Property sellers rushing to sell-off their real estate in Malaysia, to avoid paying real property gains tax (RPGT) could find their efforts wasted as property disposal requires government consent.
Obtaining the government’s official approval could push the sale up until after December 31, a day before the reintroduction of RPGT.
Tai Lai Kok, executive director of KPMG Tax Services, said that many property transactions require state approval.
Under the RPGT Act, where a contract for asset disposal must be in a satisfying condition, both acquisition and disposal of an asset shall take place at the time when the contract was made.
But there are two exceptions for these: the acquisition or disposal of the asset requires the approval of the government or a committee appointed by the government, the date of disposal shall be the date of such approval; and the approval is conditional, the date of disposal shall be the date when the condition is satisfied.
However, the RPGT Act does not define the term ‘government’, whether it refers to a federal government or to the state. In any event, land matters are under state control thus, land transaction requires state approval. “Lawyers would need to review the individual title to see what restrictions and caveats there are to ascertain if government approvals are needed.”
Several lawyers said that state approval varies in time, it maybe one month or may reach six months.
“If the property is already owned by a foreigner, it is likely the transaction would require state approval,” said Mr. Tai, adding that “conditional contracts become an issue only because of the short window period before RPGT is reintroduced.”
Mr. Tan noted that the RPGT Act introduced the government approvals in 2006.
The Malaysian government is expected to rake in RM500 million (S$204 million) from RPGT in 2010, when the tax is being reintroduced.
And because the implementation of RPGT was supposed to curb speculation, its across-the-board application has upset many property owners, especially those who held onto their property for many years, as the value of their asset was greatly appreciated.
Property players also criticized the government’s reversal of the law as a deterrent and inconsistent to several foreign investors.