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Tuesday, October 27, 2009

Real property gains tax and green tech incentives

This is the final of a three-part question-and-answer series provided by PricewaterhouseCoopers on various aspects of Budget 2010

Q. I have owned my house for 10 years. I am thinking of selling it next year, or maybe consider giving it as a gift to my son. I am a Malaysian citizen. Will I need to pay real property gains tax (RPGT)? At what rate? Will there be any special exemptions available to me?

A. If you sell the property, the rate of RPGT applicable would be 5% of the chargeable gain as per the intention of the reintroduction of RPGT.

As an individual, under the Budget proposals, you will be entitled to an exemption of RM10,000 (previously RM5,000) or 10% of the chargeable gain, whichever is the higher.

You are entitled to a once in a lifetime exemption from RPGT for disposal of a private residential property. If you give the house to your son as a gift, you will be exempted from tax, as it is proposed that all gifts of real property between parent and child, husband and wife, grandparent and grandchild would be exempt from tax.

I took a loan to finance the purchase of a piece of property a few years ago. If I sell my property, can I incorporate the interest that I have been paying on the loan as part of the purchase price of the property when calculating the RPGT liability?

Based on the proposals in the Finance Bill 2009, you will no longer be able to include any interest incurred on capital employed to acquire the asset as part of the acquisition price of your property in calculating the RPGT liability.

I sold a piece of property in January 2007, which at the time, resulted in a loss to me for RPGT purposes. However, the government then announced the RPGT exemption from April 1, 2007 onwards. As a result, I have not been able to utilise the tax relief from that RPGT loss ever since. Can I still use that tax relief when RPGT is imposed again from next year?

Based on the transitional provisions proposed in the Finance Bill 2010, if you were entitled to a tax relief for RPGT purposes and have not utilised that tax relief at March 31, 2007, you will be entitled to claim that relief as a deduction against any RPGT assessed in the first year of assessment subsequent to the year of assessment 2009, and so on for subsequent years of assessment, until the whole amount of the relief is fully allowed as a deduction.

The principal activity of my company is the manufacture of food products. The board of directors decided to register trademarks of some of our products with the Domestic Trade and Consumer Affairs Ministry. I understand that the recent budget announcement proposes that the expenses incurred on the registration of trademarks in Malaysia will be allowed as tax deduction for purposes of income tax computation. Can you please confirm?

The proposed tax deduction on the expenses incurred on the registration of trademarks will only apply to companies which have a paid-up capital in respect of ordinary shares of RM2.5mil and less at the beginning of the taxable period.

Note that the company should not be related to a company which has a paid-up capital in respect of ordinary shares of more that RM2.5mil at the beginning of the taxable period.

In addition, the company should not have full-time employees exceeding 150 persons nor annual sales turnover exceeding RM25mil respectively.

The registration expenses include fees or payments made to trademark agents registered under the Trade Marks Act 1976.

This deduction is essentially targeted for small and medium enterprises. This proposal is effective from Year of Assessment 2010 to 2014.

To expand the use of green technology, the government launched the Green Building Index (GBI) on May 21, 2009. Can you elaborate on what GBI pertains to and some of the tax incentives available.

GBI was developed by Pertubuhan Akitek Malaysia and the Association of Consulting Engineers Malaysia.

Under the GBI assessment framework, points will be awarded for achieving and incorporating environment-friendly features which are above current industry practice.

Two different sets of GBIs have been developed for both commercial and residential properties.

The assessment criteria include:

·Energy and water efficiency

·Indoor environmental quality

·Sustainable management and planning of building sites in respect of pollution control and facilities for workers

·Usage recyclable and environment friendly materials and resources

·Adoption of new technologies

As a measure to encourage the construction of buildings using green technology, it is proposed that the owners of buildings awarded the GBI certificate be given exemption equivalent to 100% of the additional capital expenditure incurred to obtain the GBI certificate.

This incentive is applicable on new buildings and upgrading of existing buildings.

The proposal is effective for buildings awarded with GBI certificate from Oct 24, 2009 until Dec 31, 2014.

Further details on GBI can be viewed at

By The Star

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