4203 T8

Topic  Real Property
Gains Tax
8
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Explain tax administration of real property gains tax;
2. Define chargeable asset and person as well as acquisition and
disposal of chargeable asset;
3. Discuss no gain no loss transactions and tax exemptions; and
4. Compute real property gains tax.
 INTRODUCTION
This topic will introduce you to the fundamental concepts and terms of taxation of
real property in Malaysia. It concentrates on the important aspect of property
taxation that is the taxation of capital gains from the disposal of real property. Real
properties are assets held for long-term investments. Real Property Gains Tax Act
(RPGT) imposes tax on the disposal of real properties.
In this topic, you will be introduced to a new tax Act, that is Real Property Gains
Tax Act, 1976 (RPGTA). In the previous topics, we referred to the Income Tax Act,
1967 (ITA). Income tax would not apply to real property transactions, as they are
capital gains and outside the scope of the ITA.
The administration of RPGT is discussed, followed by the chargeability of RPGT

where chargeable assets and persons are defined. RPGT will come into the picture
when there is a disposal of a chargeable asset by a chargeable person. In addition,
unique in this topic is the „no gain no loss transaction‰ which will be discussed
followed by the tax exemptions available for RPGT. Finally, learners will be guided
on how to compute the RPGT through a few examples.
Copyright © Open University Malaysia (OUM)

142  TOPIC 8 REAL PROPERTY GAINS TAX
8.1 FUNDAMENTAL CONCEPTS AND TERMS

OF TAXATION OF REAL PROPERTY
Real Property Gains Tax (RPGT) is a limited form of capital gains tax and it is
charged under the RPGT Act, 1976. It is a tax on capital gains arising from the
disposal of real property. The property must be in Malaysian territory as foreign
property will not be subject to RPGT.
The current rates of RPGT range from 0% to 30% depending on the holding period
of the real property before disposal and the types of chargeable person as you can
refer to Table 8.1. The rates are effective from 1 January 2014 to 31 December 2018.
However, effective from 1 January 2019, the RPGT rate on any gain on disposal by
companies or individual (non-citizen and non-permanent residence) after five
years of acquisition is increased from 5% to 10%. Any gain on disposal of property
by individual (citizen and permanent residence) after five years of acquisition will
be charged RPGT rate at 5%, not at 0%.
Table 8.1: Rates of RPGT from YA2014 to YA2018
Individual Individual
(Citizen and (Non-citizen and
Date of Disposal Company
Permanent Non-permanent
Residence) Residence)
Within three years from the
30% 30% 30%
acquisition date
In the fourth year from the
20% 20% 30%
acquisition date
In the fifth year from the
15% 15% 30%
acquisition date
In the sixth year from the
5% 0% 5%
acquisition date or thereafter
Source: IRB, 2018

TOPIC 8 REAL PROPERTY GAINS TAX  143
8.2 ADMINISTRATION OF REAL PROPERTY

GAINS TAX
The disposer and acquirer of a real property have to submit the following within
60 days from the date of disposal of the asset:
Disposer Acquirer
Form CKHT 1A - Completed Form CKHT 2A - Completed
Copies of stamped sale and purchase Copies of stamped sale and purchase
agreement agreement
Copy of grant/title deed Copy of grant/title deed
Copies of bills and receipts for expenses

claimed
The acquirer also has a duty to withhold from the consideration money a sum
equal to 3% of the total value of the consideration or the whole of the consideration,
which consists of money if it is less. The sum must be remitted to the IRB within
60 days from the date of disposal. With effective from 1 January 2018, if the
disposer is not a citizen or permanent resident, the acquirer is responsible to retain
the whole amount of the money or a sum not exceeding 7% from the total value of
the consideration, whichever is lower.
The 60-day period to submit the return form may be extended upon a written
request made by the disposer or acquirer. The tax authorities will issue a notice of
assessment once the CKHT 1 is received. The RPGT must be paid within 30 days
from the notice of assessment. Otherwise, a 10% penalty without further notice
will be imposed for late payment.
The tax authorities will issue a certificate of clearance, CKHT 5A, to both disposer
and acquirer upon payment of tax by the disposer or being satisfied that no RPGT
is payable. The acquirer will then release the 5% of the consideration to the
disposer.

8.3 CHARGEABILITY OF REAL PROPERTY

GAINS TAX
RPGT will become chargeable when there is a disposal of chargeable asset by a
chargeable person that results in chargeable gain in a relevant year of assessment.
A chargeable gain arises if the disposal price exceeds the acquisition price and an
allowable loss is incurred if the disposal price is less than the acquisition price.
Allowable losses are available to be carried forward for relief against future RPGT
liabilities. A loss arising from the disposal of RPC shares, however, does not
qualify as an allowable loss.
8.3.1 Chargeable Asset

A capital gain on disposal of a chargeable asset is subject to RPGT. Chargeable
assets include the following:
(a) Real Properties Situated in Malaysia

The term „real property‰ refers to landed property in Malaysia which consist of:
(i) Residential property – Houses, condominiums and apartments;
(ii) Commercial properties – Shophouses, commercial lots, factories and
office buildings; and
(iii) Land.
The property must be in Malaysian territory. Foreign property will not be

subject to RPGT.
(b) Shares held in a real property company (RPC).
8.3.2 Chargeable Person

A tax resident and a non-tax resident person in Malaysia are both chargeable to
RPGT in respect of any gains accruing on the disposal of real property or RPC
shares in Malaysia. „Person‰ includes a company, an individual, a partnership, a
body of persons and a corporation.

8.3.3 Year of Assessment

The year of assessment for a chargeable person disposing of a chargeable asset is
the year when the disposal is made. For example, the 2018 RPGT assessment is
based upon chargeable disposals made between 1 January 2018 and 31 December
2018 inclusive. No liability to RPGT arises until an asset is disposed of. The mere
fact that an asset has appreciated in value will not trigger an RPGT assessment.
The RPGT rate applicable varies with the holding period of the real property. The
holding period is measured from the acquisition date of the real property up to the
disposal date.
Example:
Mutiara Sdn Bhd acquired an office building on 15 May 2012. The building was
found to be unsuitable and was disposed of on 31 December 2013.
The correlations of the disposal date, holding period and the tax rates are as
shown below:
Disposal Holding period Rate (%) - Company
15.05.2012 – 14.05.2013 Year 1 30
15.05.2013 – 14.05.2014 Year 2 30
15.05.2014 – 14.05.2015 Year 3 30
15.05.2015 – 14.05.2016 Year 4 20
15.05.2016 – 14.05.2017 Year 5 15
15.05.2017 – 14.05.2018 Year 6 5
As the company disposed of the building on 31 December 2013, the disposal was
in the second year with the corresponding RPGT rate of 30%. The year of
assessment is 2013 as the chargeable gain was made in that year.

8.4 ACQUISITION AND DISPOSAL OF

CHARGEABLE ASSET
RPGT is payable on chargeable gain. Chargeable gain is when the disposal price is
more than the acquisition price of real property. In contrast, if the acquisition price
exceeds the disposal price of a real property, this would result in allowable loss.
The RPGT Act 1976 specifically defines the components of disposal price and
acquisition price.

The components are as shown in Figures 8.1, 8.2 and 8.3:
Figure 8.1: Incidental cost
Figure 8.2: Permitted expenses
Figure 8.3: Recoveries

8.5 NO GAIN NO LOSS TRANSACTION

If a disposal is deemed to be a no gain no loss transaction, the disposer will not be
liable to RPGT. However, the taxpayer is still required to file a RPGT form to IRB.
This applies when there is a related party transaction where the disposer and
acquirer are:
(a) Family members – Husband and wife, parent and child or grandparent and
grandchild;
(b) Shareholders within a company; and
(c) Partners within the same partnership, trustees and beneficiaries.
With effective from 1 January 2017, any „no gain, no loss‰ will only cover the
transfer of assets owned by citizens. The disposal price will be deemed to be equal
to the acquisition price.
The types of disposals in which an individual is treated as making no gain/no loss

are:
(a) Gifts made by an individual to his/her spouse, child or grandchild within
five years after the date of acquisition of the asset by the donor.
(b) The transfer of assets between spouses.
(c) The transfer of assets owned by an individual, his wife or an individual
jointly with his wife or with a connected person to a company controlled by
the individual, by his wife or by an individual jointly with his wife or with a
connected person for a consideration consisting of at least 75% of shares in
the company.
(d) Disposal to a nominee or trustee resident in Malaysia by an individual or his
wife or both being absolutely entitled as against the nominee or trustee.
(e) The transfer of an asset by way of security.
(f) Gifts made to the Government, a State Government, a local authority or a
charity exempt from income tax.
(g) The disposal of an asset as a result of a compulsory acquisition under any
law.

(h) The disposal of an asset by a person to an Islamic Bank under a scheme where
that person is financed by such bank in accordance with the Syariah.
(i) The devolution of the assets of a deceased person to his executor or legatee
under a will or intestacy or to the trustees of a trust created under his will.
No gain no loss transaction is applicable for a company in the following situations:

(a) Transfer of asset between companies in the same group to increase efficiency
in operation;
(b) Transfer of asset between any companies for a scheme of reorganisation,
reconstruction or amalgamation; and
(c) Distribution of asset by a liquidator of a company and the liquidation of the
company was made under a scheme of reorganisation, reconstruction or
amalgamation.
Example
Maryam disposes of a house to her only daughter for a cash consideration of
RM150,000. The market value of the house was stated at RM300,000. Since it is
a related party transaction, the disposal price and acquisition price will be
deemed at a market value of RM300,000, even though the actual consideration
is RM150,000. The RPGT liability would be nil as it is a no gain no loss
transaction.
8.6 TAX EXEMPTIONS ON REAL PROPERTY

GAINS TAX
The exemptions available under the RPGT Act 1976 on gains from disposal of a
chargeable asset to an individual are as follows:
(a) A gain equal to the amount of estate duty payable under any law relating to
estate duty applicable in Malaysia on an estate of a deceased person accruing
in respect of a disposal of the property in order to pay the estate duty.

(b) Private residence exemption:

Individuals may also get exemption on disposal of one residential property.
The conditions that must be fulfilled are:
(i) The individual must be a citizen or a permanent resident of Malaysia;
(ii) The property must be a residential property or part of the building is
used for residence;
(iii) The property is owned by the individual/spouse of the individual; and
(iv) The individual had not applied for the exemption before.
Effective from 1 January 2019, any gain from the disposal of a low and
medium cost residential house at the price of RM200,000 and below by
Malaysian citizens will be exempted from RPGT with condition the length of
ownership is more than five years.
(d) Schedule 4 exemption:

An amount of RM10,000 or 10% of the chargeable gain, whichever is greater,
for each disposal of a property by an individual. The exemption is available
to Malaysian citizens and foreigners who dispose of the whole unit of a real
property. Part disposals of a real property by an individual will not be
granted this type of exemption.
Example:
Zeeta, the owner of a double-storey house made a chargeable gain amounting
to RM120,000 on the disposal of her house in the third year. Since Zeeta is an
individual citizen in Malaysia, the RPGT computation would be:
RM
Chargeable gain 120,000
Less: Sch 4 exemption - 10% of RM120,000 or RM10,000
whichever is the higher (12,000)
108,000
Tax rate (Individual – Third Year) 30%

RPGT payable RM32,400

8.7 TAX COMPUTATION ON REAL PROPERTY

GAINS
Having gone through all the theories and examples above, we are ready to do the
tax computation for RPGT. It would be best to explain using the following
example:
Disposal by Individual
Hussein disposed of a single-storey house in 2018. The property was acquired

on 15 May 2015 for RM162,000. Legal fees and stamp duty amounting to
RM3,500 were incurred upon purchase. In 2016, Hussein incurred legal fees of
RM5,000 in defending the title to the house. In 2017, a deposit of RM7,500 was
forfeited to Hussein by an intended buyer, Hassan, who called off the deal. The
shophouse was sold to Ali for RM215,000 on 1 August 2018. Hussein incurred
real estate agent fees of RM2,800 in connection with the sale.
The RPGT payable amounted to:
RM RM
Disposal price:
Consideration received (01.08.2018) 215,000

Less: Legal fees defending the title (5,000)
Incidental cost on disposal (Agent fees) (2,800)
207,200
Acquisition price:
Consideration paid (15.05.2015) 162,000

Add: Incidental cost on acquisition
Legal fees and stamp duty 3,500
Deduct: Recoveries – Forfeit of deposit (7,500) 158,000
Chargeable gain 49,200

Less: Sch 4 exemption – 10% of RM49,200 or
RM10,000
whichever is higher (10,000)
39,200
Rate (disposal in the fourth year) 20%
RPGT payable RM7,840

As stated earlier, when the acquisition price of the real property exceeds the
disposal price, the disposer is said to have an allowable loss. No RPGT is payable.
The allowable loss will then be multiplied with the RPGT rate to obtain the loss
relief amount. The loss relief can be set off to any chargeable gain made on future
disposal of any real property afterwards.
EXERCISE 8.1
Disposal by company:
Permata Bhd made the following disposals in 2018.
A shophouse in TTDI was sold in the fourth year after acquisition. The
disposal price was RM300,000 whereas the acquisition price was
RM350,000. The shophouse was sold on 15 January 2018.
A piece of land in Kajang was sold in the fifth year on 1 June 2018 for
RM500,000. The acquisition price was RM310,000.
Compute the real property gains tax payable by Permata Bhd in respect
of the disposal of the real property.
The unutilised RPGT will be carried forward to future disposal for set off. If there
are no more disposals for 2018, the unutilised loss relief will be carried forward to
future years.
The sequence of the disposals is crucial, as loss relief cannot be applied to the
previous disposal. If the land is disposed of before the house, the loss relief from
the house cannot be set off against the gains from the land although both disposals
are in the same YA. The loss relief can only be set off against the chargeable gain
of future disposal.
SELF-CHECK 8.1
What if the disposal of land in the example above was on 1 January 2006
instead of 2 August 2018?
Recalculate the RPGT payable for YA2018.

8.8 REAL PROPERTY COMPANY

With effect from October 1988, the gain on the disposal of shares held in a real
property company (RPC) is also subject to RPGT. A RPC for RPGT purposes is a
controlled company which owns real property or shares in another RPC or both,
the value of which is not less than 75% of the value of its total tangible assets.
SELF-CHECK 8.2
List two methods by which a disposer may legally reduce or avoid

RPGT.
• Real Property Gains Tax (RPGT) is a limited form of capital gains tax and is
charged under the Real Property Gains Tax Act, 1976.
• RPGT is charged on gains arising from the disposal of real property.
• The rates of RPGT range from 0% to 30% depending on:
− The holding period of the real property before disposal;
− The types of chargeable person; and
− The disposer and acquirer of a real property have to submit the return form
within 60 days from the date of disposal of the asset.
• Chargeable assets include real properties situated in Malaysia and shares held
in a real property company.
• The term „real property‰ refers to landed property in Malaysia which consists
of residential properties, commercial properties and land.
• Chargeable gains are the difference between the disposal price and the
acquisition price of a real property.
• A chargeable gain arises if disposal price exceeds acquisition price.
• An allowable loss is incurred if disposal price is lower than acquisition price.

• Disposal Price = Consideration Received – Permitted Expenses – Incidental

Cost
• Acquisition Price = Consideration Paid + Recoveries – Incidental Cost
• If a disposal is deemed to be a no gain no loss transaction, the donor would not

be liable to RPGT.
• The main exemptions available under the RPGT Act 1976 are Private Residence
exemption and Schedule 4 exemption.
− A RPC is a controlled company which owns real property, or shares in

another RPC, or both real property and shares with 75% or more than the
value of its total tangible assets.
Acquire Disposal
Connected person Real property company
Controlled company Relative
1. State the time allowed for the disposer of real properties to pay the tax
assessment without penalty and the consequences of late payment.
2. State the amount of money which the acquirer is required to withhold for the
purpose of the Real Property Gains Tax and state when the money withheld
could be released to the disposer.
3. State the circumstances in which an allowable loss arises under the Real
Property Gains Tax Act, 1976.
4. Explain briefly and illustrate by means of an example how tax relief is

granted in respect of a disposal which results in an allowable loss.
5. State any three types of disposal by an individual in which the disposer is

treated as making no gain no loss.

6. State any two types of exemption, full or partial, available to an individual

under the Real Property Gains Tax Act, 1976.
7. Simon transferred a house owned by him to his wife, Sandra, for RM370,000
on 10 May 2018. Simon incurred valuation fees of RM2,000 in connection
with the transfer. The market value of the house at the time of transfer was
RM390,000. Simon had bought the house on 19 July 2016 for RM360,000.
State, with explanation, the real property gains tax position of Simon on the
disposal of his house to Sandra.
8. Adeline, a non-Malaysian who is a permanent resident of Malaysia, sold a

house in which she had been residing up to the date of its disposal on 20
April 2018. The house was sold for RM414,000. It was purchased on 19 April
2015 for RM320,000. This is the only property Adeline has ever owned in
Malaysia.
State, with reasons, whether or not Adeline is entitled to an exemption under

the Real Property Gains Tax Act on the disposal of her house.
1. Damai Bhd disposes of a shoplot in 2018 with the following particulars:
The property was acquired for RM90,000 on 1 March 2015. Legal fees and
stamp duty of RM3,150 were incurred upon purchase. In 2015, the company
incurred legal fees of RM5,550 in defending the title to the lot.
In 2016, a deposit of RM7,500 was forfeited to the company by an intended

buyer, Dora, who called off the deal.
The shoplot was sold for RM155,000 on 5 July 2018. The company incurred
real estate agent fees of RM4,800 in connection with the sale.
Required:
Compute the RPGT payable by Damai Bhd in respect of the disposal of the
shoplot.

2. Zara purchased a bungalow in Bangi for RM350,000 from Taming Bhd on 1

November 2013. The house was expected to be completed on 15 May 2015.
The following information is provided by Zara:
Date Particulars
01.11.2013 A booking deposit of RM5,000 was made.
05.01.2014 RM13,000 was paid on signing the sale and purchase agreement.
10.01.2014 Incurred the following expenses on acquisition: legal fees of

RM2,000 and stamp duty of RM3,300.
15.01.2014 A bank loan was taken out in order to settle the rest of the purchase
price.
15.08.2015 The certificate of fitness was issued on 1.9.2015, by which time the
interest cost incurred amounted to RM15,000.
01.01.2016 Let out the house at a monthly rental of RM2,500.
01.06.2016 Assessment rates and quit rent paid amounted to RM1,200 per
year.
01.03.2017 Carried out expansion of the kitchen costing RM65,000.
Zara sold the house on 1 November 2018 for RM465,000. A brokerÊs fee and
advertisement expense amounting to RM10,000 and RM2,000 respectively
were incurred in respect of the sale.
Required:
Compute the real property gains tax payable by Zara in respect of the
disposal of the house.

3. Harry, a non-resident, furnished the following information regarding his real

properties:
House in Cheras
This property was acquired on 1 May 2015 at a consideration of RM530,000.

Harry incurred the following incidental costs:
RM
Stamp duty 8,500
Legal fees 23,600
Advertisement for seller 410
Interest expense
- 2011 44,600
- 2012 51,100
- 2013 21,800
After the purchase, he incurred costs of RM91,000 to extend the house. On 1

June 2016, he received compensation of RM46,000 from his contractor for
defects in the extension works.
On 1 April 2018, he sold the house for RM730,000. The following costs were
incurred in relation to the sale:
RM
Legal fees 7,100
Advertisement for buyer 290
Residential land in Ipoh
This was acquired on 1 November 2013 at a consideration of RM230,000.

Harry constructed a bungalow on the land at a cost of RM250,000.
He sold the land on 1 September 2018 for RM390,000.
Required:
(a) Compute the real property gains tax payable on the disposal of the
residential house in Cheras.
(b) Compute the real property gains tax payable on the disposal of the
residential land.

4. Setia Sdn Bhd operates retail stores in Malaysia. On 15 April 2018, the
company disposed of its building in Singapore for RM3,860,000. The
expenses incurred in connection with the disposal comprised agentÊs fees of
RM341,400 and legal fees of RM5,300.
The building was bought for RM679,000 on 13 March 2008. In addition, the
company incurred stamp duty of RM17,250 and valuation fees of RM7,050.
In 2016, the company forfeited a deposit amounting to RM38,000 in respect

of an aborted sale of the building.
Required:
Compute the real property gains tax payable by Setia Sdn Bhd.
5. Dania, a Malaysian citizen, disposed of her properties as follows:
In 2014, she sold a shophouse for RM320,000 which she had bought for
RM360,000. The shophouse was sold within two years after the date of
acquisition.
In 2017, she sold a bungalow lot for RM490,000 and incurred agentÊs fees of
RM6,800 on the disposal. She had bought the condominium for RM480,000.
The condominium was sold in the fifth year after the date of acquisition.
On 13 May 2018, she sold a townhouse for RM280,000. She had bought the
land for RM185,000 on 6 April 2015.
Required:
Compute the real property gains tax payable in respect of each of the above
disposals.

12 BBTX4203 T8

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12 BBTX4203 T8

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Topic  Real Property

The administration of RPGT is discussed, followed by the chargeability of RPGT

Copyright © Open University Malaysia (OUM)

8.1 FUNDAMENTAL CONCEPTS AND TERMS

Table 8.1: Rates of RPGT from YA2014 to YA2018

Source: IRB, 2018

Copyright © Open University Malaysia (OUM)

8.2 ADMINISTRATION OF REAL PROPERTY

Form CKHT 1A - Completed Form CKHT 2A - Completed

Copy of grant/title deed Copy of grant/title deed

Copies of bills and receipts for expenses

Copyright © Open University Malaysia (OUM)

8.3 CHARGEABILITY OF REAL PROPERTY

8.3.1 Chargeable Asset

(a) Real Properties Situated in Malaysia

The property must be in Malaysian territory. Foreign property will not be

(b) Shares held in a real property company (RPC).

8.3.2 Chargeable Person

Copyright © Open University Malaysia (OUM)

8.3.3 Year of Assessment

Disposal Holding period Rate (%) - Company

15.05.2012 – 14.05.2013 Year 1 30

15.05.2013 – 14.05.2014 Year 2 30

15.05.2014 – 14.05.2015 Year 3 30

15.05.2015 – 14.05.2016 Year 4 20

15.05.2016 – 14.05.2017 Year 5 15

15.05.2017 – 14.05.2018 Year 6 5

Copyright © Open University Malaysia (OUM)

8.4 ACQUISITION AND DISPOSAL OF

Copyright © Open University Malaysia (OUM)

The components are as shown in Figures 8.1, 8.2 and 8.3:

Figure 8.1: Incidental cost

Figure 8.2: Permitted expenses

Figure 8.3: Recoveries

Copyright © Open University Malaysia (OUM)

8.5 NO GAIN NO LOSS TRANSACTION

The types of disposals in which an individual is treated as making no gain/no loss

Copyright © Open University Malaysia (OUM)

No gain no loss transaction is applicable for a company in the following situations:

8.6 TAX EXEMPTIONS ON REAL PROPERTY

Copyright © Open University Malaysia (OUM)

(b) Private residence exemption:

(d) Schedule 4 exemption:

Tax rate (Individual – Third Year) 30%

Copyright © Open University Malaysia (OUM)

8.7 TAX COMPUTATION ON REAL PROPERTY

Hussein disposed of a single-storey house in 2018. The property was acquired

The RPGT payable amounted to:

Consideration received (01.08.2018) 215,000

Consideration paid (15.05.2015) 162,000

Chargeable gain 49,200

Copyright © Open University Malaysia (OUM)

Permata Bhd made the following disposals in 2018.

Recalculate the RPGT payable for YA2018.

Copyright © Open University Malaysia (OUM)

8.8 REAL PROPERTY COMPANY

List two methods by which a disposer may legally reduce or avoid

• RPGT is charged on gains arising from the disposal of real property.

• The rates of RPGT range from 0% to 30% depending on:

− The holding period of the real property before disposal;

− The types of chargeable person; and

• A chargeable gain arises if disposal price exceeds acquisition price.

• An allowable loss is incurred if disposal price is lower than acquisition price.

Copyright © Open University Malaysia (OUM)