Real Property Gains Tax (RPGT) Exemption and Rates

Real Property Gains Tax Exemption

The RPGT in Malaysia is levied on the disposal of real property at different rates varying from 0% up to 30% depending on how long that property has been held. There are particular instances though in which gains from real property disposal are exempted from this tax.

Knowledge of the exemptions in relation to RPGT is very important when it comes to real estate transactions so as to devise effective strategies. We shall now discuss some exceptions from RPGT and those which are termed as “no gain no loss”.

Transactions Exempted From RPGT

• Private Residence Exemption: A written election by a Malaysian citizen or permanent resident to claim one-time exemption on RPGT is available when they dispose of their private residence.
• Exemption under Schedule 4: An individual will be eligible for an exemption up to RM10,000 or ten percent of the chargeable gain amount.
• Special Concession for Malaysian Citizens: There is no RPGT on selling of three residential houses to Malaysian citizens from 1 June 2020 till 31 December 2021.
• Asset-Backed Securitization Transaction: Repurchasing of chargeable assets for disposal whether to the original seller or SPV falls under the RPGT exemption.
• REITs and Property Trust Funds: Sales of assets to RPGT-approved REITs and property trust funds are also exempted from RPGT.

No Gain No Loss Transactions 

• Devolution of Deceased’s Assets: There is no gain or loss upon the transfer of assets to a trustee or legatee on the death of any person.
• Spousal Transfer: This transfer between spouses where the disposer is a citizen does not cause any gain or loss.
• Gifts to Approved Entities: There is neither gain nor losses on gifts to the Government, state Government, local authority or authorized charities.
• Compulsory Acquisition Disposal: If there is compulsory acquisition of any assets under any law, it does not occasion a ‘gain’ or ‘loss’.
• Transfer as Security: A gain or loss does not occur as a result of transferring assets as security.
• Nominee Transfer: In cases where an individual transfers funds to a nominee without a vested interest in the assets, no gain or loss is made.
• Transfer to Controlled Company: If an individual gives assets to a company the controls, or the company controlled by their spouse or connected person and receives shares of consideration exceeding 75%, such transaction will cause no gain nor loss.
• Approved Syariah Financing Scheme: The disposal of chargeable assets in an approved financing scheme under Syariah principles does not involve gains or losses.
• Family Member Transfers: The transfers between spouses, parent and child, and grandparent and grandchild, where the donor is a citizen are deemed as gifts and thus have no tax consequences.
• Intra-Group Company Transfer: Transfer of real property from one company to another within the same group and where the Director General of Inland Revenue has been given prior approval, for shares of at least 75%, doesn’t create any gain or loss.

Real Property Gains Tax (RPGT) Rates

The rate for RPGT varies depending on the category of disposer and period of chargeable asset being held. Parts of categories are defined in Schedule 5 to RPGT Act with regard to disposer.

Part 1 Schedule 5 RPGT Act

Except part II and part III. For example, individual Malaysian citizens and partners.

Part II Schedule 5 RPGT Act

Disposer is a company incorporated in Malaysia or a trustee of a trust or body of persons registered under any written law in Malaysia.

Part III Schedule 5 RPGT Act

Disposer who is not citizen and not permanent resident, or an executor of the estate of a deceased person who is not a citizen and not a permanent resident, or a company not incorporated in Malaysia.

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