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Tuesday, December 1, 2009

Confusion over Real Property Gains Tax

Property owners and investors are confused over the interpretations of the real property gains tax (RPGT) which will be imposed from Jan 1, 2010.

In the 2010 Budget announcement last October, the government fixed five per cent tax on the gains made from property disposal.

An investor, who wished to remain anonymous, said he had checked with the Inland Revenue Department (LHDN) on the tax.

"They told me for the first two years it will be 30 per cent, similar to the old scale, and for properties over five years it will be five per cent," he said.
Earlier, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah had said the RPGT at fixed five per cent would be imposed irrespective of the holding period and the category of the owner.

"The RPGT for the first year is five per cent and is the same for the second, third, fourth and fifth year," he said when clarifying a news report in a local newspaper.

Meanwhile, Malaysian Investors Association president, Datuk Dr PHS Lim, said the LHDN's interpretation of the RPGT would be unfavorable for property investment.

He said it would have a negative impact on the economy which was targeted to grow by five per cent in 2010.

"The rate is too high. Investors will not find the Malaysian property market attractive. The US, Britain, Australia, Dubai and other venues can offer better alternatives to the Malaysian property market," he told Bernama today.

Lim said the government should review the RPGT as the Malaysian and global markets were still weak and fragile.
"We are not totally out of the economic woods yet," he said.

He said the construction industry was always vital to the Malaysian economy as it affected a spectrum of other manufacturing sectors like cement, roof tiles, bricks, steel, timber, wires, paint, sand and others.

"The industry also supports many professionals -– architects, designers, valuers and others.

"We should let the property market flourish and it will be a gain-gain situation if we have more people investing in properties. The high tax rates will drive them away," he said.

Lim said the high tax would also affect ''Malaysia My Second Home'' programme.

Several parties had also voiced concerns over the impact of the RPGT on the property market.

Associations from a broad spectrum of the property industry also planned to submit a joint memorandum of appeal to Ministry of Finance not to reinstate the RPGT from Jan 1, 2010.

Chairman of the construction and property committee of The Associated Chinese Chambers of Commerce and Industry, Datuk Teo Chiang Kok, reportedly said revenue from the RPGT would be insignificant compared to the damages to the country's image and credibility.

He said the proposed flat rate of five percent without regard to the holding period and differentiation between individuals and companies was deemed more punitive than the legislated RPGT rates in earlier Act.

By Bernama

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