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Budget 2020 – Real Property Gains Tax Base Year To Be Revised

Finance Minister, Lim Guan Eng, in tabling Budget 2020 in Parliament, said that to “enhance the RPGT treatment”, the base year for real property gains tax will be revised to 1 January, 2013.

When the 0% real property gains tax for disposal in the sixth year or thereafter was removed earlier this year, provisions were also introduced whereby for properties acquired prior to 1 January, 2000, the market value as at 1 January, 2000 is deemed as the acquisition price.

The removal of the 0% proved to be unpopular, as one would imagine. The problem is that even for properties acquired a long time ago, real property gains tax is payable.

Changing the base year to 1 January, 2013 means that for properties acquired prior to 1 January, 2013, the market value as at 1 January, 2013 will be deemed as the acquisition price, regardless of the actual date of acquisition and the actual acquisition price. 

However, this does not change the fact that real property gains tax will still be payable for disposal in the sixth year or thereafter.

According to the Finance Bill 2019, this change will be deemed to come into operation on 12 October, 2019.

Comments

Bearing in mind that real property gains tax is charged in respect of chargeable gain accruing on the disposal of properties (i.e. disposal price minus acquisition price), this change to the base year may reduce the net chargeable gain resulting from the disposal of properties acquired prior to 1 January, 2013 and therefore the total amount of real property gains tax payable thereon.

The Finance Bill 2019 needs to be passed for the change to become law. If, for whatever reasons, the Finance Bill 2019 is not passed, taxpayers will not be entitled to rely on this.

If one is in the process of disposing property and this change to the base year can make a difference to the real property gains tax payable, one should consider putting on hold the disposal until the Finance Bill 2019 is gazetted. 

Contributed by:

Vijey M. Krishnan (Partner) 
(T): 603 – 2632 9868
(E): mkvijey@rdl.com.my

William Wong (Senior Associate)
(T): 603 – 2632 9905
(E): williamwong@rdl.com.my

Nicholas Mark Pereira (Senior Associate)
(T): 603 – 2632 9911     
(E): nicholaspereira@rdl.com.my