Capital Gains Tax and Real Property Gains Tax

INTRODUCTION

Capital Gains Tax
The scope of the Income Tax Act 1967 has been expanded to tax gains or profits from the disposal of capital assets. Notwithstanding the above, gains or profits from the disposal of capital assets situated in Malaysia are exempted from tax pursuant to Paragraph 38, Schedule 6 of Income Tax Act 1967 except for gains or profits from the disposal of shares of companies incorporated in Malaysia that are not listed on the stock exchange as well as shares of controlled companies incorporated outside Malaysia holding real property directly or indirectly in Malaysia. This effectively means that in respect of capital assets situated in Malaysia, only the disposal of unlisted shares of companies incorporated in Malaysia and shares of controlled companies incorporated outside Malaysia which hold real property directly or indirectly in Malaysia are taxable.

Real Property Gains Tax
Whether it’s a property investor, an owner simply looking to sell his home to purchase a dream home or a corporate group engaging in a corporate restructuring exercise, it is important to be aware of all costs associated with a real estate transaction including Real Property Gains Tax (RPGT) in Malaysia. Real property is defined to mean any land situated in Malaysia and any interest, option and other right in or over such land. The effect of the definition of real property is that RPGT can be levied on interests or ownerships which amount to less than a full title to the land. RPGT is a form of capital gains tax levied on profits arising from the disposal of real property or Real Property Company (RPC) shares.

With effect from 1 January 2024, the RPC provisions in the RPGT Act 1976 shall not apply to an acquisition or a disposal of any shares by persons chargeable to Capital Gains Tax, except for a Labuan entity as provided under the Labuan Business Activity Tax Act 1990.

COURSE OUTLINE

CGT

1. Special Derivation Rules for Shares of Foreign Controlled Company Holding Real Property Directly or Indirectly in Malaysia

2. Basis of Assessment

3. Treatment as a separate source of gains or profits

4. Rate of Tax

5. Computation of Adjusted Income

6. Exemptions from CGT

7. Certain Transactions Deemed to be at Market Value

8. Treatment of Loss

9. Date of Disposal and Acquisition of Capital Asset

10. Capital Asset Taken into Trading Stock

11. Compliance Requirements – submission of tax returns and payment due date

12. Case studies and examples

RPGT

1. Definition of Real Property and the imposition of Real Property Gains Tax (RPGT)

2. The determination of Real Property Company (RPC)

3. Acquisition Price and Disposal Price

4. Exemptions available to individuals and companies

5. Computation of RPGT

6. Income Tax vs Real Property Gains Tax

7. Market value of the property on 1 January 2013 as deemed acquisition price

8. The obligations of the disposer and acquirer under the RPGT Act, 1976

9. Latest updates on RPGT related matters

10. Case Studies

PROFILE(s)

Harvindar Singh is a Fellow of Chartered Association of Certified Accountants and is a member of the Malaysian Institute of Accountants (MIA) as well as the Chartered Tax Institute of Malaysia (CTIM). Harvindar was attached to the firms of PWC and E&Y as a tax consultant and is currently the Managing Partner of Harvey & Associates, a boutique firm that specialises in taxation consulting services as well as the Tax Partner in SCS Global Consulting (M) Sdn Bhd. Harvindar has more than 29 years of extensive experience in taxation advisory, transfer pricing documentation preparation, tax planning as well as tax audits and investigations and he serves as a Tax Specialist to numerous corporate entities such as SK International (M) Sdn Bhd and other MNEs and organisations. He is currently serving as the Chairman of the Editorial Board of the Budget Commentary and Tax Information Booklet which is produced jointly by MIA, CTIM and MICPA. Mr Harvindar is a Council Member of CTIM.