How to Calculate 2010 Real Property Gains Tax


In Malaysia, real property gains tax (RPGT) is imposed with the intention to curb property speculations. It is imposed on the gains on disposal of Malaysian landed properties and the rate varies from 5% to 30% depends on the holding period.

With effect from April 1, 2007, the Government decided to exempt RPGT in view of the economic slowdown and it was aimed at assisting property developers in disposing of their houses, and spearheading the economic progress.

Prime Minister Datuk Seri Najib Tun Razak, who is also Finance Minister, on Oct 23, however, reintroduced RPGT to put in place a fair administration of taxes.

In a nutshell, an equitable system will now be in place as income tax are imposed on income derived by any person in Malaysia while RPGT, on capital gains on disposal of landed properties. There will not be any loss of revenue to the Government.

In the Budget 2010 speech, the Government’s intention was clear. It is to ensure that the Malaysian tax system is equitable and continue to be able to generate revenue for development purposes. In line with this, the Government proposed that a tax of 5% be imposed on gains from the disposal of real property from Jan 1 2010. Any agreements signed between now till Dec 31 remains RPGT exempted.

Finance Minister II Datuk Seri Ahmad Husni Mohamad Hanadzlah then, exercising his power under section 9(3) of the Real Property Gains Tax Act 1976 (RPGTA), gazetted Real Property Gains Tax (Exemption) Order 2009 which will take effect from Jan 1, 2010. A fixed RPGT rate of 5% on gains from property gains is achieved through the application of this exemption order.

Malaysian individuals are accorded tax exemption of 10% of the chargeable gain (CG) from the computation of RPGT3. Thus, this would effectively mean that they will be paying less than 5% of RPGT rate while companies continue to pay 5%.

The RPGT Exemption Order exempts any person from the application of Schedule 5 of the RPGTA on the payment of tax on the CG arising from any disposal of assets on or after Jan 1, subject to the condition that the amount of CG exempted shall be determined in accordance with the following formula: A/B x C where:

A = Tax on CG at the appropriate tax rate reduced by the Tax on CG at 5%;

B = Tax on CG at the appropriate tax rate;

C = Amount of CG

Effectively, the exemption formula can be simplified as follows:

Chargeable gain x (Appropriate rate – 5%) / Appropriate rate

The appropriate tax rate to be applied on this exemption order depends on the holding period of the property which is summarised as per Table A.


Illustration: Malaysian citizen individuals

Chia Lat acquired a condominium in Bangsar for RM500,000 on Jan 1, 2008. On March 31, 2010 he decides to dispose the property for RM780,000. The RPGT to be paid by him would be as per Table B.


Illustration: Companies

Using the same example as above, and assuming the taxpayer is a Sdn Bhd, the RPGT payable would be as per Table C.


Mathematical confusion

The mathematical formula stipulated in the RPGT exemption basically restores to the fact that the RPGT is 5% on the CG. This is the mathematical equation:

Assuming the appropriate tax rate is y and CG is x, then the RPGT payable after the RPGT exemption would be :

[x – x(y – 5%)/y ] y =xy – xy + 5% x

= 5% of x

The Government has stated that the purpose of the RPGT is to have a fair administration of taxes. Thus the exemption is an interim measure to begin with RPGT of 5% taxes. In years to come, once the exemption order is revoked, RPGT payable would revert to the original position, ranging from 30% to 5%, depending on the holding period.

Policy reform

Currently, taxpayers are only required to keep accounting records for seven years under the law. It may not be feasible to impose 5% on the chargeable gain on gains derived from holding periods more than seven years. This would mean tax payers are required to keep their accounting records for an indefinite time to justify cost attributable to the acquisition.

It is therefore suggested that the Government impose 2% on selling price instead of holding periods exceeding seven years or as in the past, exempt these gains from RPGT. After all, the underlying purpose of RPGT is to curb speculation of properties rather than tax collection.

Moving forward, the Government may likely further align the taxes on landed transactions to be equitable with the income tax system. Therefore, it is crucial that the rakyat understand the Government’s overall objectives and appreciate that this exemption order is an interim measure to prepare the country for a complete restoration of the RPGT system when the time comes.

Once the country’s economy is paced and sustaining desired growth, this exemption may likely to be revoked and property gains will be back causing gains will be taxed at the appropriate rate.

Till then, this exemption order will continue to allow us to enjoy most of our short-term trading gains from real property transactions.

Dr Choong Kwai Fatt is deputy dean, Research and Development, Faculty of Business and Accountancy, University of Malaya.

Source : The Star

Update – This calculation was taken from The Star. However, one of brilliant 1-million-dollar-blog reader manage to identify that the calculation was wrong. Refer to comment from Joanne below for proper calculation.

7 comments… add one
  • YOur RPGT calculations in Table B is erroneous. Using the formula, a person with a longer holding period will have to pay a higher RPGT than the onw holding a shorter tenure.!

    For e.g for a person who has held for 5 years, RPGT is

    less 0 (no exemption imputed)
    CG 252,000
    Tax 5%
    RPGT 12,600

    • Yes, I get the same figure.

      Hmm, this article was taken from the star and written by Tax expert. Not sure why it is wrong.

  • I do agree that the computation is wrong.

    For individuals, we do not need to use that formula A/B * C.

    Below is the correct format of computation:

    Holding Period : 3 years

    Disposal Price : RM780,000
    Less Acquisition Price : (RM500,000)
    Chargeable Gain : RM280,000
    Less Exemption * : (RM28,000)
    Chargeable Gain To be Taxed : RM252,000
    Tax Rate : 20%
    RPGT Payable : RM50,400


    Holding Period : 5 years

    Disposal Price : RM780,000
    Less Acquisition Price : (RM500,000)
    Chargeable Gain : RM280,000
    Less Exemption * : (RM28,000)
    Chargeable Gain To Be Taxed : RM252,000
    Tax Rate : 5%
    RPGT Payable : RM12,600

    Note to * : Exemption is under Para 2, Sche 4 Exemption. This is for individuals only. 10% of chargeable gain or RM10,000 – whichever is HIGHER.

    I hope this cleared everyone’s doubt (though it’s a bit late now to discuss about it).

    • Thanks Joanne for the proper calculation. 🙂

  • from the above examples.. does it mean that if i’m charged RPGT i need only pay the RPGT? ie. so income tax no need to declare the profit from selling the property..
    thanks in advance 🙂

  • Danny, yes that is correct.

  • if i’m not mistaken, everybody got one time relief in a lifetime from RPGT. so if my house cost 200k, bought on april 2008 and i will dispose now. so how much i have to pay? please show calculation if i sell 300k and eligible for 1 time relief tq


Leave a Comment