3 April, 2019
Introduction
The Finance Act 2018 [Act 812] (“Finance Act”) was introduced to amend the Income Tax Act 1967 [Act 53] , the Promotion of Investments Act 1986 [Act 327], the Stamp Act 1949 [Act 378] (“Stamp Act”), the Real Property Gains Tax Act 1976 [Act 169] (“RPGT Act”), the Labuan Business Activity Tax Act 1990 [Act 445], the Service Tax Act 2018 [Act 807] and the Sales Tax Act 2018 [Act 806].
In this article, we will discuss the following:
a. the amendment to the Stamp Act, effected in section 68(d) of the Finance Act; and
b. amendments to the RPGT Act, effected in sections 69, 69a, 69b and 70 of the Finance Act.
The above amendments came into operation on 1 January 2019.
(A) Stamp duty on instrument of transfer of property
Pursuant to section 68(d) of the Finance Act, Item 32A of the First Schedule to the Stamp Act has been amended to read as follows:
This means that effective 1 January 2019, the stamp duty rate that is applicable for any instrument of transfer of a property that is valued in excess of RM1 million has been increased from 3% to 4%.
However, the Stamp Duty (Remission) (No. 2) Order 2018 [P.U. (A) 376] which came into operation on 1 January 2019 has provided for a remission of RM1 for every RM100 or fractional part of RM100 of the consideration value or market value of the property, whichever is greater, if the following conditions are satisfied:
i. the instrument of transfer of the property is stamped on or after 1 January 2019 but not later than 30 June 2019; and
ii. the market value of the property is in excess of RM1 million but not more than RM2.5 million.
The effect of the Stamp Duty (Remission) (No. 2) Order 2018 is to defer until 30 June 2019 the new stamp duty rate to take effect for properties the market value of which is not more than RM2.5 million.
(B) Real property gains tax
1. Increase in real property gains tax rate
The Finance Act has amended the RPGT Act to the effect that from 1 January 2019:
a. for individuals (citizens and permanent residents) — real property gains tax at the rate of 5% will be imposed on disposals of chargeable assets notwithstanding that the chargeable assets have been held by Malaysian citizens or permanent residents in Malaysia for more than five years; and
b. for companies and individuals (non-citizens and non-permanent residents) — the real property gains tax rate for disposal of chargeable assets made after the fifth year from the date of acquisition of the said chargeable assets has been increased from 5% to 10%.
With effect from 1 January 2019, the following revised rates will be applicable:
|
Date of Disposal after the Date of Acquisition |
Companies |
Individual |
Individual |
|
Within 3 years |
30% |
30% |
30% |
|
In the 4th year |
20% |
20% |
30% |
|
In the 5th year |
15% |
15% |
30% |
|
In the 6th year and thereafter |
10% |
5% |
10% |
However, the following exemption orders which came into operation on 1 January 2019 provide for exemption from payment of real property gains tax on the chargeable gain accruing on the disposal of a chargeable asset, other than shares, in the circumstances set out in the respective exemption orders, as follows:
a. Real Property Gains Tax (Exemption) Order 2018 [P.U. (A) 360]
Under this exemption order, a Malaysian citizen will be exempted from real property gains tax on the chargeable gain for the disposal of a chargeable asset, other than shares, if the following conditions are fulfilled:
i. the disposal of the chargeable asset is made in the sixth year from the date of acquisition of the chargeable asset or subsequent years; and
ii. the disposal price does not exceed RM200,000.
b. Real Property Gains Tax (Exemption) (No. 3) Order 2018 [P.U. (A) 372]
Under this exemption order, a Malaysian citizen or a permanent resident in Malaysia will be exempted from real property gains tax on the chargeable gain for the disposal of a chargeable asset, other than shares, if the following conditions are fulfilled:
i. the disposal of the chargeable asset is made in the sixth year from the date of acquisition of the chargeable asset or subsequent years; and
ii. where the contract for the disposal of a chargeable asset is conditional upon the approval of the Government or a State Government and is executed before 1 January 2019 but such approval by the Government or the State Government is obtained from 1 January 2019.
2. Market Value as at 1 January 2000 as Acquisition Price
In addition, the RPGT Act has been further amended by the Finance Act to provide that the market value of the property as at 1 January 2000 will be used as the acquisition price in calculating the real property gains tax for the disposal of chargeable assets that were acquired before the year 2000.
For further information, please contact:
Tan Yin Lu, Shearn Delamore & Co
yinlu.tan@shearndelamore.com
