for argument sake, i think the samples/articles pointed out earlier assuming an individual letting out more than 4 units, hence classified as business income. Reflecting upon the sample given, it can be treated as if an 'investment holding company', because so far only revenue is from rental. So in this case, buying a vehicle and depreciate is not allowed. But has it been mentioned that I can rent a place as office to manage my rental business/ reno/ buy furniture for the office as business expense, etc?

pls correct me if i'm wrong.

From what I have read so far.
Yes, buying a car for your company cannot be depreciated unless it's main purposes is to make more money.
Example:
You're a taxi driver.
You buy a taxi to fetch passengers to make money.

You're a logistic company.
You need trucks to send goods to make money.

If you're a real estate company.
How does buying a car help you make money?
In fact you can't. So the tax department won't allow you to write it down as an expense.

By the way, I am not a tax advisor. I only study engineering.
Please seek competent advise from them. Do note there are good ones as well as bad ones.
So I don't know how to reply simplesmile's question.



Q:What expenses are legitimate?
A: Buying another property to make more money.

Your company holds real estate, that is the primary asset that generate income.
If there is damage to it, you can spend the money you earn to fix it up. Before being tax.
You buy furniture or install fixtures to increase the value, you are allow to depreciate those items.

If you rent a place to do your real estate business to make more money, yes.
It is a legitimate expense.

You may not even need to rent an office place.
You can use one of your spare room and convert into an office place and get the benefits.

This post has been edited by jasonhanjk: Nov 2 2009, 10:53 AM

the % of income to judge whether the company is an Investment Holding Company rule was not gazetted(means not in force), i asked the IRB officer on this matter few months ago

not necessarily 4 properties, there are a detailed explanation on this.

if you are renting out a factory, it would be classified as business income too.

---

Added on November 2, 2009, 11:17 amEven if you are doing trading business, you can also purchase passenger car and take into accounts. depreciation is always not allowed but capital allowance would be able to claim depends on situation. However, capital allowance claim would usually not in full due to the purchase price restriction

This post has been edited by nothingz: Nov 2 2009, 11:17 AM

Interesting. So... then what is an investment holding company? What are the criteria?

I would think this thread start to deviate from the paying RPGT issue.

Company and personal level are always 2 different front. You either start with purchasing it (owning the properties) through company or personally. Cannot interchangable in between.
There are pros and cons in between them.

While income and disposal gain (capital gain lead to RPGT incurred) is 2 different issue.

I have a question regarding the newly imposed 5% RPGT beginning 1/1/2010.
Let say the S&P is done before 1/1/2010, however state consent etc can only be obtained 3 months later and hence balance money can only be received in 2010. Am I exempted from paying RPGT since S&P is done before 1/1/2010 or it is based on the completion of the transaction that is upon receiving the balance money?

The following is an interesting article published in The Star on 3 Nov 09

The Star 9/11/09

Tuesday November 3, 2009
Can real property gains tax be minimised?
By POON YEW HOE


It may be possible by transferring properties to a company, but there are many pitfalls to consider

AT the recently concluded budget seminar of our firm, a major focus of the 650 attendees was the proposed real property gains tax (RPGT) of 5% to be imposed on disposals of property after Jan 1.

Resigned to the inevitability of the tax and the futility of objections, the ingenious ones posed the question to us on the possibility of tax minimisation by transferring their current properties to a company before Jan 1.

The plan calls for properties which were acquired many years ago at a cheap price (say RM1mil) to be transferred to a company controlled by them at the prevailing market price (say RM3mil).

The transfer will be effected before Jan 1, thus attracting no RPGT on the disposal.

In the future when the property is disposed off by the company, the company will only be taxed on the capital gain over and above the new cost of RM3mil.

If the disposal price by the company is RM4mil, the company will only pay tax on the capital gain of RM1mil (RM4mil less RM3mil) at the rate of 5%, thus resulting in RPGT of RM50,000.

A very ingenious idea indeed. The comparison of taxes payable shows a tax saving of RM100,000 calculated as seen in the table.

Before anyone embarks on such a potentially lucrative move, one has to bear in mind many of the pitfalls, some of which are discussed below.

Date of disposal

For the purpose of this discussion, the term “chargeable assets” is used to refer to properties and other assets that can be caught under RPGT.

Chargeable assets include shares in real property companies which are companies that predominantly hold assets in the form of properties or shares in other real property companies. Only chargeable assets disposed on Jan 1 or after will be assessed to RPGT. Those disposed of from April 1, 2007 to Dec 31, 2009 will not. A day is literally night and day for tax purposes!

But the term “disposal date” has a technical definition and it is not the date when the sales price is paid over as we usually consider a sale to be. In sales circles, as they say, a sale is not a sale until the money is collected!

However, for RPGT purposes, a sale is a sale on the day a written agreement is entered into.

Hence, the date that a sale and purchase agreement is entered into for the sale of a property is usually the date of disposal for RPGT purposes. But what if there is no written agreement?

The law provides that the date of disposal is the earlier of two dates – the date that the sales price is fully received or the date that the ownership is transferred. Disposals of this nature may have disposal dates being deferred to a later date, which may fall in the 5% taxable period!

Likewise, disposal dates may be deferred even much later if the sale is dependent on securing approvals from the “Government or an authority, or committee appointed by the Government” – for example, the state government, the Securities Commission (SC) or Foreign Investment Committee.

For these “conditional contracts” which are covered by Para 16 of Schedule 2 of the RPGT Act, the disposal date is when the last of the approvals is obtained.

If a sale and purchase agreement is signed in December 2009 that is subject to SC approval which is obtained in February 2010, the disposal will be treated as having taken place in 2010 and thus subject to the 5% RPGT!

Stamp duty on the transfer

Stamp duty is imposed on the documents for the transfer of title; for example, the memorandum of transfer for transfer of property.

The rates applicable are fairly steep for properties which range from 1% to 3% with the highest rate of 3% being applicable for transfer prices which exceed RM500,000.

Transfers of shares attract duty at the rate of RM3 for every RM1,000 of the transfer price or 0.3%.

However, to avoid stamp duty, one may wish to transfer the property without the transfer of title; for example, the owner holds the property in trust for the company.

What if no transfer of title is effected as in these circumstances? Will the issue of tax avoidance then arise? Perhaps.

Anti-tax avoidance in the RPGT Act

Section 25 of the RPGT Act contains the general anti-avoidance provisions which allow the tax authorities to disregard transactions, vary transactions or impose taxes that should have been imposed.

The law specifies that this right is available if the transactions had the effect of “altering the incidence of tax”, “relieving a person from tax liability” or “evading or avoiding any liability which would otherwise have been imposed”.

Besides these general anti-tax avoidance measures which are also found in the Income Tax Act to discourage income tax avoidance, Section 25 of the RPGT Act also provides for persons who provide loans to related parties; for example, Mr A providing loans to Company A which is owned by him.

The law provides that if Company A sells a property and the property was financed by a loan provided by Mr A, the disposal may be regarded as a disposal by Mr A and not by Company A.

However, the cost of acquisition to Mr A is the market value of the property when Company A acquired the property from Mr A. If Company A had acquired the property from Mr A at the true market value, this anti-tax avoidance provision of the RPGT Act should not pose any problem.

Previous rules by Ministry of Finance (MOF)

A few years ago, the Government had granted a similar tax free period from June 1, 2003 to May 31, 2004.

During that period, the MOF had issued some guidelines to curb the avoidance of RPGT by mandating that any disposal of property must be evidenced by a sales and purchase agreement which must be duly signed and stamped within the exemption period.

Sale of property to a company in exchange for shares

Care should be taken if the property owner transfers a property to a company controlled by him in exchange for shares, or at least 75% in the form of shares. If the transfer is done this way, the shares may be considered to be chargeable assets.

In the future when these shares are sold, the gains will be subject to the RPGT of 5%. The cost of shares for RPGT purposes is not the par value of the shares but the price paid by the property owner for the property plus incidental expenses incurred by him on the acquisition; for example, legal fees.

As such, if Mr B transfers a piece of property acquired for RM1mil to his company (Company B) at market price of RM3mil in exchange for 3 million RM1 shares, and the shares are subsequently sold for RM4mil, the gains on disposal are calculated at RM3mil which is RM4mil sales price less the acquisition price to Mr B of RM1mil.

Indirectly therefore, Mr B is taxed on his full capital gains and not merely on the gains made by Company B owned by him.

RPGT or income tax?

Another aspect which has deep implications is whether the disposer had held the property as stock-in-trade or as a long term investment.

If held as stock-in-trade, the gains on disposal will attract income tax whereas if held as a long term investment, the gains will attract RPGT.

Some property investments which are disposed as part of a quick sale, or as a single isolated transaction in circumstances which give it a cloak of “adventure in the nature of trade”, could be caught under income tax.

Due to space constraints, we are unable to elaborate on this issue. If these disposals are caught under income tax, what then is the advantage of disposing the properties before Jan 1 if the disposer has to pay income tax at 25% on the gains upfront?

The obstacles can be quite challenging as seen above and careful navigation of the tax law is necessary. But I am sure good tax advisers will find a way out of the conundrum!

· Poon Yew Hoe is a partner of Horwath.

http://biz.thestar.com.my/news/story.asp?f...56&sec=business

Based on the article posted by gtchye, it seems that i have to pay RPGT even though S&P is done in Nov 2009 unless I get state consent before new year.

I should say that the disposal date is the date stated in the S&P Agreement as quoted in the article :-

"However, for RPGT purposes, a sale is a sale on the day a written agreement is entered into.

Hence, the date that a sale and purchase agreement is entered into for the sale of a property is usually the date of disposal for RPGT purposes."

"Likewise, disposal dates may be deferred even much later if the sale is dependent on securing approvals from the “Government or an authority, or committee appointed by the Government” – for example, the state government, the Securities Commission (SC) or Foreign Investment Committee.

For these “conditional contracts” which are covered by Para 16 of Schedule 2 of the RPGT Act, the disposal date is when the last of the approvals is obtained."

This line could be all those that havent gotten land office consent may get hit if the consent only release in year 2010. No?

Yes, you are right.

A condominium property is 'freehold with consent' and the S&P was signed in 2008 but consent from land office only obtained in 2009.

So the RPGT should be counted from 2008 or 2009 before a person can sell the property after 5 years?

This post has been edited by jalsrix: Jan 2 2010, 09:32 PM

nice if I were to deduct RM 400k profit from selling an 850k property can it be done? any idea?

ya.. i'll love to know that..

To TS,
Just treat me as a normal house owner want to sell their property..
example:
My S&P price is RM100K and before 5 years I manage to sell my house at RM200k..
What the trick that I can do to avoid RPGT? Claim for renovation cost and others claim at RM 100k?


or i can conclude here that i only can reduce the RPGT value only?

This post has been edited by abgkik: Jun 9 2011, 09:34 PM

everyone is allowed to be exempted from RPGT once in their life time... you may use it if you think this is probably the highest gain u ever had...

Ya.. gov allowed us once in our lifetime.. but we love to know how we can do it in the case with high profit margin..

Let's make an example here.
I bought 2 properties in 2010-2011. And I'm good in paying the bank loan all the time until suddenly my business rundown and having losses in 2013.
So I have no choice but have to sell 1 of the property to cover my loss as well as the ability to finance of the other property. And assumed I sold it with 100k profit. Can I use this 100k to state as a reason to minimize or totally waived the RPGT in order to re-run my business and the remaining I finance it to the another property?
Provided that with my business account and also bank loan statement that I didn't pay up for 2 months?

---

Added on June 10, 2011, 2:02 amIt can be done. But bare in mind that, higher return=higher risk. You might loss everything just because of the 5%. I direct make a conclusion for u. So think twice before doing it unless the trust is there.

You're right. Except from totally exempted 1 in a lifetime from RPGT, you can only minimize it. Unless your profit gain is very little then shouldn't be a problem. But if the figure is more than let say 100k, then it will be a hardwork to 100% minimize it.

This post has been edited by clanzkiller: Jun 10 2011, 02:03 AM

So, back to the same question here, if the profit of selling off the property is Rm100k then RPGT will be 5% of Rm100k = RM5k.
Is the calculation above correct?

Yes, hence the term Real Property GAIN Tax.

My advice to everyone, go to a professional such as tax agent, company auditor or accountant instead of relying on articles and reading of laws,. Difference person have different interpretation of an Act/Laws. Income tax officer tends to intrepret it to their benefit and tax payer tends to intrepret it to their benefit. A professionals will advice you and tell you what generally income tax officer intrepret certain law. I read through this tread, generally its only like 25% true, 25% wrong and 50% subject to intrepretation of the law.

Just my advice. Hope forumers here just take what is written here as a reference only.