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Do you still remember the Real Property Gains Tax (RPGT) on all properties sold being announced during the 2010 Budget? Now, there is an alteration on it. The five percent RPGT will now only be applicable to properties that are sold within five years of their purchase, commence on 1st JAN 2010.

The fixed five percent tax to be imposed on the gains from the sale of property is irrespective of the holding period and the category of the owner. The RPGT for the first year is five percent and it’s same for second, third, fourth and fifth year.

This rate of five percent will be implemented through the Real Property Gains Tax (Exemption) Order 2009. This Order will be gazetted as soon as possible and is effective 1st JAN 2010. Therefore, the current rate of RPGT, which is higher than five percent as in Schedule 5 of the Real Property Gains Tax 1976, will no longer be applicable.

However, there are three circumstances where the property owner is exempted from the five percent gains tax.

1. Where the level of exemption is increased from RM5,000 to RM10,000 or ten percent of the chargeable gains.
2. When the property sale are gifts between parent and child, husband and wife, grandparent and grandchild, but no exemption for transfer between sibling.
3. When the disposal of a residential property is a once in a lifetime transaction.

Example to illustrate the calculation of RPGT payable
Mr.X purchased a property on year 2006 at RM100,000 and sold after or on 1st JAN 2010 at RM200,000 (within five years of the date of purchase). He made RM100,000 from the transaction and the gains are subject to 5% RPGT and the calculation will be:

• RM100,000 (Property Gains) – RM10,000 (Waived Exemption) = RM90,000 (Taxable Gains)
• RM90,000 (Taxable Gains) x 5% (RPGT Rate) = RM4,500 (RPGT Chargeable)

Thus, the RPGT chargeable to Mr.X will be RM4,500.

You can check out at HERE for more details about RPGT.