When you buy or purchase a property, do you know that you can file the relevant Real Property Gains Tax (RPGT) forms to the Inland Revenue Board of Malaysia (IRB) yourself and save yourself a few hundred Ringgit by not seeking the services of lawyers/accountants to do it for you?
I’m sure many do, but do not do so because unfamiliar with the filing procedures for RPGT forms. This article hopes to shed some light on those procedures so as to make the process not so daunting. The procedures explained below are applicable for disposal of properties from 1 January 2010 onwards.
Types of Forms
There are several return forms that you have to be familiar with when it comes to the purchase or sale of a property, or shares in a Real Property Company (RPC). They are:
- CKHT 1A – Disposal of Real Property (completed by the disposer)
- CKHT 1B – Disposal of shares in a RPC (completed by the disposer)
- CKHT 2A – Acquisition of Real Property / Shares in a RPC (completed by the acquirer).
These forms can be obtained at any branch of the IRB nearest to you or alternatively, can be downloaded off the IRB’s website (http://hasil.gov.my) and printed as you are allowed to use the form in PDF format.
Submission of Return Forms
Every disposer and acquirer is required to fill the respective return form and submit it together with the relevant supporting documents to the nearest IRB branch. However, in order to expedite the processing of the form, the disposer and the acquirer are urged to submit their forms to the IRB branch where the disposer’s income tax file is located.
The disposer and the acquirer are exempted from completing and submitting the relevant disposal and acquisition forms if the disposal of the assets subject to the Income Tax Act 1967.
This is clearly spelt out under the Real Property Gains Tax (“RPGTA”) 1976, which only imposes tax on chargeable gain accruing on the disposal of any real property not assessed to Income Tax. Under Section 2 of the RPGTA, the definition of ‘gain’ means gain other than gain or profit chargeable with or exempted from income tax under the income tax law. In such situations, where required by the IRB, you may have to produce accounts (in the case of a company) or other documentary evidence to show that the gain from the disposal of a property will be declared by you under income tax.
Responsibility of the Disposer
As a disposer, first and foremost, your responsibility is to ensure that you have completed the Form CKHT 1A or CKHT 1B are completed accurately.
In order to do so, you will have to attach evidence of the acquisition and disposal such as the following:
- For disposal of real property – A copy of the duly stamped Sale and Purchase Agreement / KTN 14A / Memorandum of Transfer.
- For disposal of shares in a RPC – A copy of the duly stamped Sale and Purchase Agreement / Form 32A / Board of Directors’ Resolution / Form 24 or share certificates.
As there are many incidental costs of acquisition/disposal that you can claim, do remember to attach documentary evidence supporting your claim for expenses, eg. invoices and receipts of renovation expenses, legal fees, etc.
Thereafter, submit the Form CKHT 1A or 1B within sixty (60) days from the date of the disposal of assets or shares in a RPC.
If you elect for the once-in-a-lifetime RPGT exemption of the disposal of private residence, you are required to complete and submit the an election for Tax Exemption for Disposal of Private Residence under Paragraph 9 Schedule 3 (Section 8) of the RPGTA, in the form issued by the IRB. You are also required to submit the following documents:
- A copy of the Certificate of Fitness for Occupancy (CF) dated prior to the date of the disposal of the real property; or
- Copies of telephone, electricity or water bill, dated prior to the date of the disposal of the real property.
Where the consideration consists wholly or partly of money, the acquirer will retain the whole of that money or a sum of up to 2% of the total value of consideration (whichever is less) and pay that to the Director General of Inland Revenue within 60 days from the date of the disposal.
If you are of the opinion that the disposal of a chargeable asset is not liable to tax and does not want the acquirer to retain and remit to the DGIR all of the cash or 2% of the total value of consideration, whichever is lower, you are required to complete and submit the Form CKHT 3 (Notification under Section 27 RPGTA 1976), within 60 days from the date of disposal for the disposal.
However, if the disposal of the property eventually turns out to be taxable and the acquirer fails to retain and remit the amount due to the Form CKHT 3 was wrongly filed previously, you will be charged a penalty of 10% of the total tax payable by the IRB.
A disposal of a chargeable asset may not be liable to tax under the following circumstances:
- the assets disposed of was held for more than five (5) years,
- the disposer elects for tax exemption for disposal of private residence under Paragraph 9 of Schedule 3 (Section 8) RPGTA, or
- disposal of assets is by way of a gift without any consideration under Paragraph 12 of Schedule 2, RPGTA.
You must submit the Form CKHT Form 3 together with the Form CKHT 1A or CKHT 1B. Please note that the CKHT 3 will not be processed if it’s failed to be submitted within sixty (60) days from the date of disposal, failing which, penalties may be imposed.
Please do remember to also provide a copy of the Form CKHT 3 to the acquirer.
Responsibility of the Acquirer
As an acquirer of a property, you must also fill up a separate Form, which is the CKHT Form 2A.
Thereafter, attach a copy of proof of acquisition – stamped Sale and Purchase Agreement / KTN 14A / share certificates or Form 24 and submit them together with your CKHT Form 2A within sixty (60) days from the date of sale of property or shares in RPC.
Please attach the Form CKHT 3 along with the CKHT 2A if you obtain a copy from the disposer.
Acceptance of Real Property Gains Tax Form by the IRB
Upon receipt of the relevant Return Forms (CKHT 1A, 1B, 2A, 3), the IRB will process them provided they are duly completed. Any form which is incomplete will be returned to the disposer or acquirer to complete.
The Return Forms will be considered incomplete if you:
- do not fill in the declaration space;
- do not attach evidence of the acquisition and disposal of real property or shares in a RPC (eg copy of the Sale and Purchase Agreement, Form KTN 14A or a duly stamped Form 32A);
- do not submit supporting documents for the expenses claimed;
- did not sign the Return Form.
If the Return Form that has been completed is not received by the IRB within sixty (60) days from the date of disposal, the penalty under subsection 29 (3) of the RPGTA will apply which is:
a) a fine not exceeding five thousand ringgit or to imprisonment for a term not exceeding twelve months or to both; or
b) where the is no prosecution as above, penalty equal to treble the amount of the tax which is payable for that year.
Where all the documents are complete, the RPGT return will be processed by the IRB and a notice or certificate will be issued as follows:
- If the disposal of the property is taxable, a Notice of Assessment (Form K); or
- If the disposal of property is not subject to any RPGT, a Certificate of Clearance (CKHT 5A).
Upon receipt of the Notice of Assessment (Form K), the RPGT liability must be paid (after deducting the cash or 2% of the total value of consideration retained and remitted by the acquirer to the DGIR, whichever is lower) within 30 days from the date of the Form K. Failure to do will result in a late payment penalty of 10% imposed by the IRB on the amount unpaid.
If the amount already remitted to the IRB exceeds the tax charged, then the difference will be refunded to you.
If you are a director with a controlling interest of more than 50% in a company, you will be jointly and severally held liable for any outstanding tax of the company, which includes RPGT.
In respect of limited liability partnerships (LLPs) a compliance officer appointed amongst the partners of a limited liability partnership or where no compliance officer is appointed, then any of its partners shall be jointly and severally assessable and chargeable to RPGT not paid by the LLP.