Last Friday Prime Minister Dato Seri Najib proposed that a tax of 5% be imposed on gains from the disposal of real property effective from Jan 1st 2010 during the Budget 2010 proposal. However, Gavin Tee, a Property Investment Consultant and Speaker interpreted otherwise. “From the official web site of MOF, 5% as a fixed rate imposed on the gains is misunderstood.”
Also as the Managing Director of real estate agency Arborland & Co, Gavin pointed out that according to the finance bill, the government proposed to reintroduce the RPGT ACT 1976, in which the taxes shall be as high as 30% if the property is being disposed in the first two years.
The proposal is to add on 5% on the sixth year onwards which was exempted by the act before it was abolished. The new tax scheme applied to the individual will be the same applied to corporate ownership, which is higher than the original.
However, the Finance Ministry reassured the governmen proposed a fixed rate of 5% imposed on gain instead of reintroducing the RPGT Act 1976. He said it is expected to come up with an exemption order on the Real Property Gains Tax (RPGT) this week to clear the confusion surrounding the RPGT proposal.
The Real Property Gain Tax Act was gazetted in 1976, under the Act, in order to curb speculation; gains on disposal of property are subject to RPGT. The tax are scheduled as high as 30% on the 1st and 2nd years of disposal, 20% on the 3rd year, 15% on the 4th year and 5% on the fifth year. It shall be exempted if the property is disposed on the sixth year onwards. The Act was abolished in April 1st, 2007. ( But it was not really abolished but exempted)
Gavin commented, “The Real Estate Market is only in its initial stage of recovery, and the proposal will definitely create a big impact to the High-end property market, particularly to the areas of newly completed projects and those that are in oversupply. If the Act is reintroduced, I believe it will stop the foreign investment and worsen the real estate market.”
Gavin Seriously recommends the Government to reconsider the proposal.
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