From 1 January 2019 onwards RPGT will have to be paid regardless of how long you have owned your property. Real Property Gains Tax (RPGT) is the share of money you must pay to the government from the profit you make in selling your house.
Previously under Najib Razak RPGT in 2014 was hiked up to the highest rates in its history. This time Malaysia’s first-time populist coalition government has outdone its maligned predecessor. The new government has announced that not only will those high rates increase but RPGT will also now be perpetually payable.
Until 31 December this year if you are the owner of your property for more than five years then you pay zero % RPGT if you are Malaysian and 5% RPGT if you are a company or a foreigner.
Effective 1 January 2019 the rates of RPGT for property sold after five years is 5% for Malaysians and 10% for foreigners.
RPGT rates for property sold within three years and on its fourth and fifth years remain fixed at 30%, 20% and 15% respectively.
There are people who see tax as a great equalizer, that RPGT is a necessary evil to curb greedy speculators who drive up house prices. They feel that RPGT imposed on property sellers and landowners is fair since these wealthy people enjoy more of society’s resources and comfort. Indeed some form of rich tax is needed to reduce Malaysia’s income gap which is the widest in Asia and one of the worst wealth distributions in the world.
To do this the new government will do well to also look into the following:
- Exempt all houses that are principal place of residence from RPGT. At present sellers are only given a once in a lifetime exemption. Any owner who can prove that his house has been used as a home should not have to pay RPGT.
- Make owners of multiple houses and commercial units fork out more for RPGT but be lenient on the small house owner who may be selling his house at a better price to upgrade his family or maybe just to survive inflation.
- Abolish or reduce the present requirement to retain and send to the government within 60 days of the sale 3% (Malaysian) or 7% (foreigner) from the property price as security for RPGT. The deposit in Malaysia is normally 10% of the price so such large retention for RPGT will leave a house seller with no cash after he pays his agent and lawyer. He has to wait 6 months or more to get his money from the sale and up to a year for his RPGT refund from the government. It is discouraging to note that Malaysia holds a world record for using the longest average time to transact a property deal.
- Allow interest paid for bank loans to be deducted for RPGT. Since RPGT is going to be perpetual and applicable many years after you first bought your property most gain on property will not be real but inflationary.
Painful indeed. Agreed that the new gov should allow interest paid for bank loans to be deducted for RPGT. My cousin sold his https://grand-ion-majestic.com unit and had to pay a lot of tax.