What would happen to your house now that government is going to tax 5% beyond 5 years? Part 1.
Real property gains tax (RPGT) is governed by RPGT Act 1976. What is in this law is that when there is gain of selling real property (which includes real property company shares) there is a tax called RPGT to be paid.
In the new 2019 Budget, 5% is levied on all properties sold by locals even beyond 5 years of holding it – which in the current tax rate, is zero. For example, a RM500,000 house you bought Nov 2013, now being 5 years old (2018 Nov); you don’t need to pay for any RPGT when you sell in Dec, 2018. But, if you sell it at RM900,000 Jan, 2019 (gain of RM400,000), the RPGT will be 5% of 400,000 = RM20,000.
You probably would say, I just put that 5% in. So, your new selling price is going to be RM920,000, which cushions your burden of the 5% RPGT. RM920,000 – RM500,000 = RM420,000. RM420,000 x 5% = RM21,000. You still short of RM1,000. Closest you can get is to add this RM1,000 into the 920,000 to make it RM921,000. The tax payable is RM21,050 – you only chip in RM50 extra. If this RM50 you cannot sleep by it, just add that in! RM921,050. Then, your tax will be RM21,052.5. An extra RM2.50 – a glass of ice lemon tea in a local kopitiam.
Tomorrow we will discuss if this will fuel property price increase.