The Real Property Gains Tax (Exemption) Order 2018 (‘Principal Order') has been amended by the Real Property Gains Tax (Exemption) 2018 (Amendment) Order 2021 (‘Amendment Order') which was gazetted on 9 February 2021 and came into operation on 10 February 2021.
To recap, the Malaysian Government announced at the presentation of the Malaysian Budget 2019 that real property gains tax (‘RPGT') at the rate of 5% would be imposed on the chargeable gain arising from the disposal of a chargeable asset by a Malaysian citizen or permanent resident in the sixth and subsequent years after the acquisition of the asset. Prior to this, the disposal by a Malaysian citizen or permanent resident of a chargeable asset in the sixth or any subsequent year after the date of acquisition of the asset was not subject to RPGT. At the same time, the Government also announced that the disposal by a citizen of low cost, low-medium cost and affordable houses with prices below RM200,000/- in the sixth and subsequent years after the acquisition of the asset will be exempted from RPGT.
The Principal Order came into force on 1 January 2019 to give effect to the exemption from RPGT announced by the Minister in relation to properties priced below RM200,000/-. Our Alert on the Principal Order is available here.
To summarise, the Principal Order exempts an individual who is a
Malaysian citizen from payment of PRGT on the chargeable gain
accruing on the disposal of a chargeable asset (other than shares
in a real property company) if the following conditions are
- The disposal is made in the sixth year after the date of acquisition of such chargeable asset or any year thereafter; and
- The consideration for the disposal of the chargeable asset is not more than RM200,000/-.
The Amendment Order, inter alia, amends the
Principal Order in the following respects:
- By varying the condition set out in sub-paragraph (2) above so that the RM200,000/- threshold applies to the consideration or market value, whichever is higher; and
- By introducing a further condition that has to be fulfilled in order to qualify for the exemption, that is, the total consideration or market value, whichever is the higher, for a chargeable asset as a whole is not more than RM200,000/-.
It appears that the new condition has been introduced to make it clear that where a disposal involves only part of a chargeable asset, e.g. a half-share of the chargeable asset, the RM200,000/- threshold will apply to the whole of the chargeable asset and not only to the part that is being disposed.
The Amendment Order has tightened the conditions that have to be satisfied to qualify for RPGT exemption under the Principal Order. Henceforth, to qualify for the exemption, both the consideration and the market value of the chargeable asset as a whole have to be RM200,000/- or less.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.