Real Property Gains Tax (RPGT) for commercial or industrial property is a tax imposed on the profits gained from disposing of commercial or industrial assets in Malaysia.
This capital gains tax applies to both individuals and companies, with different rates for each category.
History of RPGT Act 1976
RPGT was first introduced in 1976 under Real Property Gains Tax Act 1976 with the objective for the government to prevent a potential bubble and curb any property speculation.
Although it was introduced in 1976, it took 20 years to implement this act. It has undergone several amendments and was even suspended between 2007 and 2009. RPGT was introduced again in 2010.
The more notable and significant changes were the amendments introduced in the budget 2019, where there is a tax increase.
- There is an increase of percentage gain tax of 10% from 5% percent for companies disposing of properties in the 6th year.
- There is an increase of percentage gain tax to 5% from 0% (death and taxes are intertwined).
- Besides, there is an increase to 10% of percentage gain from 5% for the seller (disposer) who is not a citizen or not a permanent resident.
In the budget 2020, some interesting changes were introduced. The RPGT is now assessed against a based year from 1st January 2000 to 1st January 2013.
For example, if you bought a factory in 2009 at RM20 Mil and its value in 2013 was at RM40 Mil. The property's value is estimated against the property's valuation in 2013 and not the sale date.
In this case, the factory is at the value of RM40 Mil.
RPGT Rate for Commercial and Industrial Property
RPGT is classified into 3 categories:
- Individuals (citizens or permanent residents).
- Individuals (non-citizens or non-permanent residents or foreigners).
- Companies.
What Is a Real Property Company (RPC)?
A key aspect of Malaysian tax law that often surprises businesses is the tax on Real Property Company (RPC) shares.
Under the RPGT Act 1976, a company is legally considered an RPC if at least 75% of its tangible assets consist of real estate or shares in other RPCs.
This means that selling shares in that company is taxed the same way as selling physical property, which can trigger RPGT liabilities.
It's crucial to understand these scenarios:
- Becoming a Non-RPC: If a company sells assets to the point where its real property holdings fall below the 75% threshold, it ceases to be an RPC. The shares sold to reach this point are subject to RPGT.
- Reclassifying Assets: If a company reclassifies a real property from a fixed asset to a current asset (like inventory), this is also considered a disposal and is subject to RPGT based on the property's market value at that date.
For any company involved in mergers, acquisitions, or the sale of holding companies, performing due diligence to verify the RPC status of all entities is essential.
This proactive step can help you avoid unexpected and significant tax bills.
How to calculate RPGT for company?
RPGT for company, same as individual, is calculated when the disposal price (sale price) exceeds the acquisition (purchase) price, and there is a chargeable gain;
Disposal Price = Consideration received – Permitted Expenses – Incidental Costs.
The "disposal price" is arrived at by deducting permitted expenses and incidental costs from the consideration amount.
For example, AB Company Sdn. Bhd. bought a warehouse at RM30 Mil in 2020 and sold it at RM60 Mil in 2025.
Deductible Incidental Costs That Maximize Net Returns
The chargeable gain isn't just the sale price minus the purchase price. Corporations can lower their RPGT by carefully tracking and deducting legally allowed expenses.
- Capital Enhancements: Major renovations, factory extensions, or permanent upgrades that increase the property's value are deductible. However, routine maintenance and cosmetic fixes do not qualify. All enhancement works must have proper council approvals, receipts, and documentation.
- Transactional Disbursements: You can also deduct professional and administrative costs related to the property's purchase and sale. This includes legal fees, real estate agency commissions (such as those from engaging Industrial Malaysia), property valuer fees, stamp duty, and advertising costs to find a buyer.
Exemption of RPGT in Malaysia
Under the RPGT Acts, some exceptions are provided in Malaysia, which are found in paragraph 17, schedule 2 of the RPGT Act.
- Transfers between companies for reorganisation, reconstruction or amalgamation where the transferee company is being restructured to comply with the Government policy on capital participation in the industry. Besides, the transfers within the same group to bring about greater efficiency and for a consideration consisting substantially of shares in the transferee company.
- The sales of properties to Real Estate Investment Trusts (REITs).
- The disposal of chargeable assets to the SUKUK Bank Negara Malaysia-Ijarah issued or published by BNM Sukuk Berhad.
- The disposal of chargeable assets to the issuance of private debt securities under Islamic principles.
- The land co-owned by two or more persons is partitioned to vest in each of them a portion of the land under separate titles, the partition of land is not regarded as disposable, and tax will not be imposed.
- The assets distributed by a liquidator under a reorganisation scheme, reconstruction, or amalgamation where the transferee company is being restructured to comply with the Government's policy.
- The sale of assets in connection with the repurchase of the chargeable assets for a securitisation transaction.
- The disposal of asset is made in connection with the securitisation of asset and special vehicle purpose approved by the Securities Commission from 1 Jan 2021.
- The gain accruing on the conveyance of chargeable asset upon conversion of convention partnership or private companies to a limited liability partnership RPGT.
- If there is no gain and no loss situation, this transaction is exempted from RPGT.
- Disposal of chargeable assets including shares in real property company from 1 Jan 2013 to 31 Dec 2017 to a trustee-manager on behalf of a business trust established under the Capital Market and Services Act 2007
- The disposal of chargeable assets by the ASEAN Infrastructure Fund Limited after 24 Apr 2012.
- The disposal of chargeable assets in relation to Sukuk Kijang with effect from 25 Jul 2013.
It is important to note that the conditional contract is the disposal and acquisition date of the chargeable assets concerned, depending on the date of the written agreement or the last conditions are fulfilled.
Use Intra-Group Exemptions for Strategic Restructuring
While RPGT generally applies to any profitable property sale, Malaysian tax laws provide relief for genuine corporate restructuring.
Under certain rules, transferring property between companies in the same group can be done on a "no gain, no loss" basis, leading to a full RPGT exemption.
- Operational Reorganisation: This is a powerful tool for large companies looking to streamline their operations, consolidate industrial assets, or move properties to a specialised subsidiary without losing capital to taxes.
- The Ownership Threshold: To qualify for this relief, you must meet strict requirements. The companies involved in the transfer usually need to share at least 75% common ownership. Also, the property cannot be sold outside the group for three years after the transfer. If it is, the Inland Revenue Board (LHDN) can withdraw the exemption.
How to file the RPGT in Malaysia?
If you want to file an RPGT, you can obtain the necessary forms by downloading them from the IRB site or going to the nearest Inland Revenue Board or LHDN branch.
There are several key steps to ensure the filling process is smooth.
- First and foremost, the seller (disposer) fill the Disposal with Real Property (CKHT 1A) form, Sales and Purchase Agreement (SPA) form and other supporting documents
- Then, complete the Notification under Section 27 of the RPGT 1976 (CKHT 3) form so you can apply for RPGT exemptions.
- The next step is to ask the buyer (acquirer) to fill the Acquisition with Real Property (CKHT 2A) form that comes with a copy of the SPA or Sale and Purchase Agreement.
- Do note that seller (disposer) and buyer (acquirer) have to file RPGT returns within 60 days from the transaction date.
- These forms can be submitted either manually or online.
- For manual submission, the relevant forms need to be downloaded and printed. Once completed with the required details, they must be submitted to the nearest LHDN branch.
- For online submission, the forms can be filled in and submitted by logging into the official website at MyTax.
Filing Deadlines and the Section 109 Retention Sum
Complying with RPGT rules means you have to meet strict deadlines. The responsibility rests with both the seller and the buyer, so they need to coordinate their efforts.
- The 60-Day Window: Both parties must file their forms (CKHT 1A for the seller, CKHT 2A for the buyer) with the LHDN within 60 days of signing the Sale and Purchase Agreement (SPA). Missing this deadline will result in immediate financial penalties.
- The 3% Retention Mandate: To secure its tax revenue, the government requires the buyer's lawyer to hold back 3% of the total purchase price. This amount is sent to the LHDN within 60 days and serves as an advance payment on the seller's final RPGT bill. If the actual tax is less than the amount held back, the selling company can file for a refund.
Penalty of Late RPGT Payment
If you fail to pay RPGT after 60 days, the seller (disposer) may need to pay the penalty. The penalty is 10% of the amount payable as RPGT.
How can you benefit from Industrial Malaysia?
Our expert team can guide your company through all processes in investing in industrial properties, from understanding your company goal for the purchase, understanding investment site attributes and closing the deal.
We can also help your company in determining the right time to buy, the right location to look at, and everything needed to close the deal. We are constantly watching the real estate rental market, conditions, and trends.
Besides, we can help you engage tax consultants in the RPGT and stamp duty field and work with you to engage with the local and state authority for your buildings to have a smooth and efficient property purchase and disposal.
Reach out to us at hello@industrialmalaysia.com.my if you are keen to know more about the warehouses and factories for sale or for rent.
LEGAL NOTICE: INTELLECTUAL PROPERTY PROTECTION
© 2024–2026 Industrial Malaysia. All Rights Reserved. This content, including text, custom graphics, and proprietary data, is protected under the Malaysian Copyright Act 1987.
Notice to Scrapers & Aggregators: We actively employ automated monitoring tools to detect unauthorized scraping and content redistribution. Unauthorized reproduction, mirroring, or "content jacking" is strictly prohibited and will be met with a formal Digital Millennium Copyright Act (DMCA) takedown notice and potential legal proceedings for damages.
Request for Use: Should you wish to syndicate or reference our content, please contact hello@industrialmalaysia.com.my for official licensing and permission.
