Repercussions of the 5% RPGT (of 2009)

Guys! Since the whole "RPGT" thing that was goin on @ "thepropertizer", i stumbled on an article that was written @ 2009 @ the star's property site.
In this article, there are a few interesting comments that was expressed concerning the new 5% RPGT ruling! (which is of course, in the past but still interesting to look at anyways).
Here it is! Ta-dah!

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Since three months ago, the property market in Malaysia has been gaining momentum. It was evident in the number of foreigners attending property forums and seminars. These potential buyers were looking to either purchase properties for investment or rental purposes.

It was also widely believed that property prices in good locations will only increase. Thus, real estate agents have always advised their clients to start investing. With such a thriving industry, it looked like the lagging economy may just receive a shot in the arm…until the 5% RPGT was announced.

Back in 2007, the Malaysian government announced that RPGT was waived for all locals and foreigners. Foreigners who bought property three years back believed that tax would not be imposed when they made a sale. Currently, real estate agents are finding it difficult to explain to them that the ruling is void and tax will be imposed, which naturally eats into their profit.

What some foreigners say
Below are what some foreigners have to say about the new 5% RPGT ruling:

“How can your government do this “see-saw” ruling on RPGT? I was under the impression and believed that I could get a 30% profit from my condominium sale? I am a pensioner and this gain will assist me with my monthly expenses and now I am faced with 5 % less! It is unfair! Please ask your government to weigh the pros and cons before the ruling is made. It will have an adverse effect on your property industry.” – Mr. Joe of the United States, 56 years old

“We like and love Malaysia and you have all the beauty of land, sea and beautiful houses and condominiums. We like to stay here because it is cheaper to educate our children and purchase an apartment in your country. In Korea, a 1,400 sq ft apartment 45 km from the city centre will cost us USD1 mil. Therefore, Malaysia is heaven to us. Tell your government, we investors have expenses but no income as we don’t have a business here. We sometimes travel in and out (of Malaysia) for our business in Korea, and if we have enough money, we will buy property here. Revenue will be brought into your country. Ask the government to impose tax on other things, OK?” – Mr. Jin Lee of Korea, 48 years old

“I have visited your country for the past 6 years just to learn your rulings (on property) and I feel that it is unfair because pamphlets printed by us have not been fully distributed (in Iran) and now a new ruling has been made. Buying property is one of the main priorities for Iranians because we strongly believe that having our own home is better than renting. We are new in your country and are still learning (about the local property market). We have not digested the old ruling and there is already a new set of ruling. I am not old but it is taking me a long time to understand what’s going on, so imagine what it is like for the older ones who hardly speak English. How do we explain the changes to them? They won’t understand and will think we are trying to swindle them. Government of Malaysia, do think through (the ruling) and don’t impose the 5% RPGT for the good of the property industry!” – Mr. Reza, of Iran, 47 years old

Foreigners are not the only ones against the new ruling as real estate agents are finding themselves spending more time explaining the rulings (especially to their foreign clientele) than selling properties.

For instance, a recent rule imposed on foreigners states that beginning Jan 1, 2010 a RM500,000 limit will be imposed on the sale of a property in Selangor. Federal Territory will impose the same limit while Perak’s limit is at RM750,000. Each state in Malaysia will have a different limit and new agents who are not aware of the ruling are expected to make mistakes…and pay for them.

Extra costs
Most medium income earners will own one or two properties to help finance their children’s education or their aging parents. Typically, the older generation would not have purchased life insurance as it is taboo to buy it.

With the new RPGT, the purchaser is now required to withhold 2% (of the buying price) to pay the Inland Revenue Board (IRB), which consequently incurs more cost such as lawyer fees. Charges will definitely be imposed by lawyers for processing documents – which may take up to 3 years – until a settlement is made between the property seller and IRB.

These extra costs will not be clearly understood by property buyers and it again falls on the real estate agent to explain why and how the costs are incurred. It is difficult to explain these details when, say, even the 5% service tax imposed by the service industry is not fully understood by most vendors.

Apart from that, the individual who inherits properties will usually not keep the records of remuneration to the surveyor, valuers, accountant, renovations and other related expenses required by the IRB for the disposal of the inherited property.

Therefore, the MIEA believes that the 1975 tax ruling that follows a time frame when disposing property is a better option for most people. An example of the previous taxation method is as follows:-

a) For resident Companies and individuals:-

b) For non citizens and non-permanent residents effective Oct, 1997 and valid till 2007:- Disposal within 5 years is 30% and disposal after 5 years is 5 %.

However, Malaysians as well as permanent residents in Malaysia are entitled for an RPGT exemption once in their lifetime. The exemption is given to both husband and wife.

Relook the 5% RPGT
A joint memorandum of appeal to prevent the RPGT from taking effect on Jan 1 was held on Nov 18, 2009 at the office of the Associated Chinese Chambers of Commerce & Industry of Malaysia. Below is the list of organisations that signed the memorandum:-

a) The Associated Chinese Chambers of Commerce & Industry of Malaysia (ACCIM)
b) Malaysia institute of Real Estate Association ( MIEA)
c) Real Estate & Housing Developers Association, Malaysia ( REHDA)
d) International Real Estate Federation Malaysia Chamber ( FIABCI)
e) Master Builder Association Malaysia ( MBAM)
f) Pertubuhan Aktor Malaysia ( PAM)
g) Building Materials Distributors, Association of Malaysia ( BMDAM)
h) The institute of Engineers Malaysia( IEM)
i) Balai Ikhtisas Malaysia, BIM ( Malaysia Professional Centre)
j) National House Buyers Association( HBA)
k) Chartered Institute of Building Malaysia(CIOB)
l) All Petaling Jaya Selangor Residents Associations.
m) Association of Consulting Engineers Malaysia ( ACEM)
n) Property Management Association of Malaysia ( PMAM)

Apart from that, a dialogue with Y.B. Dato' Seri Kong Cho Ha, Minister of Housing and Local Government, was held at his office on Dec 11, 2009. Therefore, the MIEA hopes that the Malaysian government will hear its concerns and will not implement the 5% RPGT come Jan 1, 2010.

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So what did you guys think? Blast from the past, huh?
Did you agree with their statements and comments up there (Now that we are living in the year 2010). There were really Big talks going about this! (Before the 70% on the 3rd house ruling came out, that is)
Well thats 2009, now were living in the year 2010...and....proceeding into the 2011 soon!
Have any new years plans yet? :)