MALAYSIA will now impose real property gains tax (RPGT) of 5 per cent on those who sell their property within five years of acquiring it.
This reverses a government decision made in October to slap a flat 5 per cent tax on all real estate transactions regardless of how long the property had been owned. The revised move was announced by Prime Minister Najib Razak on Wednesday night.
The about turn comes in the wake of concerns that home-owners – particularly senior citizens – would be badly affected by the tax. Although it was put in place to curb real estate speculation, the tax in its earlier form would have been unfair to those who had held on to their properties for decades.
Foreign investors had also complained about reinstating the tax that Mr Najib’s predecessor, Prime Minister Abdullah Ahmad Badawi, had waived in 2007 to boost the property sector.
Even so, the decision marks another policy U-turn.
The government is expected to forego some RM200 million (S$82 million) as a result of the latest decision, but in truth, many believe that the RPGT reversal was inevitable, particularly its imposition on long-holding owners.
Although some had argued that 5 per cent was a modest amount, many, especially senior citizens, had lamented it was unfair since some family homes had been held over several generations.
‘I inherited an old shophouse which was bought in 1960 at RM10,000. Today it is worth about RM400,000. So I would have to pay about RM20,000 in RPGT? I am retired and likely need to sell off this property to support my old age,’ a retiree had complained.
And as many had pointed out they were no longer in possession of documents and receipts dating back through the years to facilitate the calculation of the tax.
Property players had also been disappointed with the re-imposition given that the sector is still soft, barring a few areas that are in demand. While the economy appears to have grown stronger in the last quarter, many fear that it may not be sustained once governments worldwide ease up on stimulus spending.
Tax experts had observed a rush in applications by sellers to beat the deadline following the re-introduction of RPGT in the October national budget.
Source: Business Times, 25 Dec 2009