Real Property Gains Tax (RPGT) is a critical aspect of property investment in Malaysia, especially when dealing with commercial and industrial real estate. Whether you’re a seasoned investor, a property owner, or planning your first commercial investment, understanding how to calculate RPGT for commercial and industrial property in Malaysia can save you thousands—and keep you compliant with Malaysia’s Inland Revenue Board (LHDN).
In this article, we break down everything you need to know about RPGT for commercial and industrial properties in Malaysia: what it is, how it’s calculated, what exemptions exist, and how to plan strategically.
What is RPGT in Malaysia?
RPGT, or Real Property Gains Tax, is a tax charged on the profits made from the sale of real property or shares in real property companies in Malaysia. It’s applicable whether you’re selling residential, commercial, or industrial property.
For commercial and industrial properties, RPGT is particularly significant due to the typically higher transaction values involved. The goal of RPGT is to curb property speculation and generate revenue for the government from property profits.
The tax is calculated based on the net gain, which is the difference between the disposal price and the acquisition price after deducting allowable expenses and exemptions.
When Does RPGT Apply to Commercial and Industrial Properties?
RPGT is triggered when you dispose of a property—meaning when you sell or transfer it—within a certain number of years from the acquisition date. The key rule here is timing. The RPGT rate is tiered based on how long you’ve held the property.
Here’s a quick breakdown of the RPGT holding period:
| Holding Period | Rate for Companies | Rate for Individuals (Malaysians) |
|---|---|---|
| Within 3 years | 30% | 30% |
| 4th year | 20% | 20% |
| 5th year | 15% | 15% |
| 6th year and beyond | 10% | 5% (from 6th year onwards) |
For foreign investors and companies, a flat 10% RPGT applies from the sixth year onwards.
Step-by-Step: How to Calculate RPGT for Commercial and Industrial Property
Here’s how to accurately calculate RPGT when selling commercial or industrial property:
1. Determine the Disposal Price
This is the price you sold the property for. It includes:
- Sale price
- Any liabilities or debts assumed by the buyer
2. Determine the Acquisition Price
This is the price you paid to acquire the property, including:
- Purchase price
- Legal fees
- Stamp duty
- Valuation fees
- Renovation costs (must be justifiable and documented)
3. Deduct Allowable Expenses
These may include:
- Legal fees during disposal
- Agent commissions
- Advertisement costs
- Renovation or maintenance done for the sale
4. Apply the RPGT Formula
The net chargeable gain is calculated as:
Net Chargeable Gain = Disposal Price – (Acquisition Price + Allowable Expenses)
Once you get the net gain, multiply it by the applicable RPGT rate depending on how long you’ve held the property.
Example Calculation
Let’s say you bought an industrial property for RM 2,000,000 in 2020. You sold it in 2024 for RM 2,800,000. Here’s how the RPGT works:
- Disposal Price: RM 2,800,000
- Acquisition Price + Expenses: RM 2,200,000 (including legal fees, stamp duty, and minor renovations)
- Net Gain: RM 600,000
- Holding Period: 4 years
- Applicable RPGT Rate (Individual Malaysian): 20%
- RPGT Payable: RM 120,000
What Expenses Can Be Deducted in RPGT?
The good news is not everything counts towards your gain. You can reduce your taxable amount by deducting certain allowable expenses in RPGT for commercial and industrial property in Malaysia. These include:
- Legal fees for acquisition and disposal
- Stamp duty on purchase
- Real estate agents’ fees
- Renovation costs (with receipts)
- Advertisement costs (to sell the property)
- Surveyor’s and valuation fees
Important: Keep all original receipts and legal documents. LHDN requires valid proof for deductions.
