RPGT and Appeal Ahmad & Salamah Q2

Thomas Sim PEA2066

Q.
Mr Ahmad sold his double-storey terrace house located at Kota Damansara to Madam Salamah on 30 August, 2013. The market price for similar properties at the subject locality is RM650,000 per unit. However, Mr Ahmad sold his property at lower price of RM550,000 due to urgent needs to cover the medical costs required for his child's treatment.

The house was purchased in 2010 at a higher price of 10% above the current market price for that year but he purchased the property because he wanted to stay near to his sister's house.

a) Explain the taxes involved and the basis to determine the taxes in the above case. (10 marks)

b) If Madam Salamah is not satisfied with the amount of tax that she has to pay, explain the action that need to be taken by her. (15 marks)

(25 marks, 2014 Q2)

A.
Similar questions on Stamp Duty Appeal were in:
Kurunathan & Eric 2013 Q7
Suria & Wong 2011 Q4

Part b) please refer to earlier post on Stamp Duty Appeal here.

a) Stamp Duty
Transaction Mr Ahmad to Mdm Salamah RM550,000 instead of Market Value of RM650,000 on 30 Aug, 2013.

Stamp Duty is payable by transferee Mdm Salamah on the Market Value of RM650,000. Under the Stamp Duty Act, 1949, it is specified that Stamp Duty due in a transaction is based on the Consideration paid or Market Value, whichever is the greater. Thus, in this case, the Stamp Duty payable is based on the higher Market Value RM650,000, payable by Mdm Salamah to the Stamp Collector.

Stamp Duty on Loan Facilities
In case of Mdm Salamah taking a loan and charged the property as a security, it is common practice now to treat the Loan or Facility Agreement as principal instrument and the charge as subsidiary instrument. In the aforesaid circumstances, the principal instrument will be charged with ad valorem duty whereas the subsidiary instrument will be charged only RM10.

The ad valorem duty for the principal instrument of a loan is calculated at RM5 for each RM1,000 or part thereof. For example, if the loan is RM400,000, the stamp duty payable is calculated as follows:-

RM5 x RM400,000 ÷ RM1,000 = RM2,000

Transaction Mr Ahmad purchased the property at 10% above Market Value in 2010.

Stamp Duty is payable by transferee Mr Ahmad on the Actual purchase price based on the Stamp Duty Act, 1949, which is higher than the Market Value. Thus, Mr Ahmad was due to pay Stamp Duty on Actual Purchase Price to the Stamp Collector.

Stamp duty on bank loan also remains as tax payable upon securing a bank security. The transaction SPA should be stamped before it is recognizable by the bank.

RPGT
Transaction of sale for Mr Ahmad on 30 Aug, 2013, holding period of 2+ years (2010 - 2013).

Mr Ahmad has sold the property after having acquired the property for 2 years plus (within the third year). Based on the RPGT rate of 2013 (during which the property was disposed of), the rate was 10%. See below the historical RPGT rates from 1995 - 2014, courtesy of Loanstreet.com.

The calculation of RPGT is based on the gains deducting the Acquisition Price from the Disposal Price, less personal relief of RM10,000 or 10% of the gain and any previous allowable losses, if any to arrive at the Chargeable Gain.
As there was no exact figures of the Acquisition Price, assumptions are made with the below workings.
Disposal Price
Less
  Acquisition Price
Less
  Personal Relief (RM10,000 or 10% of gains whichever is greater)
Less
  Previous Allowable Loss carried forward
= Chargeable Gain
This Chargeable Gain is imposed a RPGT Rate of 10% (disposal in the 3rd year).
b) Stamp Duty Appeal
Mdm Salamah having to pay the Stamp Duty based on the Market Value of RM650,000 instead of the actual purchase price of RM550,000, there is a significant difference of RM100,000 which is above RM500,000 being imposed of 3% stamp duty:
RM100,000 x 3% = RM3,000
(1% for the first 100,000, 2% for the next 400,000, and 3% for the remaining sum).
For the significant saving of RM3,000, Mdm Salamah can appeal to the Stamp Duty Collector by a Notice of Objection (Section 38A), and if still not satisfied, thereafter appeal to the High Court for judgment based on Section 39 of the Stamp Act, 1949.
See earlier posts on Stamp Duty Appeal here.

Ref:

Earlier posts as indicated respectively.