Yang Pei Keng 13 – 3 - 2010
Introduction
In January 2010, the Inland Revenue Board (IRB) issued a set of new Guidelines on the latest amendments to the Real Property Gains Tax Act 1976. The Guidelines are known as the Garis Panduan Cukai Keuntungan Harta Tanah [referred to as the “RPGT 2010 Guidelines” in this article].
The Guidelines begin with the brief history of the RPGT Act. Numerous examples are given to illustrate the application of the recent amendments to the RPGT Act 1976, showing how the flat rate of 5% gains tax is to be calculated
Introduction
In January 2010, the Inland Revenue Board (IRB) issued a set of new Guidelines on the latest amendments to the Real Property Gains Tax Act 1976. The Guidelines are known as the Garis Panduan Cukai Keuntungan Harta Tanah [referred to as the “RPGT 2010 Guidelines” in this article].
The Guidelines begin with the brief history of the RPGT Act. Numerous examples are given to illustrate the application of the recent amendments to the RPGT Act 1976, showing how the flat rate of 5% gains tax is to be calculated
A cumbersome formula A/B x C is used to calculate the amount of “gain exempt from tax”. The amount of “gain exempt from tax” is then deducted from the “total chargeable gain” to arrive at the “taxable gain” . The “taxable gain” is then multiplied by the rate of tax under Schedule 5 (Rates of Tax) of the RPGT Act 1976, to arrive at the 5% gains tax payable.
It is a roundabout way of finding out first the amount of “gain exempt from tax” based on Schedule 5, before working out the amount of 5% gains tax payable.
For practical purposes, the flat rate 5% gains tax payable can easily be calculated by using a simple formula of “chargeable gain x 5%”. First, just work out the chargeable gain (less: incidental expenses,10% exemption, etc.) and then multiply it by 5%, and the amount of gains tax payable is arrived at with little effort.
The cumbersome formula of A/B x C is of no practical significance to the parties and their respective solicitors, because the amount of “gain exempt from tax” calculated according to Schedule 5 (Rates of Tax) does not concern them.
The sliding scale of rates of gains tax payable ranges from 30% to 5% for any disposal is of no consequence to them, since currently a flat rate of 5% gains tax has been imposed. [In passing, the original Schedule of Rates of Tax has been slightly amended: s56, Finance (No.2) Act 2010]
Click here to view summary of the salient points of RPGT 2010 Guidelines.