Q.
Mrs Suria purchased a double storey terrace house at Subang Perdana from Mrs Asiah on 30 April, 2008 at a purchase price of 20% higher than the market value. Mrs Asiah was awarded the house by the State of Selangor as an appreciation for her achievement in obtaining gold medal in the national sport event.
Mrs Suria then sold the house to Mr Wong on 30 November, 2010. The market value of similar properties is at RM550,000. However, Mrs Suria only sold the house for RM450,000 because she needed the money urgently to cover her medial expenses.
a) Explain the property tax involved in the above case. (15 marks)
b) If Mr Wong is not satisfied with the amount of duty to be paid, explain the actions than can be taken by him. (10 marks)
(25 marks, 2011 Q4)
A.
Part b) is about Stamp Duty Appeal, similar in
Stamp Duty Objection and Appeal 2012 Q1
Past Year 2013 Q7 Kurunathan & Eric
Past Year 2013 Q7b (complete on appeal of Stamp Duty)
Past Year 2014 Q2 Ahmad & Salamah
a) Mrs Suria
There are generally two types of tax involved in the above cases/transactions. They are Real Property Gains Tax and Stamp Duty.
Mrs Suria bought from Mrs Asiah 30 April, 2008
Stamp Duty Treatment
The house was given as a gift from State of Selangor for Mrs Asiah's contribution in a National Sports Event. Based on Stamp Act, 1949, the transaction price was consideration paid or Market Value, whichever is the greater. As there was no consideration paid as it was a gift, the market value at the time was used for stamp duty calculation.
The Acquisition Price of Mrs Suria from Mrs Asiah above should be the Market Value + 20% on 30 April, 2008. Based on the appreciation of the property since Mrs Asiah received it as a gift, this Market Value would have been appreciated from the earlier Market Value when Mrs Asiah received it from the State of Selangor.
The transaction of this Market Value + 20% would require Stamp Duty to be paid by the transferee who is the purchaser, i.e. Mrs Suria. Based on the consideration paid or the market value, whichever is the higher. Of course, in this case, market value + 20% is the higher.
Stamp Duty rates are:
1% for the first RM100,000
2% for the next RM400,000
3% for the remaining sum.
Stamp Duty on Loan Facilities
In case of Mrs Suria 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:-
0.5% x RM400,000
= RM2,000
RPGT treatment for Mrs Suria when property was sold to Mr Wong.
When Mrs Asiah sold the property to Mrs Suria, RPGT was levied on the transaction. But, as the property was awarded to Mrs Asiah when she was much younger, we assume that more than 5 years had passed before she sold it to Mrs Suria. Hence, RPGT is zero for holding period beyond 5 years.
On the recent sale of Mrs Suria to Mr Wong, it was within 3 years (30 Apr 2008 to 30 Nov 2010), therefore RPGT is imposed on the gains, if any.
The above Stamp Duty plus and any incidental cost of legal fees, e.g. advertisement to purchase the property can be deducted from the Consideration Paid for the property (Market Value).
Acquisition Price for Mrs Suria:
Market Value + 20% (actual consideration paid) as at 30 Apr, 2008
Add:
Stamp Duty (paid by Mrs Suria)
Incidental Costs of Advertisement/agent fee
Legal fee
Less:
Recoveries, if any
--- Acquisition Price (30.04.2008)
Mrs Suria sold to Mr Wong 30 November, 2010
This is a normal transaction, where Mr Wong bought the property in open market. The price was below market value of RM550,000, and was at RM450,000 as she required money for medical emergencies. The correct value used is RM450,000 which was the consideration received by Mrs Suria.
Disposal Price for Mrs Suria:(30.04.2008 - 30.11.2010 = 3rd year)
Actual Consideration received as at 30 Nov, 2010: RM450,000
less:
Cost of defending the title, if any
Enhancement cost (renovation, construction or extension)
Incidental Costs of Advertisement/agent fee
Legal fee
--- Disposal Price (30.11.2010)
The gain in RPGT is calculated by:
Disposal Price
less:
Acquisition Price
= Chargeable Gain
less:
Sch 4 Exemption of RM10,000 or 10% whichever is higher
less:
Any RPGT allowable losses within the last 5 years
= Taxable Gain x 5% (refer earlier post here for historical RPGT rates in Malaysia)
= Amount due for RPGT payment
b)
Appeal by Mr Wong on Stamp Duty due
Refer post of Stamp Duty Objection and Appeal in 2012 Q1.
Ref:
Own Account.