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Real Property Gains Tax Act 1976
For purchases of property for investments with an intention to resell at a higher price, the purchaser needs to be concerned with Real Property Gains Tax (RPGT). Real Property Gains Tax is a tax on the gain or profit from the reselling of real estate. It is payable to the Collector of Inland Revenue and applicable to the seller.
The effective RPGT rates as of 8 January 2015 according to Real Property Gains Tax Act 1976 are as follows:
| Date of Disposal | Companies | Individuals (Citizen & Permanent Resident) |
|---|---|---|
| Within 3 years of the date of acquisition of the chargeable asset | 30% | 30% |
| In the 4th year | 20% | 20% |
| In the 5th year | 15% | 15% |
| In the 6th year and subsequent years | 5% | 0% |
In the case of an individual who is not a citizen and not a permanent resident, the following rates of tax shall apply:
| Date of Disposal | Individuals (Non-citizen) |
|---|---|
| Within 5 years of the date of acquisition | 30% |
| In the 6th year and subsequent years | 5% |
RPGT is calculated based on your net chargeable gains. To arrive at your net chargeable gains, you can deduct a few expenses such as legal fees, real estate fees (sales commission), administrative fees, and expenditure incurred to maintain/upgrade the property (including interior design works).
RPGT is only chargeable if there is a profit gained from the disposal of the property. As such, if the seller sells the property lower than the acquisition price, there is no profit gained and therefore no RPGT is payable by the seller.
Likewise, if the seller sells the property equal to the acquisition price, there is neither a chargeable gain nor an allowable loss. As such, no RPGT is payable.
The seller may be charged a penalty if the payment is made after 60 days from date of disposal. Generally, the penalty imposed is 10% of the amount payable as RPGT.
The seller may file on his own the necessary forms with the Inland Revenue Board or appoint any lawyer at a fee prescribed by the Solicitors’ Remuneration (Amendment) Order 2016.
The Real Property Gains Tax Act 1976 allows certain incidental costs of the acquisition of the property and disposal of the property to be taken into account, being the legal fees for the acquisition and disposal of the property, agent sales commission, cost of transfer (including stamp duty) and renovation cost.
Under the subject Act, there is an exemption for gifts between family members by way of love and affection if the case falls under any one of the following scenarios:
- Transfer between husband and wife
- Transfer between parent and child
- Transfer between grandparent and grandchild
In these instances, the donor is deemed to have received no gain and suffered no loss on the disposal. The donee is deemed to have acquired the property at an acquisition price equal to the acquisition price paid by the donor, together with any incidental expenses incurred by the donor.
Any other form of transfer between family members not mentioned above is not entitled for exemption, such as a transfer between siblings.
Under the Real Property Gains Tax Act 1976, in the case of a gift of an asset on death, the disposal of the asset shall be deemed to take place on the date of transfer of ownership of the asset to the recipient.
Under the Real Property Gains Tax Act 1976, the date of acquisition shall be deemed to be the date of death of the deceased person.