Real Property Company (RPC) Malaysia

Real Property Company (RPC) Malaysia
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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 blog

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