There they go again. Changing the law as the feedback for a particular amendment was not well received by the people. As much as the rakyat will rejoice about the way things have developed, it just give the business community a scare as they may have to take into account the uncertainty in the cost of doing business. But, I bet, the way things have turn out for the dreaded Real Property Gain Tax will be received well by all.
Our Prime Minister, Datuk Seri Najib has announced very late last night (23.12.09) that the RPGT which is to be taxed on all property transaction, no matter how long you have held it in your possession, will only now be taxed on any transaction for property held lesser than 5 years. The 5 years duration seem to go back to the original timeframe which was the determining factor of how much RPGT you have to pay before its deferment in April 2007.
Before April 2007, a tier of RPGT which starts at 30% and finally to none for individual was levied on any property transaction which stops after the fifth year anniversary. For company which sell any of their property, the RPGT will stop at 5% even after passing the five year line.
Then in the last Budget 2010 announcement, the Prime Minister who was also the Finance Minister announced an RPGT scheme where no matter how long (or how short) you hold a property in your hands and then sell it with a profit (called 'chargeable gains' in the RPGT Act), you have to pay a flat RPGT of 5%. That means, if you have in your possession a land which you inherit from your parents or grandparents or even an ancestor whom you never meet or the land was in your family since time immemorial, when you sell it and make any gain, you will have to pay the 5% tax.
It was quite absurd as the only exemption is the once in a lifetime exemption which you can apply when you elect any of the house that you sell as your resident; a property transaction between spouses; parents and child; or between grandparents and their grandchild. There is also the across the board exemption of RM10,000 which is given to all transactions. And of course, the cost when you buy the property, the maintenance and the renovation that goes into the house can help you lessen it.
I had written a chapter specifically about RPGT in my book "39 Questions You Should Ask Your Lawyers When You Buy A Property in Malaysia" explaining how does one calculate and how to lessen it. Now, with this new development, I am not sure whether I should publish a half baked or half-confirmed law or just amend it to generalise it more....
However, as I tweeted yesterday at kruel74 (add me up), I did say "As a person who is selling a few properties since last month, I am glad that RPGT has been changed to another form, but as an author, I am now stuck with a manuscript which I have to amend".