Call to revert the filing of returns and the payment of Real Property Gains Tax (RPGT) to that practiced in 2007. New procedure unfair cumbersome, burdensome and has caused uncertainty.
Real Property Gains Tax was introduced in 1976 through Real Property Gains Tax Act 1976. RPGT was abolished from 1/4/2007 but was reinstated by the Government from 1st January 2010. From 1/1/2010, the Government imposed 5% tax on gains received from the disposal of a property which was acquired within 5 years.
The new RPGT rules, however, require the Purchaser to forward the returns and 2.0% of the purchase price to the income tax department within 60 days from the date of the Sale and Purchase Agreement failing which an additional 10.0% on this amount will be imposed.
These new rules are unfair, cumbersome, burdensome and has caused uncertainty for the following reasons:-
1. 2.0% of purchase price very often far exceeds the 5.0% RPGT that is imposed.
e.g. If a property acquired at RM1.0 million is sold for RM1.1 million there is a gain of RM100,000-00. A sum of RM22,000-00 will have to be paid to the income tax from the deposit paid within 60 days. The tax payable is however, only RM5,000-00. A sum of RM17,000-00 will have to be claimed back from the income tax department on a later date. From experience, it will take a long long time to claim back money from a government department. This constitute undue enrichment to the Government who does not pay interest on this additional sum paid.
2. The Purchaser or his solicitor is under a duty to forward this 2.0% of the purchase price. This placed an unfair duty and burden on the Purchaser because additional 10.0% penalty will be imposed on this amount if payment is delayed.
3. Those who will not be taxed will also be required to file form.
4. Getting the refund and filing of the unnecessary CKHT 3 form will cause the parties expenses and time. This is unproductive work for both the government servants and the additional staff that the solicitors and tax agents will have to employ.
5. It create uncertainty when a sale falls through. In such an event the deposit paid will be forfeited by the Vendor. The 2.0% purchase price which form part of the deposit was paid by the Purchaser to the income tax department. Will the tax department refund the amount to the Vendor or the Purchaser in the event of a dispute?
6. In the case where a sale is contingent on an event e.g the requirement for the Menteri Besar’s consent, will the 2.0% purchase price still have to be forwarded to the income tax department within the 60 days period? (one income tax officer says the 60 days period operate from the date the Menteri Besar consent is received but it is not stated in the rules. Will the Purchaser be slamned with a 10% increase if another officer interprete otherwise?)
I proposed that we revert back to the practice in 2007 before RPGT was abolished. Both Vendor and Purchaser submit their respective returns within 30 days and RPGT be paid upon the tax department issuing the notice for payment. The estimated RPGT payable be retained by the Purchaser’s solicitors until then. At least the Purchaser is entitled to the interest earned if the tax department delayed in assessing and issuing the notice for payment.
Dated this 22nd day of March 2010.
DATO’ NGEH KOO HAM
- Deputy Secretary General DAP Malaysia
- MP for Beruas