RPGT: Treatments of gifts

The gift of a chargeable asset by any person and the corresponding acquisition is deemed to be disposed at the market value of the asset.

In a situation where a gift is made and the donor and the done are related, i.e husband and wife, parent and child, or grandparent and grandchild, and the gift is made within 5 years after the date of acquisition of the asset by the donor, the donor is deemed to have received no gain and suffered no loss and therefore any gains will be exempted from RPGT. The donee is deemed to acquire the asset at the donor's acquisition price plus the permitted expenses incurred by the donor.

If the asset is transferred after 5 years from the date of acquisition, the donor is deemed to have disposed of the asset at market value on the date of transfer. As a result, the done is deemed to have acquired the chargeable asset at market value on the date of transfer.

However, if the chargeable asset is acquired as a gift upon the death of the donor, the recipient (done) is deemed to acquire the asset at its market value as on the date of transfer of ownership of the asset to the recipient.

Example 1:

On 31.05.2013, Encik Ali gave his daughter, Cik Nain one of his house which he purchased on 01.09.2009 for RM190,000. The permitted expenses amounted to RM4,000. The market value of the house on 31.05.2011 was RM210,000.

Since it was a gift from the parent to his child, there is no chargeable gain or allowable loss from the transfer of the above property.

Disposal price deemed to be (RM190,000 + RM4,000) = RM194,000

Less: Acquisition price = RM190,000

Add: Permitted expenses = RM4,000

Chargeable gain = NIl

The acquisition price to Cik Nain is, therefore, RM194,000, which is the disposal price to Encil Ali.

Example 2:

a) On the occasion of her daughter's ACCA graduation on 31.03.2019, Mr. Kim gave her a flat which he purchases on 02.08.2005 for RM215,000. The market value on 31.03.2019 was RM450,000.

Ans: The graduation gift is deemed to be disposal (after 5 years) and Mr. Kim is deemed to have disposed of the flat at market value. Mr. Kim would be liable for RPGT as the rate of RPGT after 5 years is 5% (subject to change, depending on Government policy). His daughter is deemed to have acquired the flat at market value (i.e. RM450,000).

b) For the wedding on 02.04.2014, Mr. Kim gave her an apartment which he purchased in 2010 for RM380,000.

Ans: The wedding gift falls within the provision as it was a gift from parent to child made within 5 years after acquisition. Therefore, Mr. Kim is deemed to be in a "no gain no loss" situation in respect of the apartment. She is deemed to have outside the stipulated at the acquisition price paid by her father (RM380,000).

In conclusion, both transactions are gift from parent to child. The distinction between them lies in the holding period of the asset before parting as gift. It is the distinction that results in a different tax treatment in the hands of the daughter, if she disposes of the asset in the future.