Is 5  rpgt a tax on inflation property malaysia propsocial cover
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The 2019 Budget announcements, which were made last year, included the minimum of 5% Real Property Gains Tax (RPGT) for Malaysian and 10% for foreigners and companies.

The Finance Minister, during his announcement, noted that this will exclude the low, low-medium cost and affordable housing priced below RM200,000 and sold after the fifth year of ownership.

On the calculation of property gains tax for units purchased before the year 2000, the Government will use the market price on 1st January 2000 as the initial point of valuation.


What is the rationale for choosing 1st January 2000?

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Upon realising the potential negative implications of the revised RPGT rates, the Government is now saying that the reference date for the valuation of the properties will not be the original date of acquisition but will use the market price on 1st January 2000 as the ‘initial point of valuation’.

What is the rationale for picking this reference date? In addition, is the reference date going to be applied uniformly for all types and classes of properties and applicable throughout the country?

While setting the market value effective on “1st January 2000” will result in potentially lower RPGT especially for properties bought decades before the year 2000, the announcement by the government brings about more unanswered questions.


Assessment of profit does not take into consideration the interest paid by the property owners to the financier

In the current manner of computation of the profit made, the interest paid to Banks for the property loan is not taken into consideration.

Only interest paid to the bank for progressive releases of the loan made prior to the issuance of the CCC is taken into consideration as part of the acquisition costs.

As such it may appear as if a substantial profit has been made when in actual fact it is not the case if interest paid on the loan is not allowed to be taken into consideration - because it’s not a deductible item.

The actual costs of acquisition must include the interest element paid to the financier for a fair assessment of the profit.


Impose higher RPGT on the third and subsequent property instead

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The majority of the Rakyat will only be able to buy 2 properties in their lifetime, the first being for own stay and the second for long term investment or perhaps to fund their children’s education.

In view of this, the National House Buyers Association (HBA) had in the past called on the Government to impose higher RPGT on the third and subsequent property disposed of by individuals.

HBA had recommended the following RPGT rates for Malaysian citizens / permanent residents:

(a) First and second properties disposed of. No change to the previous tier structure, meaning no RPGT if the property is disposed of after 5 years.
(b) Third and subsequent properties.
- Disposed within 10 years of acquisition – RPGT of 30%.
- Disposed of after 10 years of acquisition – RPGT of 0%   

HBA humbly urges the Government to reconsider imposing RPGT on individuals and companies disposing of properties held for more than 5 years.


In the alternative

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HBA urges the Government to reconsider this move and to instead increase the RPGT tier rate for disposal within the 2nd, 3rd and 4th years with a corresponding increase of additional 5%: meaning instead of 30% (first to the third year) increase the rate to 35%.

HBA further suggests that the rate of RPGT imposed on foreign owners be increased correspondingly.

Speculators and foreign buyers go into the property market with their eyes wide open. They are aware that they will be taxed and are ready for it.

Further, in view of the short holding period, the profit cannot be as substantial as compared to those who hold their property for decades.

OR

Only if absolutely unavoidable, HBA proposes that the ‘cut-off point’ or grace period be pushed back by 1 or 2 years to the 6th or 7th year.

The previous ‘cut-off point’ of 5 years to be pushed slightly further and beyond that point, no RPGT shall be payable on the disposal. Any disposal after the new cut-off point will not attract RPGT.


Conclusion

Property prices just like everything else is expected to increase in the long term due to various factors such as supply vs demand and also inflationary pressures.

Imposing RPGT on properties held for more than 5 years is effectively imposing a tax on inflation and punish buyers who purchased properties for own stay and for long term investments and is not in line with the philosophy of the government which aims to reduce the burden of the rising cost of living.

If the government wishes to raise revenue, then do it by increasing the rate of real property tax imposed on speculators and the foreign property owners and not on long term Malaysian property owners.

HBA urges our honourable Finance Minister to make an immediate ruling that there is no RPGT to be imposed on properties held for more than 5 years in line with the caring philosophy of the PH government.

This article is contributed by the National House Buyers Association of Malaysia.

National House Buyers Association of Malaysia (HBA) is a voluntary non-governmental, non-profit and non-political organisation. The organisation’s working committee consists of volunteers from various professions working around sheer humanitarian principles and ethics striving wholly for a balanced, fair and equitable treatment for house buyers in their dealings with housing developers.

The Association’s Pro Tem Committee came into existence on 16th October 1999 comprising a group of aggrieved house buyers who had discovered to their disappointment that getting their woes heard was a frustrating process.

On 26th July 2000, the Association was registered by the Registry of Societies and then formally launched as the House Buyers Association (Kuala Lumpur & Selangor) on 20th April 2001 by YB Dato’ Seri Ong Ka Ting, the Minister of Housing and Local Government back then.

(11 July 2019)

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I support HBA's proposal

Windz neom small

not bad for the proposal.