What is CKHT / CKHT 1A @ RPGT

What is CKHT / CKHT 1A @ RPGT

CKHT / CKHT 1A, or in full, Real Property Gains Tax, is a type of tax imposed on profits from the sale of all types of property such as residential homes, commercial buildings, land, or SHARES in property companies.

CKHT 1A is a form that must be filled out by property owners when they want to sell their property. The form can be downloaded here: CKHT 1A FORM

This tax is also called RPGT (Real Property Gains Tax) and the tax rate ranges from 0% to 30%.

This tax is calculated from the date we sign the sale and purchase agreement (SP/SPA) or the date of the memorandum of transfer (MOT).

CKHT is calculated after deducting the purchase price and other expenses involved such as:

1. Stamp duty,
2. Legal fees,
3. Advertising fees,
4. Home renovation costs,
5. Administrative fees,
6. Sales commission, or others.

 

Tax Rates According to the Year of Property Disposal

• First: 30%
• Second: 30%
• Third: 30%
• Fourth: 20%
• Fifth: 15%
• Sixth Onwards: 6%

Importance of CKHT / CKHT 1A in the Real Estate World

The government’s purpose in creating the real property gains tax is to control property sales activities and prevent property bubbles.

If this tax were not created, many property investors would sell their properties less than 5 years from the date of purchase.

If this activity is not curbed, property market prices will rise dramatically in a short period and ultimately reduce the property purchasing power of Malaysians.

Formula to calculate CKHT / CKHT 1A

Property Selling Price on March 16, 2017 = RM 400,000.

Costs involved when selling property:

• Renovation (with receipt) = RM 20,000.
• Legal = RM 4,000.
• Real Estate Consultant (3.18%) = RM 9,000.
• Total: RM 33,000

Property Disposal Price: RM 400,000 – RM 33,000 = RM 367,000

Purchase Price in 2013: RM 210,000

Costs involved during purchase:

• Stamp Duty Payment = RM 3,200.
• Legal Costs = RM 2,100.
• Total: RM 5,300

Calculation of Tax Net Profit After Selling Property:

1. Property Acquisition Price: RM 210,000 + RM 5,300 = RM 215,300
2. Profit on Property Sale = RM 367,000 – RM 215,300 = RM 151,700
3. CKHT / CKHT 1A tax relief RM 5,000 or 10% of profit (whichever is higher): RM 151,700 x 10% = RM 15,170
4. Taxable profit = RM 151,700 – RM 15,170 = RM 136,530
5. Total CKHT Tax to be Paid: RM 136,530 x 20% (4th year disposal) = RM 27,306
6. Net Profit: RM 136,530 – RM 27,306 = RM 109,224

 

CKHT Exemptions

CKHT / CKHT 1A can be exempted; there are three types of exemptions allowed:

Exemption on profits from the sale of one residential property once in a lifetime for individuals

Exemption on profits from the sale of property between family members:

• Husband and wife,
• Parents,
• Children,
• Grandparents,
• Grandchildren
• 10% of the profit or RM 10,000 for each transaction (whichever is higher) is not taxed

As usual, this tax is collected by the Inland Revenue Board and becomes one of the country’s sources of income.