Under the Real Property Gains Tax Act 1976 (RPGTA), individuals and companies in Malaysia are subject to Real Property Gains Tax (RPGT) when disposing of chargeable assets such as real property or shares in a Real Property Company (RPC).
This guide explains how disposal price, acquisition price, and available exemptions are determined for RPGT computation in Malaysia.
1. Disposal Price (Paragraph 5, Schedule 2 RPGTA)
The disposal price represents the consideration received from selling a real property. It may be reduced by specific permitted expenses, including:
| Category | Description |
| Capital Expenditure | Renovation cost or cost of constructing a building on the land. |
| Legal Fees | Fees incurred to establish, preserve, or defend land ownership. |
| Incidental Costs | Brokerage, valuation, legal, and advertising expenses related to disposal. |
Market Value Substitution by DGIR
Under certain circumstances, the Director General of Inland Revenue (DGIR) may substitute the disposal price with market value if the transaction is not at arm’s length or involves special conditions such as:
- Transfer between family members or related companies
- Asset exchanges or transfers related to loss of employment or debt settlement
- Lump-sum disposals involving multiple assets
- Consideration that cannot be properly valued
- Cases where anti-avoidance provisions under Section 25(2) apply
Excluded expenses: Revenue expenses like repairs, quit rent, assessment, and interest costs.
2. Acquisition Price (Paragraph 4, Schedule 2 RPGTA)
The acquisition price represents the total cost incurred in obtaining the property. It includes:
| Component | Description |
| Purchase Consideration | Price paid wholly and exclusively for acquiring the property. |
| Incidental Costs | Stamp duty, legal fees, valuation fees, tax agent fees, and advertising costs. |
| Recoveries | Compensation or insurance receipts related to property damage, destruction, or forfeited deposits (to be deducted). |
Deemed Acquisition Price (Effective 12 October 2019)
For real property acquired before 1 January 2013, the market value as of 1 January 2013 may be used as the deemed acquisition price, provided the disposer is:
- A Malaysian citizen or permanent resident
- An estate of a deceased person who was a Malaysian citizen or PR
- A limited liability partnership or partnership
The market value must be based on the Valuation and Property Services Department’s (JPPH) assessment.
This provision does not apply to the disposal of RPC shares.
3. Private Residence Exemption (Schedule 3 RPGTA)
Malaysian citizens and permanent residents are entitled to a once-in-a-lifetime RPGT exemption on the disposal of one private residential property.
To qualify:
- The disposer must be a Malaysian citizen or permanent resident.
- The property must be used as a residence or be fit for occupation.
- The disposer has not previously claimed this exemption.
- The exemption applies only once in a lifetime.
4. RPGT (Exemption) Order 2018 [PU(A) 360/2018]
With effect from 1 January 2019, RPGT exemption applies if:
- The property is held for more than 5 years, and
- The consideration value ≤ RM200,000
However, this exemption does not apply to RPC shares.
Its main objective is to ease the tax burden on low, medium, and affordable housing sectors.
Key Takeaways
- RPGT applies to disposals of real property and RPC shares.
- Disposal price may be adjusted to market value under DGIR discretion.
- Deemed acquisition price available for properties acquired before 2013.
- One-time exemption allowed for Malaysian citizens and PRs.
- Filing compliance under the RPGT Act 1976 is mandatory.
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