The importance of knowing the taxes, and how you can reduce them as a property owner is vital. You can reduce your taxes by knowing the tax laws and how to reduce them. You can also find tax-saving tips that can help you lower your tax bill.
Direct taxes are the taxes that are directly imposed on you by your government, such as income tax. Indirect taxes are the taxes that are imposed by a third party on you, such as sales and services tax(SST), and other taxes.
Knowing your taxes means taking note of Real Property Gains Tax(RPGT). Purchasing property now, the price might rise later which can affect your Real Property Gains Tax(RPGT) later.
You can reduce your tax bill by purchasing property now. However, buying property now can significantly increase its value later and affect your tax bill.
Here are five ways you can reduce your property taxes.
- Allowable expensesAllowable expenses are the costs you spent to improve or maintain a property in order to keep or increase its value. Such as:
- Enhancement costs - Renovation costs, installation of air conditioners, extensions of the balcony.
- Stamp duty
- Advertising costs - Advertising property, agent advertising
- Professional services of a valuer, legal advisers
It is important that when a purchase is made, any receipt or invoice received, is kept. It is essential to keep a copy of every transaction to prevent any incidents where you have missed out when filing taxes. Money that was spent now, and can help reduce the RPGT in the future.
2. RPGT Exemption
Inland Revenue Board (IRB) Malaysia provides all homeowners with a once in a lifetime opportunity exemption. This means whatever profit is made from disposing of your property, you will be exempted from any RPGT or taxes. This exemption is only applicable to residential properties. Malaysian Citizens and permanent residents are also eligible for this exemption.
3. Real Property Gains Tax(RPGT)
Real Property Gains Tax (RPGT) is a type of tax that Malaysian homeowners and businesses must pay when selling their property.The longer the period of your holding of the property, the lower the RPGT rate when disposing it.
Look at your calendar. Calendars play an important role when it comes to your RPGT rate as you will need referr to the date as stated in your Sales and Purchase Agreement(SPA). RPGT is calculated by the holding period when it comes to holding periods for investors and property owners. The longer you take to sell, the RPGT rate goes lower or at zero percent.
4. Rental Expenses From Rental Income
Many have real estate as part of their investment and get rental income from them. These rentals will be taxed on a received basis, which means that losses in one year cannot be rolled over to the next or offset by other taxable statutory income. All capital assets such as furniture and fittings and air conditioning are also not eligible for any tax deduction.
5. Holding of Property Individual Vs Company
The holding of property comes in two different scenarios. When purchasing property, it is important that you identify the main purpose of it, whether it is for own stay or investment purposes. If the property is under a company, do not involve or state your personal details as it is specifically for investment purposes.
Personal tax is a critical area. If rental income is more than 24%, it’s better to put it under company. Identify the purpose of property. Property under inheritance purposes are encouraged to be put under company.
One thing to keep in mind is that when it comes to tax claiming, the authorities would want to see receipts. It would be difficult to claim taxes if you cannot provide proof of the transactions.
To better understand how you can really save your taxes, head to Property Hunter’s Facebook page to watch Wanconnect share their secrets at https://fb.watch/d2IOAjJH3I/ .