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Tax Planning On Your Property

 

Rental Income

For citizen, rental income is considered as income source chargeable at income tax rate.  For non citizen, rental income is taxed at a flat rate of 26% which will be reduced to 25% in 2015. Income-generating expenses are deductible from the gross rent such as interest expense, cost of repairs, assessment tax, quit rent, and agentís commission. Depreciation does not qualify for tax deductions against income, and capital allowances are not available for residential and commercial buildings. Rental income earned by non residents may be subject to 10% withholding tax. The withholding tax may be credited against the non residentís income tax liability.

Real Property Gain Tax (RPGT)
Chargeable persons
Every company and person whether or not resident in Malaysia is chargeable to RPGT in respect of any gains accruing on the disposal of real property located in Malaysia. RPGT is also applicable in the procurement and disposal of shares in companies where 75% of their tangible assets are in properties located in Malaysia.
Rates of tax
Companies, Citizen & permanent residents
 
Category of disposal Companies Citizens/PR Non-Citizens
  % % %
3 years or Less 30 30 30
More than 3 years but 4 years or less 20 20 30
More Than 4 years but 5 years or less 15 15 30
More than 5 years 5 - 5
 

1.  The following are exempted from tax (for houses & other cases) :

  • For individuals, the first RM10,000 or 10% of any chargeable gain whichever is greater.

  • The gain on disposal by an individual who is a citizen or permanent resident of Malaysia of one private residence during his lifetime.

  • The gain on compulsory acquisition under any written law. Gifts to governments, local authorities of charities.

  • ii. The following are treated as disposals at the original acquisition price so that no gain arises on the disposal (for houses & other cases) :

  • Transfer by way of gift between husband and wife, parent and child and grandparent and grandchildren taking place within 5 years of acquisition.

  • A transfer of real property to a company for a consideration consisting of shares or substantially of shares and the balance in cash. 

  • A transfer of assets between companies in the same group with the consent of the Director General of Inland Revenue.

  • Acquisition & Disposal of Chargeable Assets (Real Property)
    Chargeable gain or allowable loss is the difference between the disposal price and the acquisition price on the disposal of a real property

     

    1) Acquisition price includes:

    Consideration per SPA

    Plus
    Incidental costs which include

    • Fees, commission or remuneration paid for professional services of surveyor, valuer, accountant, agent or legal adviser
    • Cost of transfer including stamp duty
    • Cost of advertising to find seller
    • Interest paid on capital employed to acquire the property where such a claim has not been made under income tax for rental income

    Less:

    • compensation for damages to the asset
    • receipts under an insurance policy for damages to the property
    • deposits forfeited in respect of the property

    2) Disposal price includes

    Sale consideration

    Less:
    Incidental costs, which includes

    • Fees, commission or remuneration paid for professional services of surveyor, valuer, accountant, agent or legal adviser
    • Cost of transfer including stamp duty
    • Cost of advertising to find seller

    Less:

    • Expenditure incurred on the asset at any time after its acquisition for the purpose of enhancing or preserving the value of asset ( includes renovations)
    • Expenditure incurred in establishing, preserving or defending the owner's title or a right over the asset
    Administration
    Form Filing
    C.K.H.T. 1 Return of disposal of chargeable asset To be filed within 1 month of date of disposal of chargeable asset
    C.K.H.T. 2 Return of acquisition of chargeable asset To be filed within 1 month of date of acquisition of chargeable asset

     

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