20190302 (Sat) What is RPGT? What is Stamp Duty? What is SST?

20190302 (Sat)

What is RPGT? What is Stamp Duty? What is SST?

To answer this question, we shall look at taxation in a bigger picture – classification of taxes.

Tax can be classified into various types. It can be based on two main parameters:

From where and purpose
How to quantify (fixed or ad valorem)

If it is from the income of a person – it is Income Tax – a direct tax. If it is from another person collected on behalf of the government – indirect. For example, SST 6% of the legal fee is paid by client of a law firm, collected by the lawyer and to be paid to government. Standard rate is applied no matter how big or small the legal fee – thus a fixed or specific tax, and NOT ad valorem tax. On the other hand, if various rates are used with the amount, like Stamp Duty – 1% for the 1st 100,000, 2% for the next 400,000, 3% for … it is called “ad valorem” tax.

RPGT is a tax on real property – real estate and including shares of real property companies. The tax is levied on the gains – earning or profit and not on total amount transferred. So, it is called “Gains” tax. How is it quantified?

By a different rate for different period of holding – 30% is holding less than 3 years, 5% if holding for 5 years or more. Hence, the rates are different – thus ad valorem.

Is it a consumption tax? No, it isn’t. Consumption tax are like Goods and Service Tax (GST) or Sales and Service Tax (SST) or Value Added Tax (VAT). A good summary of how taxes are classified is available at link below.


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