Saturday, 21 December 2013

Budget 2014: Real Property Gains Tax / Goods & Services Tax


There were many measures announced in the Budget for 2014 and of these, two will be of particular interest to expats, the former of the two in particular if you own, or are contemplating buying, property here.

The regulations regarding Real Property Gains Tax (RPGT) have been amended in an attempt to curb foreign property speculation, unfortunately expat residents, including MM2H visa holders, have not been exempted from the changes.  From January 2014 non-Malaysians / non-residents (e.g. those who do not whole Permanent Resident status) will be required to pay 30% tax on any property price gain if sold within 5 years of acquiring the property.  After 5 years the tax is levied at 5%.  I stress that this is on the gains, not the overall sale price, so if you buy a property for RM 750K and sell for RM 900K after 5 years you will pay 5% RPGT only on the RM 150K the property has gained in value.  When calculating the gain you can subtract the cost of acquisition (e.g. legal fees etc) and any renovation costs, so it will be worth hanging on to any bills!

Still, the increase is quite considerable given that in 2013 the rate was 15% if the property was sold within 3 years (and of course, in Penang at least, foreign owners are locked in for 3 years so could not sell), dropping to 10% in years 4 and 5 and zero thereafter.  For some this is still not an issue but it may be enough for others, depending on their plans and circumstances, to think harder and longer about buying a property here.  What will be interesting to see is the trend over the next few years.

The second change, which will of course apply to everyone, is the imposition of a Goods and Services Tax from April 2015, however the current Sales Tax (6%) and Service Tax (10%) will be abolished.  There will be no GST on essential cooking items (rice, flour, spices and oil etc) or on electricity consumption up to 200 units.  Property sale is also GST exempt.

An overview of the announcements for the 2014 Budget can be found here at 'The Malaysian Insider'.  There is also a useful PDF showing some budget highlights here.

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