Myth Buster

Scenario

Shawn is a Malaysian citizen. He acquired a property in May 2012 and has entered into a sale and purchase agreement (“S&P”) to dispose of the property on 15 January, 2015. Upon the execution of S&P, he realise the Balance Deposit being released to him is not equivalent to 8% of the Purchase Price. Shawn was confirmed by his friend, Lily that only 2% of the Purchase Price shall be retained for real property gains tax submission.

Mythbusted.

It was proposed in the Finance Bill (No. 2) 2014 that with effective from 1 January, 2015, the buyer has to retain 3% (as opposed to 2% currently) of the total purchase price as real property gains tax retention sum and submit the amount to the Inland Revenue Board of Malaysia (“LHDNM”) within 60 days from the date of disposal.

Notwithstanding to the above, do take note that the proposed Bill is still subject to readings and debates by the Members of Parliament before it is officially comes into force. Do also note that pursuant to Article 66(5) of the Federal Constitution, the Parliament shall have the power to make law with retrospective effect. This means that the law can be implemented e.g. 1 January 2015, but being gazetted thereafter.

Thus, Shawn will be subjected to the retention rate of 3% from the total purchase price unless otherwise announced by the relevant ministry.

So, how much did you know about this Legal Myth?

Share with us your thoughts and feedback to us. Ask us a question on AskCA@Thursday or suggest a Myth Buster for us.

Thanks!