Monday October 26, 2009
5% cap for real property gains tax
PETALING JAYA: The Government will issue an order to cap the real property gains tax (RPGT) at 5%.
Second Finance Minister Datuk Seri Ahmad Husni Hanazdlah reiterated the RPGT of 5% was imposed on gains from the disposal of real property irrespective of the holding period and category of owner.
“In the Budget 2010 presentation, the Government proposed that real property gains tax at a fixed rate of 5% be imposed on the gains from the disposal of real property effective Jan 1, 2010,” Husni said in a statement yesterday.
“The rate imposed is irrespective of the holding period and the category of the owner,” he added.
The 5% rate will be implemented through the Real Property Gains Tax (Exemption) Order 2009.
“This order will be gazetted as soon as possible and is effective Jan 1, 2010.
“Therefore, the current rate of RPGT, which is higher than 5% as in Schedule 5 of the Real Property Gains Tax 1976, will no longer be applicable,” he said.
However, exemptions to individuals are given as follows:
● The level of exemption is increased from RM5,000 to RM10,000 or 10% of the chargeable gains, whichever is the higher;
● Gifts between parent and child, husband and wife, grandparent and grandchild; and
● Disposal of a residential property once in a lifetime.
There was some confusion when after the budget announcement last Friday, Deloitte Malaysia country tax leader Ronnie Lim said in a statement that the highest rate for RPGT was 30%.
Based on the Finance Bill, Lim said, disposal within two years of acquisition will be taxed 30%; in the third year, it will be 20%; in the fourth year 15%, while disposal within five years and beyond, will still be subject to 5% tax.
“Through our press release of Oct 23 in connection with Budget 2010, we reported on the proposed changes to the Real Property Gains Tax (RPGT) Act 1976 as a result of the Finance Bill.
“The Finance Bill retained all the holding period sensitive rates of RPGT in force prior to the suspension of that tax (in April 2007) but, in respect of individuals, introduced a 5% tax rate in place of a nil rate for disposals which take place after the fifth year from acquisition date.
“Apart from this rate change, the existing rates of RPGT in effect prior to the suspension of that tax were not altered by the Finance Bill,’’ Lim explained in a statement yesterday.
“The Ministry of Finance has issued a press release on the matter and explained that a 5% rate of RPGT, irrespective of holding period and category of tax payer, individuals or companies, will be introduced through a ministerial exemption order.
“When the ministerial exemption order is issued and gazetted, the rates of tax in the RPGT Act will be modified by the rates in the order.
“Generally, such orders are temporary in nature and specify a commencement and cessation date. These orders may also be renewed or revoked.
“As long as the order is in force, the rates of RPGT in the Act, which begin at 30%, will be over-ridden by the rates to be specified in the order,’’ Lim said, adding that a flurry of property transactions was expected before the end of the year.
Source: theStar Online
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Saturday October 24, 2009
Property gains tax makes comeback
Reports by YAP LENG KUEN, ANITA GABRIEL, ERROL OH, JAGDEV SINGH SIDHU, ANGIE NG, RISEN JAYASEELAN, HANIM ADNAN, THEAN LEE CHENG, DALJIT DHESI, IZWAN IDRIS, FINTAN NG, YEOW POOI LING, YVONNE TAN, LEONG HUNG YEE, SHARIDAN M. ALI, EILEEN HEE, EUGENE MAHAL
THE Government has proposed to reimpose real property gains tax (RPGT) for gains arising from property disposal.
Based on the Finance Bill, disposal within two years of acquisition will be taxed 30%; in the third year, it will be 20%; in the fourth year 15%, while disposal within five years and beyond will still be subject to 5% tax.
The latest measure, which will come into effect in January next year, has been described as “a knock-out punch” by Deloitte Malaysia country tax leader, Ronnie Lim.
“It was merely four short sentences in the 2010 Budget speech. However, that short reference to RPGT carried a knock-out punch,” Lim said in a statement yesterday.
He pointed out that from the speech itself, many would have thought that a low rate of tax of 5% would apply to most gains arising from disposals of real property.
“Be prepared for a shock – this is not the case and the highest rate of RPGT will be 30%,” he said.
Most rates of RPGT from January 2010 will be restored to those prevailing immediately before its suspension in April 2007.
Lim said one notable difference was that the exemption from tax for disposals after the fifth year of acquisition has been removed.
“Even where a property was purchased over 20 years ago, a gain on disposal from 2010 will attract 5% RPGT (without any indexation of acquisition price to reflect current purchasing power of the ringgit),” he said, adding that a flurry of property transactions could be expected soon.
Concurring with Lim, OCBC Bank Bhd director and chief executive officer Jeffrey Chew described the measure as a counter-productive move in efforts to encourage property investments among local and foreign investors, particularly to attract real estate investment trust investors.
“Furthermore, this would make Malaysia’s property market less attractive compared to other neighbouring countries in the region despite our property prices being among the lowest in the region,” Chew said.
However, Khong & Jaafar Sdn Bhd managing director Elvin Fernandez gave the thumbs up to the RPGT, saying “it shows that Malaysia, like other Asian countries, is not for unfettered speculation.”
“The RPGT is an anti-speculative tool, not a revenue earner for Government coffers,” he added.
To promote home ownership and enhance the people’s quality of life, the Government has also proposed a scheme to allow Employees Provident Fund (EPF) contributors to utilise their current and future savings in Account 2 for home purchase.
Meanwhile, to encourage green technology in the property sector, building owners obtaining Green Building Index (GBI) Certificates from Oct 24 until Dec 31 will be given income tax exemption equivalent to the additional capital expenditure in obtaining such certificates.
Those purchasing buildings with GBI certificates from developers will be given stamp duty exemption on instruments of transfer of ownership.
The exemption amount is equivalent to the additional cost incurred in obtaining the GBI certificates. This exemption is given to buyers who execute the sale and purchase agreement from Oct 24 until Dec 31, 2014.
And to promote rehabilitation of abandoned housing projects, the Government will consider extending appropriate financial assistance to rehabilitate low and medium-cost houses based on the existing project list.
An allocation of RM200mil will be provided under the housing and local government ministry.
Under the Government’s initiative to provide housing facilities for the low and middle-income groups, the National Housing Department will provide 74,000 low-cost houses to be rented in 2010.
Source: theStar Online
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