RPGT Exemption under Penjana Gazetted
30 July 2020
On 5 June 2020, the Prime Minister of Malaysia, Tan Sri Muhyiddin Yassin, announced the Short-Term Economic Recovery Plan (June to December 2020), known by the acronym ‘PENJANA’ (Pelan Jana Semula Ekonomi Negara), to revitalise the Malaysian economy and to address issues that arise from the economic downturn caused by the Covid-19 pandemic.
Among the measures in PENJANA to stimulate the property market is the exemption from payment of real property gains tax under the Real Property Gains Tax Act 1976 (‘the Act’) on the disposal by an individual of up to three residential properties from 1 June 2020 to 31 December 2021. This measure has now been formalised under the Real Property Gains Tax (Exemption) Order 2020
(‘Exemption Order’) which was gazetted on 28 July 2020 and came into operation retrospectively on 1 June 2020
Under the Exemption Order, an individual is exempted from paying real property gains tax on the chargeable gain accruing on the disposal of up to three units
of residential property if the following conditions are fulfilled –
- the individual must be a citizen who is the sole or joint owner of the property being disposed;
- the property disposed must be a ‘residential property’, namely a house, a condominium unit, an apartment or flat in Malaysia, and includes a service apartment and a small office home office (SOHO) which is used only as a dwelling house;
- the residential property must be disposed on or after 1 June 2020 until 31 December 2021;
- the residential property which is being disposed of is not acquired within the period from 1 June 2020 until 31 December 2021 –
- by way of a transfer between spouses; or
- by way of a gift between spouses, parent and child, or grandparent and grandchild where the donor is a citizen; and
- the sale and purchase agreement for the disposal of the residential property is executed on or after 1 June 2020 but not later than 31 December 2021 and is duly stamped not later than 31 January 2022 or where there is no sale and purchase agreement, the instrument of transfer for the disposal of the residential property is executed on or after 1 June 2020 but not later than 31 December 2021 and is duly stamped not later than 31 January 2022.
Where an individual disposes of more than three units of residential properties, the disposer may elect any three from the said disposals to be exempted and the election so made shall be irrevocable.
In the case where the contract for the disposal of a residential property is a conditional contract which requires the approval of the Federal Government or a State Government, the exemption shall only apply if -
- the contract for the disposal of the residential property is executed on or after 1 June 2020 but not later than 31 December 2021 and is duly stamped not later than 31 January 2022; and
- the approval of the Federal Government or the State Government concerned for the disposal of the residential property is obtained on or after 1 June 2020.
The exemption from payment of real property gains tax under the Exemption Order does not absolve the disposer from complying with the requirement to submit any returns or information under the Act.
While the Exemption Order sets out the conditions that have to be fulfilled by a disposer to qualify for exemption under the said Order, the Exemption Order does not provide guidance as to whether the disposer is required to provide any documents to support his declaration in a CKHT3 Form that the disposal is exempted from real property gains tax under the Exemption Order to obtain a notice of non-chargeability from the Director General. Such notice is required to dispense with the purchaser’s obligation to retain and pay to the Director General the retention sum under section 21B of the Act.
It is also to be noted that the exemption granted under the Exemption Order does not affect the right of an individual to elect for exemption under the other provisions of the Act.