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RPGT of a few hundred thousand? Here’s how you calculate.

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Many are worried that they will be taxed lots of money when they sell their property in the near future. After all, 5% Real Property Gains Tax (RPGT) is now applicable even if we sell the property only the end of 5 years. Assuming we sell a property for RM2,000,000 today, the 5% RPGT means we pay RM100,000 right? NO. Well, it used to be ZERO RPGT after 5 full years of holding the property, remember? Okay, so if the property price has appreciated by 10 percent from the price we paid, if we sell it now, we only get 5 percent profit? Answer is still NO.

Calculation as follows: (6th year of ownership onwards)

Price we bought: RM400,000

Price we sold: RM800,000

Gross Profit: RM400,000

RPGT of 5% = RM800,000 – RM400,000 = RM400,000 x 5% RPGT = RM20,000

RM20,000 is the MAXIMUM amount payable to the government. As we know there are also other costs such as stamp duty, legal fees, advertisement charges, etc. These are deducted from the gross profit before the RPGT of 5% is applied. To make it even simpler, here’s a RPGT calculator from LoanStreet for your perusal too. Just click here.  RPGT’s intention is aimed at deterring speculators from flipping properties (in the beginning). This is actually good for the market especially for most genuine home buyers as well as potential home buyers. We do not want the property prices to spiral out of control, do we?

As for RPGT in Budget 2019, there are a few key intentions which could be observed. First is to help the government in getting more revenues through taxing those who has the money (after selling…) versus taxing the B40 households. (someone has to pay the tax…)  Second is to help to reduce some incoming supply from sellers because if these sellers could hold, they will not sell so soon because of the extra RPGT which is payable. This should help to clear some of the unsold stocks in the market today. Third is well an extension of the cooling measures so that people do not simply buy any property. Now they know that even if they keep for over 5 years, they will still be charged RPGT. Happy understanding.

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written on 8 Nov 2018

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