Tuesday, October 27, 2009

M’sia to draft property gains tax exemption order

The Finance Ministry is expected to come up with an exemption order on the Real Property Gains Tax (RPGT) this week to clear the confusion surrounding the RPGT proposal.

Under the 2010 Budget, the government proposed a fixed tax rate of 5 per cent imposed on gains from the disposal of real property effective Jan 1 next year. However, based on the Finance Bill, disposal within two years of acquisition will be taxed 30 per cent, 20 per cent in the third year and 15 per cent in the fourth year while disposal within five years and beyond will still be subjected to 5 per cent.

‘As far as the Act is concerned, the rate is still there, which is 5 per cent to 30 per cent. Exemption order has yet to be gazetted but it is coming out very soon, maybe around this week,’ Finance Ministry’s Under Secretary, Tax Analysis Division, Siti Halimah Ismail, said yesterday.

She was speaking to reporters after the 2010 Post Budget Dialogue, jointly organised by the Malaysian Economic Association and University of Malaya’s Faculty of Economics and Administration, and supported by Standard Chartered Bank Malaysia Bhd.

Gains from the disposal of property are subject to tax under the Real Property Gains Tax Act 1976 to curb speculative activities in the property sector. However, the RPGT was exempted in 2007 to help the property sector.

Siti Halimah said the government is expected to collect some RM500 million (S$206.2 million) from the real property gains tax in 2010 but lost RM240 million in individual income tax due to the reduced one per cent from 27 per cent to 26 per cent.

On the sources of tax revenue, she said that Malaysia’s tax base was narrow. ‘Being a narrow base, the revenue is not sustainable actually. For example, the import duty, because of our commitment to free trade agreements, we have no choice but to reduce the rate,’ she added. Come Jan 1, 2010, an estimated 98 per cent of the goods that come from Asean countries will be at zero import duty.

Source: Business Times, 27 Oct 2009

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