Real Property Company (RPC) Malaysia
Real property is defined as any land situated in Malaysia and any interest, option or other rights in or over such land. RPC is essentially a controlled company where its total tangible assets consist of 75% or more in real property and/or shares in another RPC.
IRB Hot List 2021 RPC
Many are totally unaware that if they dispose of shares in a real property company they will be subjected to both Stamp Duty and RPGT.
The taxation of a Real Property Company (RPC shares) is not as easy as you think. Please consult your entrusted approved tax agent or licensed company secretarial on RPC matters.
There is a catch...which has undisputedly become IRB Hot List 2021.
A real story from our client on RPC :
Client: Hi! KTP, I am thinking to quit my business and dispose my shares to another partner, but recently I saw a lot of news on selling shares is subject to RPGT. I am not very sure whether this applies to me.
Auditor: Hi Mr Tan, it is very simple. To confirm, let me just ask you a few questions.
Auditor: First question, your company have how many shareholders and is controlled by how many people?
Client: Our company got 5 shareholders including me, all of them are directors as well.
Auditor: Next question, what is the percentage of your property value over total asset? including stocks, machinery and other asset.
Client: Ermmm.. I think around 40%, we bought the factory 10 years ago.
Auditor: No no no, it has to be based on market value as of today.
Client: I see. I use my neighbour price can? Same size factory. I think around 88%.
Auditor: Ermm.. Mr Tan, bad news for you. So, your company is considered a Real Property Company (RPC) and when you sell shares, the gain from the disposal will be subject to RPGT!
Client: Aiyooo broke already! *#$^#^*%#^&@
Key tax summaries of RPC
• A controlled company having ≤ 50 shareholders and controlled by ≤ 5 persons
• Owned property or RPC shares in another RPC or both
• Value of the property or shares in other RPC or both > 75% of the value of its total tangible assets
Effect on RPC shares due to changes in RPC status
A real property company is no longer a RPC when the defined value becomes less than 75% of the value of its total tangible assets due to the disposal of the property or shares in another RPC or both.
The effect of the company's shares are:
RPC shares remain as chargeable assets in the hands of shareholders even though at the time of disposal of the shares by the shareholder the company is no longer a RPC.
Acquisition of shares during the period when a company is not a RPC, is not an acquisition of chargeable assets (non-RPC shares) until the company becomes a RPC.
Full story in our bloghttps://www.ktp.com.my/blog/real-property-company-rpc-malaysia/07sept21
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Published : 7-Sep-2021