2024/2025 Real Property Gains Tax (RPGT)  Exemption In Malaysia

Real Property Gains Tax (RPGT) in Malaysia is a form of capital gains tax imposed on the profit earned from the disposal of real property or shares in a Real Property Company (RPC). With the introduction of Capital Gains Tax (CGT) effective on 1 January 2024, certain share disposals are now taxed under CGT instead of RPGT. This article will explore RPGT exemptions, applicable RPGT rates and updates relevant for 2024/2025 which helps taxpayers navigate the real property gains tax landscape in Malaysia. 

What Is Real Property Gains Tax (RPGT)? 

RPGT is a tax levied on the gains derived from the disposal of real property located in Malaysia or shares in a Real Property Company (RPC). It applies to both residents and non-residents of Malaysia. Assets subject to RPGT include:

• Land and any interest, option or right over land in Malaysia
• Shares in a Real Property Company (RPC) 

Scope of Real Property Gains Tax In Malaysia

The scope of RPGT Malaysia extends to the disposal of shares in an RPC. An RPC is a controlled company where 75% or more of its tangible assets consist of real property or shares in another RPC. A controlled company is defined as one with no more than 50 shareholders and controlled by 5 or fewer people. 

Starting from 1 January 2024, gains from the disposal of shares in RPDc by persons subject to CGT are no longer subject to RPGT. Instead, they fall under the CGT regime. This shift primarily affects companies, LLPs, co-operatives and trust bodies.   

Disposals that trigger RPGT liability include: 

• Sale
• Assignment 
• Conveyance
• Settlement
• Any form of ownership transfer 

The date of disposal is typically the date of the written agreement. If there is no agreement, it defaults to the full payment or completion of ownership transfer. For cases that require government or state approval, the date of disposal is based on when approval is received or conditions are fulfilled. 

Real Property Gains Tax Exemptions 2024/2025

Under the Real Property Gains Tax (RPGT) Malaysia framework, RPGT exemptions are available in some specific scenarios. These exemptions help reduce the effective RPGT rate or eliminate tax liability altogether, depending on the nature of the transaction and the profile of the disposer.

For individuals, an RPGT exemption is available for RM10,000 or 10% of the chargeable gain, whichever is higher, on each disposal. Additionally, Malaysian citizens and permanent residents enjoy a one-time RPGT exemption on the disposal of one private residence.

RPGT exemption is available for certain disposals such as transfers between spouses, inheritance from deceased estates, gifts to the government or approved charities and so on. Other transactions qualifying for exemption under real property gain tax Malaysia include:

• Disposal of assets to Real Estate Investment Trusts (REITs) or Property Trust Funds.
• Securitisation of assets.
• Transfer of assets between spouses (if the disposer is a citizen).
• Gifts to the government, local authorities, or approved charities.
• Devolution of assets from a deceased individual’s estate.
• Compulsory acquisition under the law.
• Transfers within a corporate group (with DGIR approval), where at least 75% of the consideration is in shares.
• Family gifts (husband–wife, parent–child, grandparent–grandchild; donor must be a citizen)
• Court-ordered transfers between former spouses (if transferor is a citizen)

These RPGT Malaysia exemptions play a critical role in facilitating personal, charitable, and strategic business transactions without imposing unnecessary tax burdens.

RPGT Rates in Malaysia (2024/2025)

The RPGT rate varies depending on the holding period and the disposer’s residency status. 

RPGT Vs. Capital Gains Tax (CGT)

In Malaysia, Real Property Gains Tax (RPGT) and Capital Gains Tax (CGT) serve different purposes but both aim to tax profits from asset disposals. Understanding their differences is essential, especially in the context of the latest updates effective from 2024

From 1 January 2024, CGT Malaysia was introduced to cover disposals of capital assets like:

• Unlisted shares in Malaysian-incorporated companies
• Shares in foreign companies that derive value (directly or indirectly) from Malaysian real estate

The CGT rates are:

• 10% on net gains or 2% on gross disposal price for assets acquired before 1 January 2024
• 10% on net gains for assets acquired on or after 1 January 2024

Key CGT exemptions include:

• Share disposals related to Initial Public Offerings (IPOs) approved by the Securities Commission or Bursa Malaysia
• Group restructurings from 1 March 2024 to 31 December 2028, subject to regulatory approvals
• Venture capital-related disposals
• Foreign capital gains remitted into Malaysia between 2024 and 2026, provided economic substance requirements are met

While RPGT continues to apply to real property gain tax Malaysia, CGT fills the gap by taxing other capital asset disposals by companies, LLPs, co-operatives, and trust bodies. However, individuals are still exempt from CGT, which supports the targeted scope of this regime.

RPGT Filing, Payment & Compliance

For RPGT compliance in Malaysia, the disposer and acquirer of real property or shares in a Real Property Company (RPC) must submit their returns correctly and on time. Under the existing framework, both parties must file their RPGT returns with the Inland Revenue Board (IRB) within 60 days of the disposal date. The disposal date is typically defined as the date of the written agreement. However, iIn the absence of a written agreement, the disposal date is determined by the earliest date of full payment or legal completion of the transfer process.

A self-assessment system for RPGT in Malaysia was introduced on January 1, 2025. With this system in place, the return filed by the taxpayer will be alleged to be an assessment from the Director General of Inland Revenue, streamlining the assessment process. 

To ensure tax collection, the acquirer is required to withhold and remit part of the purchase consideration in certain situations especially if the transaction is in cash:

• 7% of the total acquisition price if the disposer is a non-citizen, non-permanent resident, or a foreign company.
• 5% if the disposer is a Malaysian-incorporated company, trustee, or society and the property is disposed of within 3 years.
• 3% for all other disposers.

The withheld amount must be remitted to the IRB within the same 60-day window. This total is applied towards the RPGT liability of the disposer. Currently, RPGT payable must be settled within 60 days of issuing a notice of assessment. This will change to 90 days from the date of disposal effective January 2025, thus providing more flexibility for managing payments to the taxpayers.

Tax Planning Tips For Property Transactions

Time Your Disposals Wisely 

Holding onto real property for over five years can significantly lower your RPGT rate. For Malaysian citizens and permanent residents, the RPGT rate dropped to 0% after year six. For companies and non-residents, the RPGT rate falls to 10%, compared to 30%  if the disposal occurs within three years.

Utilize RPGT Exemptions

Take advantage of key RPGT exemption opportunities such as: 

• A one-time exemption for Malaysian citizens and permanent residents on the disposal of their private residence.
• A minimum exemption of RM10,000 or 10% of the chargeable gain (whichever is greater) for individuals.
• Transfers between spouses, parents and children, or grandparents and grandchildren, provided the donor is a citizen.

Leverage RPGT exemptions for intra-group transfers

For businesses, intra-group transfers of real property may qualify for RPGT exemption if they aim to improve operational efficiency and meet specific criteria. With prior DGIR approval, such transactions may receive favorable tax treatment, potentially deferring any tax liability until a future disposal.

Structure RPC Share Disposals Carefully 

With the introduction of Capital Gains Tax (CGT) in 2024, shares in a real property company (RPC) fall under CGT instead of RPGT. It’s crucial to know this difference when planning share disposals to avoid unexpected tax consequences.

Keep Detailed Records and Valuations 

Keeping proper documentation about acquisition, disposal, agreements and records of expenses is crucial for accurately calculating gains and justifying exemptions or reliefs during audits or assessments. 

Conclusion

Real Property Gains Tax (RPGT) remains a vital aspect of the Malaysian tax landscape, especially for individuals and businesses involved in property transactions. With the introduction of Capital Gains Tax (CGT) in 2024 and the transition to a self-assessment system for RPGT from 2025, stakeholders must stay updated and adapt to the evolving compliance requirements. As the regulatory environment becomes increasingly complex, especially with overlapping CGT provisions and RPGT obligations, it is crucial to approach with a strategic preparation. Whether you are disposing of land, property, or shares in a real property company (RPC), tailored planning will ensure compliance and potential savings.

How FastLane Group Can Help

At FastLane Group, we provide end-to-end support for individuals, companies, and foreign investors navigating RPGT Malaysia and CGT regulations. Our experienced tax professionals are equipped to assist you in structuring your property and capital transactions in the most tax-efficient way. Let us simplify the complexities of RPGT and CGT, so you can focus on maximizing business success. Contact us now for free consultation.