Malaysia has abolished its capital gains tax on property with effect from 1 April 2007, this being a further effort by the government to help boost its sluggish property market. Recent rulings have made it possible for foreigners to now be able to buy up-market property without the approval of the Foreign Investment Committee.

Real Property Gains Tax (‘RPTG’) has long been seen as an ‘unnecessary’ obstacle to the nation’s attempt to attract more foreign direct investment in the property sector. Buyers are already required to pay stamp duty that can amount to sizable figures especially for high end properties in up-market and prime locations.

With the abolishment of RPGT, foreigners will be more attracted and inclined to buy property in Malaysia as they would no longer need to pay a 30% tax on the property if they dispose of it within 5 years of its date of purchase. Owners will no longer be reluctant to sell their property out of fear of having to pay RPGT and bearing a loss should they sell their property at a lower price, or having their profits trimmed.

Just like its neighbouring countries, Singapore and Hong Kong, the Malaysian government’s decision to abolish RPGT after 30 years of it being around has a significant impact on the property sector. RPGT certainly played a major role in deterring speculation in the property market.

As a result of the removal of RPGT, there would now be more investors who buy properties with the view of sale within the first two to three years. Sellers would no longer have to wait for five years just to avoid being taxed.