Real Property Gain Tax

1.0 Introduction of Chargeable Asset

A chargeable asset includes real property and shares in real property companies. Real property is defined as " any land situated in Malaysia and any interest, option or others right in or over such land".
Land includes:
a. the surface of  the earth and all substance forming that  surface
b. the earth below the surface and substances therein
c. buildings or structures attached to land
d. standing  timber, crops and other vegetation growing on land, and
e. land covered by water

2.0 Who is Chargeable (section 6 and Schedule 1 of the RPGT Act 1976)

- every person whether resident or non resident in Malaysia, is chargeable in respect of any chargeable gains he has made on the disposal of a chargeable asset.
- partnership
- incapacitated person
- non residents
- rules and ruling chiefs
- companies
- A Hindu Joint Family
- executors
- trustees

3.0 Disposal Price

The disposal price of an asset is the consideration received less any of the following expenses:
a. expenses wholly and exclusively incurred in enhancing or preserving the value of the asset such as alterations, improvements or extensions.
b. expenses incurred, after acquiring the asset, in respect of preserving or defending the title to the asset.
c. incidential expenses relating to the disposal of the asset (fees, commissions, lawyers, surveyours)
d. advertising costs to find buyers.

4.0 Acquisition Price

The acquisition price of an asset is the consideration paid plus any incidential costs or expenses that are relevant such as:
- fees, commissions, remuneration paid for professional service, e.g. accountants, lawyers, surveyours, architects.
- costs of transfer, e.g. stamp duty
- cost of advertising to attract sellers.

Any revenue expenses that can be claimed under ITA 1967 will not rank for deduction in arriving at the acquisition price, such as interest on money borrowed to buy the propertyy. sch 2, Paragraph 4 also provides that in computing the acquisition price, the following receipts must be deducted:
a. compensation or similar receipts for any damage, injury or destruction to the asset.
b. receipts under an insurance policy for any damage, injury to the asset.
c. any deposits forfeited in respect of the asset.

5.0 Chargeable Gains

- chargeable gains = disposal price > acquistion price
- allowable loss = disposal price < acquisition price
- real property gains tax is computed on a scale rate depending on the ength of ownership of the chargeable asset.
- the  relief for allowable loesses is given as a deduction from the total tax assessed on the chargeable gains of a taxpayer for the y/a in which the lost arises.

Any amount of unabsorbed tax relief for losses may be carried forward to future years. The tax relief for losses is computed at the rate of tax applicable to the category of disposal giving rise to the loss.