Updated Real Property Gains Tax (RPGT) Guidelines

Updated Real Property Gains Tax (RPGT) Guidelines

The Inland Revenue Board (IRB) recently published on its website the RPGT Guidelines dated 6 January 2023 (2023 Guidelines) in Bahasa Malaysia, titled “Garis Panduan Cukai Keuntungan Harta Tanah”. These new 81-page 2023 Guidelines contain the following 27 sections and set out 19 examples:

1. Introduction
2. Objective
3. Scope of imposition
4. Rate of tax
5. Date of disposal and acquisition
6. Disposal price and acquisition price
7. Non-allowable expenditure
8. Chargeable gains or allowable losses
9. Deduction of allowable losses
10. Exemptions
11. Gifts
12. Transfer of assets by way of inheritance
13. Joint venture with developers
14. Transfer of assets by way of power of attorney (PoA)
15. Transfer of assets to controlled companies
16. Transfer of assets into stocks
17. Shares in real property companies
18. Application of Paragraph 34A and Paragraph 34 of Schedule 2 of the RPGT Act 1976 (RPGTA) are mutually exclusive
19. Procedures for filing a RPGT return
20. Methods of filing RPGT returns
21. Disposers’ responsibilities
22. Imposition of penalties on disposers
23. Acquirers’ responsibilities
24. Conviction on certain offences by acquirers
25. RPGT payments
26. Imposition of penalties on acquirers or disposers in relation to RPGT payments
27. Procedures for a RPGT refund

Appendix 1
Appendix 2

The 2023 Guidelines state that the earlier Guidelines dated 13 June 2018 (2018 Guidelines) and 18 June 2013 remain applicable for transactions where the disposal date falls within the period of the earlier Guidelines.

Some of the key changes are outlined below.

• The 2023 Guidelines outline / update the definition of the following terms:

-        Asset

-        Chargeable asset

-        Chargeable gain

-        Dispose

-        Land

-        Real property

• The 2023 Guidelines incorporate, explain and provide examples to demonstrate the legislative changes introduced to the RPGTA since the previous 2018 Guidelines, including the following:

(a) The RPGT rates that apply, depending on the category of taxpayer (see Appendix 1 to the 2023   Guidelines)

(b)  The rates that apply in relation to the retention sum by acquirers under Section 21B of the RPGTA (see Paragraph 25.1(a) to the 2023 Guidelines)

(c)   Effective 1 January 2019, for disposals of assets acquired prior to 1 January 2000 by taxpayers categorized under Part 1 of Schedule 5 of the RPGTA (which include individuals who are Malaysian citizens), the acquisition price will be deemed to be the market value as at 1 January 2000.

Effective 12 October 2019, for disposals of assets acquired prior to 1 January 2013 by taxpayers categorized under Part 1 of Schedule 5 of the RPGTA, the acquisition price will be deemed to be the market value as at 1 January 2013. This however does not apply to the disposal of shares under Paragraphs 34 and 34A of Schedule 2 of the RPGTA.

(d)  Effective 1 January 2022, Paragraph 2 of Schedule 4 of the RPGTA was amended to provide a formula to compute the amount of exemption allowed for a partial disposal of shares under Paragraphs 34 and 34A of Schedule 2 of the RPGTA, by an individual. The exempted amount is to be the higher of 10% of the chargeable gain, or the amount calculated based on the formula below:

A / B x C

Where:
A = the number of shares disposed which are deemed to be a chargeable asset under Paragraphs 34 or 34A of Schedule 2

B = the total number of issued shares deemed to be a chargeable asset in relation to shares deemed  to be a chargeable asset under Paragraphs 34 or 34A of Schedule 2

C = ten thousand

(e)  Effective 1 January 2022, Paragraph 3(1)(b) of Schedule 2 of the RPGTA was amended to expand the scope of transactions in which the disposal price is deemed to be equal to the acquisition price, to include transactions involving the disposal of chargeable assets by a nominee or trustee of an individual, the wife of the individual or both, to a company controlled by the nominee or trustee for the individual, the wife of the individual or both.

• The 2023 Guidelines include an additional example to determine the date of disposal and/or acquisition in a situation where there is no written agreement for the disposal of the asset.
• The 2023 Guidelines explain and provide additional examples to demonstrate the following:

(a)   Expenditure and/or costs to be included or excluded in determining the disposal price of an asset  under Paragraph 5(1) of Schedule 2 of the RPGTA
(b)   Incidental costs to be included or excluded in determining the acquisition price and disposal price of an  asset under Paragraph 6 of Schedule 2 of the RPGTA.

• The 2023 Guidelines provide additional explanations on non-allowable expenditure for the purpose of computing the acquisition price and/or disposal price, including:

-        Input tax that is creditable and output tax that is borne by the disposer

-        Interest on loans to purchase the asset

-        Fees incurred to complete and submit the RPGT form

• The 2023 Guidelines stipulate that for the purpose of ascertaining the acquisition price of an asset acquired by way of gift, where the donor and recipient are husband and wife, parent and child, or grandparent and grandchild, the recipient’s acquisition price is as follows:

(a)   Gift is made within five years from the donor’s acquisition date: An amount equal to the acquisition price paid by the donor plus permitted expenses incurred by the donor

(b)  Gift is made after five years from the donor’s acquisition date: Market value of gift received

(c)   Gift is made between 1 January 2019 to 31 December 2021: Same as (a) above

Note:
Based on Paragraph 12(2) of Schedule 2 of the RPGTA, effective from 1 January 2019, the recipient’s acquisition price will be the “amount equal to the acquisition price paid by the donor plus permitted expenses incurred by the donor”, regardless of the donor’s period of ownership. It is hoped that the guidelines will be updated accordingly.

• The 2023 Guidelines include a new section to explain the tax implications of disposals transacted via a PoA. The 2023 Guidelines stipulate that the grant of an irrevocable PoA for valuable consideration is a “disposal” as there is an “assignment”. Generally, the disposal date will be the date the PoA is granted to the Donee (recipient of the PoA), and the disposal price will be the market value or consideration given for the grant of the PoA.

The 2023 Guidelines go on to state that the ascertainment of whether the interest or right in or over an asset has been granted to the Donee will depend on the terms and conditions of the PoA. An example has also been provided in the 2023 Guidelines to provide further guidance on this.

• The 2023 Guidelines provide more guidance on the responsibilities of disposers / acquirers (e.g., the types of forms to be completed and submitted, how the forms are to be completed). However, the details of supporting documents required from disposers / acquirers, which were outlined in the 2018 Guidelines, have been removed from the 2023 Guidelines.

The 2023 Guidelines also explain the penalties that may be imposed on disposers (under Sections 29(3), 30(2) and 14(5) of the RPGTA) and acquirers (Sections 29(1) and 36 of the RPGTA) for non-compliance.

• The 2023 Guidelines outline the latest procedure for RPGT payments (e.g., by e-TT system) and provide an updated list of authorized banks and available services.
• The 2023 Guidelines explain the penalties that may be imposed in relation to RPGT payments under Sections 21B(2) and 21(4) of the RPGTA.

The Guidelines are available at the following link: Garis Panduan Cukai Keuntungan Harta Tanah