My Real Property Gain Tax Rants

My legal firm now is close to a meltdown regarding this Real Property Gain Tax issue as clients want to sign and get their property transaction over and done with. The Real Property Gain Tax or better known as RPGT in the property fraternity is a two-headed monster which is making a comeback as government wants to get a new source of revenue. It was shoved under a carpet for a while between 1st April 2007 until 31st December 2009. And yes, there are still days for one to sell their property and keep all the money that they gain (if any) for themselves and not pay any taxes to the government. There are 15 days or 14 days for you to do that according to whether you work in Selangor or other places.

What is RPGT actually? It is a tax which is imposed on those who makes money out of disposing their property. Before 1st April 2007, there was a tier where you will not pay any RPGT after the fifth year of holding to the property and then disposing of it. So, if you inherit a property 10 or 30 years ago or you own part of a property in your kampung which you never pay one sen for as you have a rich relative who left it to you or if you just bought a property a year ago and has to move away and sell it, ALL OF YOU, now has to pay a 5% RPGT. No two ways about it. Of course, there are exemptions. Such as if you sell the house you lived in, you get once in a lifetime chance to get the exemption or if the transfer is between kins such as father or mother to their children or to between spouses. And there is the RM10,000-00 or 10% (whichever is higher) chargeable gain exemption.

The issue that is bugging us for the next 14 working days or so is whether if our client sign a Sale & Purchase Agreement before 31st December 2009, they will be exempted to pay the RPGT or not as the new amendment will come into force by 1st January 2010. Not all will be affected if what we, as lawyers,  understand the law to be is read carefully. They will affect those who buys leasehold property which mostly has the what is termed as Restriction in Interest where a State Government's approval need to be acquired before the property can be transferred. In Selangor, the state I am practising, except for certain place, most of the property in it is under this restriction. Parts of Subang Jaya, Shah Alam, Petaling Jaya and Damansara are under this type of restriction. This restriction is better known among property fraternity as 'Consent' or Consent to Transfer. And everyone knows the fastest you can get an approval from the state authority is 1 months or truthfully, it usually takes 3 months (although the State government has been saying they are fast!)

Why can't these clients get away with it if they signed before 2010 comes? It seems, there is an amendment done in 2006 where in Schedule 2 of  Real Property Gain Tax Act 1976, it is stated that there maybe some Sale & Purchase Agreements which are viewed as conditional contract. It explains that a conditional contract is where the disposal or acquisition requires approval from the government. And if there is such approval required, the date of that approval is the disposal date. So, if I sign a Sale & Purchase Agreement before 2010 but my property has a Consent attached to it, although I stamped the agreement before 2010, I may still be taxed with RPGT if my consent comes later.

As a property investor myself, who is currently restructuring all my property portfolio, including by refinancing one house, disposing one land, disposing one house and looking for either one or two more to add into it, I am adversely affected by the RPGT issue. I am selling one house to a Sarawakian bumiputra and that in itself is an issue which is another can of worm altogether. Malaysian may understand it and we in the legal fraternity has our own opinion about the consent issue.

We just got an email from a senior lawyer who is always advising the government on amendments that the procedure will still be the filing of the document showing how we acquire the land (may be Sale & Purchase Agreement or a certificate by the court for inheritance) and the document of disposal. And we just got the forms for the clients to sign. Seems that there is no change in the forms.

I hope the government will rethink on how to do this procedurally and sticks to how they charged it before. They should also impose a limit on how a property is acquired as this is supposed to curb speculators. This issue is affecting me on a working level and on a personal level. If you do have any question about this matter, email me or leave a comment at the comment section...

Luckily we managed to complete the sale of this house earlier...

...but for this we may or may not be so lucky...