Latest Real Property Gains Tax amendments that affect non-citizens and non-permanent residents

Contributed by Ng Choon Yon and Greyson Siow Wai Pin from Messrs Ismail Sabri, Wee & Wong (ISW Legal IP)

 

From Left: Ng Choon Yoon and Greyson Siow Wai Pin from Messrs Ismail Sabri, Wee & Wong (ISW Legal IP)

From Left: Ng Choon Yoon and Greyson Siow Wai Pin from Messrs Ismail Sabri, Wee & Wong (ISW Legal IP)

In budget 2017, the government announced three amendments to the Real Property Gains Tax (RPGT) that will affect non-citizens and non-permanent residents that came into effect on Jan 1, 2018.

Amendment 1

If you are a Purchaser/Acquirer acquiring a property from a person who is not a citizen or a Permanent Resident, you are now legally required to retain, either the whole of the cash consideration or 7% of the purchase consideration, whichever is lesser, and to remit the monies retained to the Inland Revenue Board (IRB) within sixty days of the signing of the Sale and Purchase Agreement (SPA).  

There has been an increase in the retention sum from 3% to 7% of the purchase consideration. This is a significant change that will affect non-citizens and non-permanent residents especially those looking into selling their properties as they need to make prior arrangements. This is because the Vendor/Seller can expect to receive only 30% of the 10% deposit for the purchase price in a standard SPA as the remaining 70% has to be retained and remitted by the Purchaser following the new amendments.  

On the disposal of property by a Malaysian citizen or permanent resident, there has been no change in the amount of retention sum, and it remains at 3% of the purchase consideration.  

Amendment 2

An amendment is made to Schedule 2 Paragraph 3 of the Real Property Gains Tax Act 1976 (RPGT Act) to provide that the disposal price shall only be deemed to be equal to the acquisition price in the case of:

(a) a transfer of asset between spouses, where the asset to be disposed of is owned by the husband or the wife, who is a citizen; and

(b) a transfer of asset to a company, where the asset to be disposed of is owned by an individual or the individual’s wife, who is a citizen, or where the asset is jointly owned by the individual and his wife, both of whom are citizens, or where the asset is jointly owned by the individual and his connected person, both of whom are citizens.

As you may note, this “no gain, no loss” rule does not cover the transfer of asset owned by a non-citizen. Previously, there was no requirement for the disposer of the chargeable asset to be a Malaysian citizen for the sale transaction to be deemed as a “no gain, no loss” transaction. This means that in the event a non-citizen making a profit from the sale, the IRB will reinstate and treat it as a gain for RPGT purposes.  

Amendment 3

Part III of Schedule 5 of the RPGT Act has been amended and expanded to apply the same tax rates imposed on an individual who is not a citizen and not a permanent resident to the executor of the estate of a deceased person who is not a citizen and not a permanent resident.

With these three amendments to the RPGT Act, it is clear that the non-citizens and non-permanent residents will no longer be given the same treatment as the Malaysian and permanent residents.

The current applicable RPGT rates are set out in the table below:

 

Holding Period Citizen or Permanent Resident Company Non-Citizen or Non-Permanent Resident
within 1 year 30% 30% 30%
within 2 years 30% 30% 30%
within 3 years 30% 30% 30%
within 4 years 20% 20% 30%
within 5 years 15% 15% 30%
Beyond 5 years 0% 5% 5%

Source:  the Corporate and Conveyancing Practice Group of Messrs Ismail Sabri, Wee & Wong (ISW Legal IP)

(c) ISW Legal IP. All rights reserved. The views and opinions attributable to the author or editor of this publication are not to be imputed to the firm. The contents of this publication are intended for purposes of general information and academic discussion only. It should not be construed as legal advice or legal opinion on any fact or circumstance.

 

About the Contributors

Ng Choon Yon and Greyson Siow Wai Pin is partners at Messrs Ismail Sabri, Wee & Wong (ISW Legal IP). The firm is licensed to practice as a Registered Patent, Trademark and Industrial Design Agent and thus expanded its practice to include Intellectual Property and Information Technology laws. Currently, the firm’s practice area has also expanded to include Corporate and Commercial laws to serve a wider range of its clients’ needs. More information can be found at ISW Legal

 

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