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Real Property Gains Tax Act 1976 amended pursuant to the Finance Act 2023

02 June 2023

The Finance Act 2023 was gazetted on 31 May 2023.
 
Amongst others, Chapter III of the Finance Act 2023 introduces the following amendments to the Real Property Gains Tax Act 1976 (‘RPGTA’) with effect from 1 June 20231:  
 
1. Transfer of assets between former spouses
The transfer of assets2 between former spouses pursuant to any court order in consequence of the dissolution or annulment of their marriage is to be treated as a transaction in which the disposal price is deemed equal to the acquisition price provided that the transfer involves an asset owned by a Malaysian citizen.3
 
Prior to the amendment, such a transfer between former spouses is subject to real property gains tax ranging between 0% to 30% based on the period which the asset has been held by the disposer of the property.4
 
It is to be noted that where the former spouse to whom the asset is transferred under the court order subsequently disposes of the asset, that former spouse is deemed to have acquired the asset at an acquisition price equal to the acquisition price paid by the former spouse from whom the asset is transferred plus permitted expenses.5
2. Limitation of scope of transfer to a controlled company
As from 1 June 2023, the transfer of assets owned by an individual, his spouse or by an individual jointly with his spouse or with a connected person, by a nominee or trustee for an individual or his spouse or for both, to a company incorporated in Malaysia that is controlled by the individual, his spouse or by the individual jointly with his spouse or with a connected person, by a nominee or trustee for an individual or his spouse or for both, for a consideration consisting of shares in the company or substantially of shares6 in the company and the balance of a money payment, is to be treated as a transaction in which the disposal price is deemed equal to the acquisition price.7 
 
Prior to the amendment, the controlled company to which the assets are transferred under the above-referred provision may be a company that is a resident or non-resident in Malaysia.

Alert by Eo Shao Dong (Associate) of the Real Estate Practice of Skrine.
 
 
1 Section 18 of the Finance Act 2023.
2  For the purposes of the amendments, all of which relate to Schedule 2 of the RPGTA, an ‘asset’ refers to a chargeable asset (see Paragraph 1(1) of Schedule 2 of the RPGTA).
3 New paragraph (ia) to Paragraph 3(1)(b) of Schedule 2 and amendment to Paragraph 3(2) of Schedule 2 of the RPGTA.
4 See Part I of Schedule 5 of the RPGTA.
5 Amendment to Paragraph 19(5) of Schedule 2 of the RPGTA. Paragraph 19(5) also provides that if the property was acquired by the transferor prior to 1 January 1970, the acquisition price shall be the market value of the asset as at 1 January 1970 plus permitted expenses incurred by the transferor after 1 January 1970 less the types of payments received or forfeited by the transferor under subparagraphs (a), (b) or (c) of Paragraph 4(1) of Schedule 2 of the RPGTA.
6 The expression “a consideration consisting substantially of shares” means a consideration consisting of not less than 75% of shares (see Paragraph 1(4) of Schedule 2 of the RPGTA).
7 Amendment to Paragraph 3(1)(b)(ii) of Schedule 2 of the RPGTA.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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