tax planning and issues for property developers -...

TST Consultants Sdn Bhd 1

Tax Planning and Issues for Property Developers

Prepared By

Dr Tan Thai Soon

TST Consultants Sdn Bhd

VENUE: REHDA INSTITUTE

30 March 2016

1


DisclaimerAll content on this presentation is for generalinformation and educational purposes only. Thisinformation should not be considered complete,up to date, and is not intended to be used in placeof professional advice. The presenter disclaims allresponsibility for any losses, damages suffereddirectly or indirectly from reliance on suchinformation.


Part 1. Real Property Gains Tax (RPGT)

Part 2. Accounting outgoing for Property Developers

Part 3. Tax Planning and Tax Issues for Property Developers

Part 4. Tax Audits for Property Developers


Part 1.1

Real Property Gains Tax


1.0. Historical Developments of RPGT

1976 RPGT Act.1976 was introduced

(Effective from 7-11-1975)

1988 Impose liability on gains on the disposal of

shares in "Real property Companies”


2004

Budget

The Minister provides exemption to the RPGT

on disposal of chargeable assets for a limited

period

(From 1-06-2003 to 31-5-2004)


1.0. Historical Developments of RPGT

2007 The Minister exempts all persons from the RPGT Act 1976 in

respect of any disposal of chargeable assets


(RPGT Exemption)

2010

Budget

The Minister reinstated the RPGT. All persons are subject to

RPGT gains on disposal of chargeable assets within 5 years

period.



1.1. Chargeable Concepts

RPGT

Chargeable Person (CP)

Chargeable Gain (CG)

Chargeable Asset (CA)

TST © 2010

RPGT


1.2. Chargeable Persons (S6, Schedule 1)

Resident individual & company,

Non-resident individual

Body of persons, partnerships

Co-proprietorship, and

executors and trustees

Limited Liability partnership (WEF 21 Feb 2013)


Chargeable Persons (S6, Schedule 1)

Resident

IndividualNon- Residents

Individual

Companies

Executor Trustees


Investment in Malaysia

Individual

Investor

Residential

PropertyRental income

Income tax

Individual tax rate

Disposal

RPGT

Malaysia

Singapore



Company

Residential

PropertyRental income

Income tax

Corporate tax

Disposal

RPGT

Malaysia

Singapore

Foreign

source

Source of fund


Close relative who are foreigner

Individual

Brother/sister

Rental income

Income tax Disposal

RPGT

Malaysia

Singapore

Individual

Brother/Sister

EPU

ValueAll categories

Of properties



IHC Company

Company (RPC)

Commercial PropertyRental income

Income tax

Malaysia

Singapore Dividend

Holding period

Disposal of share

Easy to transfer

RPGT: No

Low Income Tax

Estate


Chargeable Concepts




TST © 2010

RPGT


1.3. Chargeable Assets –S3(1)

A) Real Property; and

B) Shares in Real Property Companies


A) Real Property

is ‘land’ situated in Malaysia and any interest, option or other right in or over such land.

S5 NLC: ‘Land’ includes the following items:

The surface of the earth

The earth below the surface

All vegetation and other natural products growing on land

Building or structures attached to land or on land

Land covered by water (e.g. The Mine/The Haven)


S52 NLC categorized the usage of land into:

a) Agricultural

b) Building (commercial and residential)

c) Industrial

S81(3) of NLC (Penang and Malacca titles) Act 518

Provides for First grade land appropriate for urban development


B) Shares in real property companies

Disposal of shares in real RPC

(under controlled companies)

Controlled companies (defined under S2, ITA, 1967)

less than fifty members; and

control by not more than five persons

(Include Private Exempt Company)


Chargeable Concepts

RPGT




TST © 2010

RPGT


1.4. Chargeable Gains & Allowable Losses (S7)

Disposal Price > Acquisition Price

= Chargeable Gain

Disposal Price < Acquisition Price

= Allowable Losses

Disposal Price = Acquisition Price

= No Gain or Loss


RPGT FlowchartA. Ascertain the “Acquisition price”

B. Ascertain the “Disposal Price”

C. Determine the “Chargeable Gains/Loss”

Computation

of RPGT

DP > AP

DP ≤ AP

No RPGT

Exemption

Under RPGT

No RPGT

CP

CA

CG/

CL

Abbreviations:

CP : Chargeable person

CA : Chargeable Assets

CG : Chargeable Gains

DP : Disposal Price

AP : Acquisition Price

TST © 2010

Submission

of Return

Basic

Exemption


Acquisition Price

&

Disposal Price


A. Acquisition price (Para.4,Sch 2)

Acquisition Price of real property comprises of

the following:

1. Purchase consideration (e.g. SPA)

2. Add: Incidental cost

3. Less: compensation/insurance coverage

received/deposit forfeited

Acquisition prior to 1/1/1970 is the market value as at

1/1/1970


Add: Incidental cost (Para.6,Schedule 2)

Incidental costs such as (1):(a) Lawyer’s fees, commissions, remuneration for

professional services of accountants, surveyors, and architects.

(b) Expenses of transfer (including stamp duty)

(c) Costs of advertising (in acquisition -to find a seller)

(d) Cost of advertisement (in disposal-to find a buyer)

(e) GST ITC (disposer-not taxable person/not entitled for ITC, WEF YA 2015)

(interest paid on capital employed can not be included, wef1/1/2010)


LESS: Deductions from the purchase consideration

Compensation or receipts of any damage, injury,

destruction, dissipation of the chargeable asset.

(e.g. access road)

Insurance policy receipts for any damage or injury

(e.g. fire insurance claimed)

Deposits forfeited, if any, in respect of a proposed sale of

an asset.


Other Excluded Expenditure:

Expenses deducted under the Income Tax Act 1967

cannot be deducted in arriving at the acquisition price or

the disposal price (Para.7 Sch.2)

expenses allowable as deduction under the ITA

(revenue in nature)

e.g. Term loan interest expense

Repair and Maintenance

GST ITC by a disposer ( who is liable to be registered

but failed to register) (WEF YA 2015)

GST on output tax ( borne by the disposer) (WEF 2015)


Summary of Acquisition PriceAcquisition Price XX

Add:

Incidental acquisition expenses, fees xx Commission, to surveyor, valuer, xx

Stamp duty, advertising costs and legal fees xx

XX

Less:

Compensation monies received in respect

of damage to asset. (xx) Insurance monies received for damaged asset (xx)

Deposits forfeited in respect of abortive sale (xx)(xx)


Example: Acquisition Price

RM

Acquisition Price

Add:

Incidental expenses such as fees, commission,

to agent, surveyor, valuer, and stamp duty,

advertising costs and legal fees

Less:

Compensation monies received in respect of

damage to asset

Insurance monies received for damaged asset

Deposits forfeited in respect of abortive sale

xx

x

(x)

(x)

(x)

1,000,000

50,000

--------------

1,050,000

-

Net Acquisition price xx 1,050,000


B. Disposal Price

Paragraph 5, Schedule 2

The sale consideration less:

1. Capital expenses

such as alterations, improvements and extensions.

2. Expenses incurred, in defending the title to the

chargeable asset

e.g. removal of private caveat

3. Incidental cost of disposal of real property (brokerage

fees, valuation fees, legal fees and advertisement fees)


Summary of Disposal PriceRM

Disposal Price xx

Less:

Expenses incurred in improving

or preserving the asset xx

Expenses incurred in establishing,

preserving or defending title to asset xx

Incidental expenses such as fees,

commission, to surveyor, valuer,

Stamp duty, advertising costs and legal fees xx

xx


Example: Disposal Price

RM

Disposal Price

Less:


or preserving the asset

Expenses incurred in establishing, preserving

or defending title to asset




xx

x

x

X

2,000,000

200,000

-

100,000

Net disposal price xx 1,700,000


C. Chargeable Gains (Loss)

Disposal Price X

Less: Acquisition Price X

Chargeable Gains (Loss) X


Example: Computing Chargeable Gains

RM

Disposal Price

Less:


or preserving the asset

Expenses incurred in establishing, preserving

or defending title to asset




xx

x

x

X

2,000,000

200,000

-

100,000

Net disposal price xx 1,700,000 (A)



RM

Acquisition Price

Add:




Less:

Compensation monies received in respect of

damage to asset

Insurance monies received for damaged asset

Deposits forfeited in respect of abortive sale

xx

x

(x)

(x)

(x)

1,000,000

50,000

--------------

1,050,000

-

Net Acquisition price xx 1,050,000 (B)



RM

Chargeable gain (1,700,000-1,050,000)

Less:

Basic exemption

Sch.4 Para.2 (10% CG or RM10,000 whichever higher)

xx

(x)

650,000

65,000

A-B

Net chargeable Gain xx 585,000


Date of Disposal & Acquisition


Date of Disposal – Schedule 2

With agreement-the agreement date (Para.15(1))

No agreement-the date of completion of the disposal of the

asset (Para.15(2))

Date of Completion – Para.15(3), Sch.2

The date of Completion of disposal is taken to mean:

(i) the date of transfer of ownership; or

(ii) the date on which the whole of the consideration is received by the disposer

Whichever is the earlier?


Date of Conditional Contract-Para.16, Sch.2

Where a contract is conditional, and the

condition is satisfied (e.g. exercise of a right under

an option) the disposal date is the date on which

the contract was made

Where the contract requires the approval by the

Govt or a State Government or an authority or

committee appointed by the Govt, the date of

disposal shall be the date of such approval


Date of disposal – Particular case – Sch. 2

Gift of asset on death, the disposal date shall be the date of transfer of ownership (para.15A(a))

Executor shall be deemed to have acquired on the death of deceased

(para 15B(1))

AP=MP at the date of transfer of ownership (Para.19(1))

Date of Disposal Price

Estate to Executor On death of

deceased

Para 15B(1)

Executor Acquisition Price

= Market value

(Para. 19(1))

Executor to

Beneficiary (below

age 18)

On date of transfer

(upon full age of 18)

Para 15A(a)

Executor Disposal Price

= Market value

Executor to Third

party

On date of transfer Executor disposal Price

= Market value


Time of accrual of chargeable gains-Para.14 Sch.2

The chargeable gain is deemed to accrue to disposer at the time of the disposal

Whether the consideration has been received


Acquirer’s default in payment- Para.18 Sch.2

In the event of default in payment

Disposer may appeal to DG for CG to be adjusted accordingly


Exemptions


1.5. Exemption

A. Basic exemption (Sch.4)

B. Exemption-Special cases (Sch.2 Para.3)

C. Exemption - Transfer of CA between companies in “same group”

(Sch.2 Para.17)

D. Exemption – Estate Duty (Sch.4. Para.4)

E. Exemption – Government Bodies (Sch.4. Para.3)

F. Private Residence (Section 8)

G. Gifts Between H & W, parent & child or Grandparent & grant child

(Sch.2 Para12)


RPGT Flowchart

Computation

of RPGT

Basic

Exemption

DP > AP

DP ≤ AP

No RPGT

Exemption

Under RPGT

No RPGT

CP

CA

CG/

CL

Abbreviations:

CP : Chargeable person

CA : Chargeable Assets

CG : Chargeable Gains

DP : Disposal Price

AP : Acquisition Price

TST © 2010

Submission

of Return


A. Basic Exemption Sch.4 Para.2

10% of chargeable gain or RM10,000

(whichever is greater for individuals)

Individual A (RM) Individual B (RM)

Chargeable Gains 200,000 90,000

Basic Exemption

10% of 200,000

10% of 90,000 or RM10,000

20,000

10,000

Net Chargeable Gains 180,000 80,000


Exemption on partial disposal

Current Position: Para 2, Schedule 4

• In partial disposal, exemption given partially using the specified

formula

A

---- x C

B

Where:

A: part of area of chargeable asset disposed

B: total area of the chargeable asset

C: ten thousand or 10% of chargeable gain, whichever is greater


Exemption on partial disposal

Proposed Change: Para 2, Schedule 4

• In partial disposal, exemption given partially using the specified

formula

A

---- x C

B

Where:

A: part of area of chargeable asset disposed

B: total area of the chargeable asset

C: ten thousand

or 10% of chargeable gain, whichever is greater

Effective on operation of the Finance Act 2015


B. Exemption – Devolution of asset Para.3(a) Sch.2 A devolution of asset under a will or intestacy

(from deceased to executor or legatee)

Disposal Price deemed equal Acquisition price

Deceased

Executor

Beneficiary

Exempt

ExemptThird Party Scale rate


B. Exemption - Specific Cases (Paragraph 3, Schedule 2)

Disposal Price =Acquisition price

DP = AP Para.3(c) Acquisitions from or disposals to a nominee or trustee resident in

Malaysia by an individual (or his wife or both)

Para.3(d) Conveyance or transfers as security

(including transfer and re-transfer on the redemption)

Para.3(e) Transfers as gifts to the Government, a State Government, a local authority or a charitable institution

Para.3 (f) Transfers due to compulsory acquisition under any law


B. Exemption on Family Control Company

Para.3(b) Sch.2

DP=AP

1. Transferred to a controlled company by an individual

or his wife or both or a connected person (spouse’s

brother, sister/ whether or not resident in Malaysia)

2. Where the consideration is shares in the company or

“substantially of shares” ie. not less than 75% in

shares

3. DP=Original AP + Permitted expense + Cash

4. No tax


Example

Year 1 Mr T & Mrs T purchase a real property RM400,000

Year 3 They transfer the real property to a control

company in exchange for shares

RM400,000

Year 3 CG=Nil (DP=original AP) Nil

• Husband & Wife transfer individuals property to a control company


C. Exemption - Transfer of CA between companies in “same group” (Para.17 Sch.2)

a Para.17(1)(a) To enhance greater efficiency in operations

(the consideration is substantially of shares )

b Para.17(1)(b) In a scheme of reorganization, reconstruction or

amalgamation

c Para.17(1)(c) By a liquidator in a scheme of reorganization,

reconstruction or amalgamation

All the above The transferee company must be resident in Malaysia

Prior approved of the DGIR must be obtained

For (b) & (c ) To a resident company which is restructured

In accordance with Government policy on capital

participation in industry.


D. Exemption – Estate Duty

Estate Duty-Para.4, Sch.4

In a case where an asset is disposed because the

disposer is compelled to dispose a property in order to

settle estate duty. The exemption is equal to the amount of

estate duty.

Estate duty was abolished from 1 November 1991


E. Exemption – Government Bodies

Exemption for Government Bodies-Para.3, Sch.4

Chargeable Gains of the Government, State Government or a local authority.


F. Private Residence-Section 8 Gains arising from the disposal of private residence

By citizen or permanent residence

Exempted.

Exemption is limited to one unit only-Para.9(1),Sch.3

Elect an exemption and specifying which asset

No further exemption in respect of any other private residence, and

Made in writing and the election shall be irrevocable.

Bungalow lot?


G. Gift-Para. 12 & 19, Sch.2 A chargeable asset given as a gift is deemed to have

been disposed of at market value (Para.19, Sch.2)

However, a gift between husband and wife, parent and child, grandparent and grandchild made within five years after the date of acquisition of the asset by the donor. ( no gain or loss for the donor). There is no need to make any election for the exemption. (Para.12, Sch.2)

The acquisition price for the donee is the donor’s acquisition price plus permitted expenses.


Example-Gifts from Father

Within 5

Years

DP = original AP of donor + Permitted expenses

Acquisition date = date of transfer

Year Transactions AP (RM) DP (RM)

Year 1 Father Acquired a piece of land

AP=RM100,000

100,000

Year 4 Father Trafer to Son

DP=Original AP

100,000 100,000 DP=AP

No Tax

Year 5 Son disposal to Third Party

DP=MP

100,000 200,000 DP-AP

RM100,000

Taxable


Example-Gifts from Father

After 5

Years

DP = MP at date of transfer

Acquisition date = date of transfer

Year Transactions AP (RM) DP (RM)

Year 1 Father Acquired a piece of land

AP=RM100,000

100,000

Year 6 Father Tfr to Son

DP=MP=RM180,000

100,000 180,000 DP=MP

(after 5 years)

No tax

Year 7 Son disposal to Third party

DP=MP=RM200,000

180,000 200,000 DP-AP

RM20,000

Taxable


Example: Gift from Husband to Wife

Year Transaction Husband Wife

Year 1 H & W Co-purchase a property 100,000 100,000

Year 2 H transfer his share to W - 200,000

Year 6 W sold the property for RM400,000 400,000

Total Chargeable Gains 200,000

½ chargeable gains after 5 year

½ chargeable gains within 5 year

0

100,000


Amount

withhold

Acquirer responsibility (e.g. purchaser’s lawyer)

To retain either the whole of the cash consideration or

a sum not exceeding 3% of the total consideration

whichever is less.

Period Remit to LHDN within 60 days from the date of

disposal

Penalty Failure to comply

10% penalty will be imposed to the purchaser.

1.6. Withholding Monies-W.E.F 1/1/2010


Example

Non cash consideration RM495,000

Cash consideration RM 5,000

Total Consideration RM500,000

3% of RM500,000 RM15,000

Tax Remitted (Max cash consideration) RM5,000


1.7. New Scale Rate (Part I, II and III, Schedule 5)

Rates of Tax still applicable, subject to “special formula”

Effective from 1 January 2014

Type of disposal Company Individual

Citizen or PR

Individual

Not Citizen

& Not PR

Disposal in the within 3rd year 30% 30% 30%

Disposal in the 4th year 20% 20% 30%

Disposal in the 5th year 15% 15% 30%

Disposal in the 6th year and thereafter 5% 0% 5%


1.8. Submission of Return Forms

Seller Purchaser

Period Within 60 days Within 60 days

Transaction of

Real Asset

CKHT 1A &

Supporting documents

CKHT 2A & CKHT 502 (3% wef

1.1.15 ) & supporting documents

Transaction of

RPC shares

CKHT 1B &

Supporting documents

CKHT 2A & CKHT 502 (3% wef

1.1.15) & supporting documents

Not taxable/

Exemption

CKHT 3

5 years

Para. 9 Sch.3 Section 8

-Private Resident exemption

Para. 12 Sch. 2

-Gift exemption



Seller Purchaser

Statement of

Assessment

Pengiraan RPGT

CKHT 605A

Notice of

Assessment

Form K

Payment within 30 days

CKHT 501

Not taxable Sijil Perakuan Penyelesaian

Kes tidak kena cukai

CKHT 5A



Seller Purchaser

E-filing WEF 1.1.2013

Individual with tax file

CKHT 1A & CKHT 3 only

Not applicable to lawyer,

nominee & company

WEF 1.1.2013

Individual with tax file

CKHT 2A


1.9. Tax implications & Other considerations

1. The importance of will writing

2. Where an immediate family member is a bankrupt

3. Setting up an “family incorporated” company

4. Appointment of trustee (e.g. Interest scheme, property

club, vacationers club)

5. Appointment of committee

(e.g. facilitate application of subdivision of title &

application of development order)

6. Setting up of foundation


Q & A


Part 1.2

Real Property Companies &

Real Property Companies Shares


1.2.1. Shares in Real Property Companies

WEF 21/10/1988

The Act impose liability on gains on the disposal of shares

in "Real property Companies”


1.2.2. Meaning of “Real Property Companies” (Sch.2

Para.34A)

Para 34A introduced to counter individuals selling

companies shares instead of land

A controlled companies holding

-real property or

-shares (shares/loan stock/debentures)

Define value ≥ 75% Total Tangible Assets (TTA)


A) Define value includes:

-Real property - at the market value, or

-RPC shares - at the acquisition price

B) Total Tangible Assets

The value of TTA is the aggregate of

defined value of relevant assets, and

value of other tangible assets.

(e.g. plant and machinery, stock-in-trade, stock and shares in companies other than RPC, book debts, etc. based on book value will be accepted)

C) Determination of RPC (A/B)

Define value ≥ 75% Total Tangible Assets (TTA)


Determinant of RPC

Example of Real Property Company (1)

RM

Real property 600,000

Define value 600,000 A

Non Current Assets (PM) 10,000

Current asset (stock/debtor etc) 150,000

Total tangible assets 760,000 B

Define value of Real property/Total tangible assets

600,000/760,000 =78% *78% A/B

*Since the define value is ≥ 75% (ie78%) the company is RPC company


Example of Real Property Company (2)

RM

Real property/RPC share - at the market value 600,000

RPC share in XYZ company 100,000

Defined value 700,000 A

Non Current Assets (PM) 10,000

Current asset (stock/debtor etc) 150,000

Total tangible assets 860,000 B

Define value of Real property/Total tangible assets

700,000/860,000 =81% *81% A/B

*Since the define value is ≥ 75% (ie81%) the company is RPC company


1.2.3. Date of Acquisition (not require?) As at 21/10/1988 -the shares held at that date.

(should complete & return Form CKHT 19)

Initially not a RPC but subsequently becomes a RPC

(should complete & return Form CKHT 19 in subsequent date)

Having ceased to be a RPC subsequently become RPC


Compliance by RPC & their shareholder

RPC shares are chargeable assets, shareholder should be notified

Any changes in the shareholding



1.2.4. Acquisition Price - RPC shares

The acquisition price is equal to a sum determined as follows:

(A/B) x C

No of shares acquired (A)

Total no of shares issued (B)

x

Defined value of real property/shares (C) owned by the RPC at the date of acquisition


1.2.5. Chargeable Asset

The chargeable asset includes:

The acquisition or disposal of shares in a RPC; or

The acquisition or disposal of a real property.


1.2.6. Valuation of RPC shares

Date of acquisition of RPC shares

Chargeable asset shall be deemed to be acquired

-on the date the where the company becomes a RPC

1/1/11 Mr T invest 400,000 shares (40%)

In TST S/B (Non RPC company)

RM400,000

1/6/11 TST S/B acquired a real property costing RM1.5m &

become a RPC company

RM1,500,000

1/6/11 Mr T’s shares become RPC share on 1/6/11

400,000/1,000,000 x1,500,000

RM600,000


1.2.7. Disposal of RPC shares

Chargeable gains on disposal of RPC shares

1/1/11 Mr T invest 400,000 shares (40%)

in TST S/B (Non RPC company)

RM400,000

1/6/11 TST S/B acquired a real property &

become RPC company

RM1,500,000

1/6/11 Mr T’s shares become RPC share on 1/6/11

400,000/1,000,000 x1,500,000

RM600,000 (A)

1/1/12 Mr T sold 400,000 shares for RM700,000 RM700,000 (B)

1/1/12 CG=RM700,000-RM600,000 RM100,000 (C)=(B)-(A)


1.2.8. Acquisition & Disposal of Share

1/9/11 Mr T acquired 100,00 share from Mr S RM120,000 A

1/6/12 Mr T sold 100,000 share RM150,000 B

1/6/12 CG=RM150,000-RM120,000 RM30,000 C=B-A


1.2.9. Bonus shares & Disposal

1/10/11 Mr T received 50,000 Bonus share Nil A

1/6/12 Mr T sold 50,000 bonus share RM75,000 B

1/6/12 CG=RM75,000-0 RM75,000 C=B-A


1.2.10. RPC Cessation

After disposal of relevant assets the defined value of

the remaining relevant assets is less then 75% of its

TTA.

Further acquisition of relevant assets may result in the

company becoming a RPC again.


1.2.11.Submission of Form

Within 60 days of an agreement:

CKHT 1B –by shareholders making a disposal of RPC

shares

CKHT 2A -by shareholders making an acquisition of

RPC shares

CKHT 3-by shareholders making a disposal (not subject

to RPGT)


1.2.12.Tax Planning on RPC

Making the company not a controlled company, or

Become an incorporated enterprise, or

Become an management services company

Ensuring 75% test not met.

-increase paid up capital

-placed an Fixed deposit

-increase current asset (stock/other debtors)


Q & A


Part 1.3

Landowner’s Income

&

Joint Venture


1.3.1. Joint Venture Agreement

Parties Landowner and developer

Agreements Surrender the land to developer

Joint Venture Agreement/supplementary agreement/PA

Disposal date Deemed disposal on date of Joint Venture

Rationale -Low initial cost for Developer

-Easy to sell & get higher value (20%-25%) for landowner

-No land title yet (Letter of alienation)

-Involve a group of individual landowners

(e.g. co-operative)

Consideration Exchange for number of units of property/and cash consideration

A certain % of the progress payments from the sale of the houses

Sales proceeds from the house allotted to him


1.3.1.1. Common Mistakes in signing JVA

Signing JVA with another JVA owner

Obtaining a PA from another PA holder

Signing JVA without part cash consideration (100% contra units)

JVA without specify sales consideration (only indicate sharing of

% of profit)

Incorporate a JV company without shareholder agreement to

protect the minority


1.3.2. Tax Treatment on Landowners’ Income

• Non business income

Land owner does not take an active part in the

development activities

• Business income

Land owner actively participates in the development

activities


1.3.3. Landowners’ Income – non business

• Identify the acquisition date & cost

• Identify the JV date & Market value/consideration

• Calculate the Chargeable Gains (not taxable, if >5 yrs)

• Identify the subsequent disposal date & sale consideration.


Example (1) of Joint Venture for contra units

Yr 1 Mr T acquired a piece of land 1,000,000

Purchase date

To

JV date

(4th yr)

Mr T signed a JV with TST Developer

Market value at JV date (disposal date)

-8 units of intermediate terrace

(RM300,000 x 8) =RM2,400,000

-2 units of corner lot

(RM 450,000 x 2) = RM900,000

3,000,000

4th yr

Scale rate=20%

CG=MV-AP=3,000,000-1,000,000

Less:10,000 or 10% CG

Net Chargeable Gains

2,000,000

200,000

1,800,000 A

JV date

To

Disposal date

4th yr

Scale rate=20%

Mr T disposal 1 unit of intermediate

Less: AP at JV date

300,000/(300,000x8+450,000x2)xRM3,000,000

Chargeable Gains

Less: 10,000 or 10% CG

350,000

272,727

77,273

10,000

67,273 B


Example (1) (Cont)

Computation of Chargeable Gains

Chargeable Gain (A) Chargeable Gain (B)

Net chargeable Gain 1,800,000

@ 20% 360,000

3% (within 60 days) Nil

-------------

Amount payable 360,000

Net chargeable Gain 67,273

@20% 13,455

3% (within 60 days) 10,500

---------

Balance payable 2,955

• For CG (A) TP need not require to remit 3% to IRB (no cash consideration)

However, the RPGT amount to RM 360,000

• For CG (B) TP need to remit 3% of RM350,000=RM10,500 to IRB within 60

day of sighing SPA, the balance payable is RM2,955


Example of Joint Venture for contra units & part cash consideration

Yr.1 Mr T acquired a piece of land 1,000,000

Purchase date

To

JV date

(4th yr)

Mr T signed a JV with TST Developer

Market value at JV date (disposal date)

-8 units of intermediate terrace

(RM300,000 x 8) =RM2,400,000

-Cash consideration =RM900,000

(in place of 2 corner units)

3,000,000

4th yr

Scale rate=20%

CG=MV-AP=3,000,000-1,000,000

Less:10,000 or 10% CG

Net Chargeable Gains (not taxable, if > 5 yrs)

2,000,000

200,000

1,800,000 A

JV date

To

Disposal date

(4th yr)

Scale rate=20%

Mr T disposal 1 unit of intermediate

Less: AP at JV date

300,000/(300,000x8)+900,000)x3,000,000

Chargeable Gains

Less:10,000 or 10% of CG

350,000

272,727

77,273

10,000

67,273

B


Example (2) (Cont)

Computation of Chargeable Gains

Chargeable Gain (A) Chargeable Gain (B)

Net chargeable Gain 1,800,000

@ 20% 360,000

3% (within 60 days) 90,000

-----------


Net chargeable Gain 67,273

@ 20% 13,455

3% (within 60 days) 10,500

---------


• For CG (A) TP need to remit 3% to IRB within 60 days of signing JVA

3% x 3,000,000 =RM90,000, the balance of RM270,000

• For CG (B) TP need to remit 3% of RM350,000=RM10,500 to IRB within 60

day of sighing SPA, the balance payable is RM2,955


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