Real Property Gain Tax (RPGT) Tips

Since I just sold my house lately, I just want to share with you some tips for this real property gain tax (i.e. RPGT) that I learned.


First tip is you can apply for waiver for this RPGT once in a life time. This means once you use it, that's it. So think carefully before you apply for this. :D

There are forms (from Income tax office) that you need to fill up for this application. For convenient, you can just ask your lawyer to do that for you. Most lawyers offer this service. You still need to pay for the RGPT and once your application is approved, they will refund your money.

You need to show this document (either one) for this RPGT waiver applications:

• Your electricity or water bill OR
• Occupation Certificate (i.e. OC) of your house

A lot people do not know about this OC thingy, even for my lawyer. I figured that out myself from my income tax office website. This is very useful especially if you have new house and not vacant yet, and you want to sell your house. No electricity or water bill is required.


Second tip is don't put 2 names under this property if you trust the other party. The reason is if this property belongs to 2 of you (e.g. couples), you both need to apply for this RPGT waiver. Once both of you applied, that's it. You both have already used this once in a life time ticket! lol :) If you trust your partner and just use one name, you can save one more time of RPGT waiver in future. :)


Okay, that's all! Hope this helps! :)

Is Malaysia Income Tax Rate Reasonable?

Malaysia has lower income tax rate if you compared to most Europe countries (e.g. look at the Irish tax scheme that I posted quite sometime ago), United State and Australia and you should feel grateful for it.

However, when you come to compensation we're at the losing side. We pay taxes but we do not get back any compensation from the government especially for the middle income group people like me. So technically speaking, our low tax rate has been offset with the compensation that western countries offer.

That is also why personal finance is more important here in Malaysia as compared to those countries! :) For instance, we can't rely on government to plan for our retirement, you can't totally rely on EPF which is not enough in most of the cases.

Having said so, if we compare to Hong Kong and Singapore where compensation is similar to Malaysia, our income tax rate can not be considered low anymore. In fact, it is pretty high comparatively. Let's see the table below where I get it from Personal Money magazine:


Hong Kong Tax Rate (2011/2012)

Income Bracket (HK$)	Tax Rate
1 - 40K	2%
40K - 80K	7%
80K - 120K	12%
> 120K	17%

Singapore Tax Rate (2012)

Income Bracket (S$) - 2012	Tax Rate
1 - 20K	0%
20K – 30K	2%
30K - 40K	3.5%
40K - 80K	7%
80K - 120K	11.5%
120K - 160K	15%
160K - 200K	17%
200K - 320K	18%
> 320K	20%

Malaysia Tax Rate (2011)

Income Bracket (RM) - 2011	Tax Rate
< 2.5K	0%
2.5K - 5K	1%
5K - 20K	3%
20K - 35K	7%
35K - 50K	12%
50K - 70K	19%
70K - 100K	24%
> 100K	26%

Well as you can see from the table above, Malaysia tax rate is higher than Hong Kong and Singapore based on the income bracket. Let's take an $100K income as example for comparison:


Income Tax Rates Comparision with $100K Income

	Hong Kong	Singapore	Malaysia
Income	HK$100K	S$100K	RM100K
Marginal tax rate	12.0%	11.5%	24.0%
Total tax payable	HK$5.2K	S$5.1K	RM14.325K
Effective tax rate	5.2%	5.1%	14.3%

As I commented in my previous post on 3 thankful things of Malaysia 2013 budget, most tax scheme is progressive tax scheme:

Which means, if you earn RM50K, it doesn't mean you will get taxed at 12% for all RM50K but only RM20K. For the rest of the RM30K it gets taxed at lower tax rate than 12% based on the tax income bracket scheme.

That's why if you look at the table above, there is marginal tax rate and effective tax rate. The effective tax rate is the actual tax rate. So for $100K, the effective Malaysian tax rate is 14.3/5.2 = 2.75 time higher as compared to Singapore and Hong Kong.

Also, few interesting facts that you MUST KNOW where I read an article recently from theedgemalaysia.com:

• Less than 10% of workforce in Malaysia pays tax
• Number of taxpayers represent 5.6% of the population
• 19.9% of Hong Kong population pays tax
• 20.7% of Singapore population pays tax

These facts conclude that number of individual tax payers in Malaysia is extremely low and most importantly is:

"The burden of personal income tax is disproportionately borne by a small group"

A comment from facebook reader on the recent Malaysia 2013 budget saying the the individual tax rate is too high because the maximum tax rate(i.e.26%) is even higher than the corporate tax rate (i.e.25%).  Well, I think he has a very good point. Either we tax too low for corporate or we tax too high for individual.

So now, do you still think Malaysia income tax rate reasonable given that only 5.6% of population pays tax? Something is very wrong, in my opinion. What do you say?