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The Malaysian government’s introduction of a fixed 5% Real Property
Gains Tax (RPGT) effective Jan 1 2010 is perplexing, to say the
least. If the surprise announcement by the prime minister when unveiling
Budget 2010 was intended as a lenient and hence palatable variant of the RPGT before its waiver in April 2007, it could not be further from the
truth.
Although a seemingly watered-down version of the original RPGT, the
impact of the fixed 5% RPGT should not be seen as harmless as it has
been made out to be. Already, the local property fraternity is feeling
the heat; the edginess can be expected to catch up with prospective
buyers around the globe. Moral of the story is, refrain from any step,
however minute it may appear, that could undermine market sentiment.
To recap, the previous RPGT (waived in April 2007) hinged on a sliding
scale of 30% to 5% of the gains if the property concerned was disposed
of within five years of its acquisition. Beyond that, the RPGT would no
longer apply. This time around, a fixed 5% RPGT kicks in everytime there
is a real transaction, never mind when the property was purchased. There
are some exemptions, among them sale of a residential property for the
first time and transfer of properties among family members, like father
to children.
Primarily, there are two very disturbing aspects of the 5% RPGT.
Malaysian property values may have generally been spared the intense
beating experienced in some countries but developers here will tell you
it has been no walk in the park.
Certain areas have done better than the others, with the super prime
address of Kuala Lumpur City Centre even taking a hit. Interest is said
to be returning, slowly but surely in tandem with an improving market.
Still, sentiments remain very tender and delicate and they must be
handled with extreme care. While it is easy to bring a machine to an
abrupt halt, getting it started and running again will demand both hard
work and time.
The 5% RPGT is in danger of being viewed as yet another of Malaysia’s
once infamous flip flops in real estate-related guidelines and
regulations.
Few of senior Malaysian Real Estate Agents interviewed by us around KL and
PJ foreseeing perplexing in sub sale properties market by fears of income
security amid a deteriorating economic outlook and re-implementation of
5% RPGT starting 2010.
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