Essay: Stamp Duty & Real Property Gains Tax In Malaysian Taxation.

Clearly discuss the nature of stamp duty and real property gains tax
Briefly explain the tax fundamental applied to those taxes including the parties liable for paying the taxes, the bodies collected the taxes, and tax rate structure.
Illustrate the tax calculation basing on the examples given
With reference to the example illustrated above, observe and explain the exemptions/relief or penalties available to the respective parties

Malaysian taxation

With the increasing changes in the external environment, an entity owner becomes more cautious in terms of safeguarding its business interest from all the external competition lies in the market to maintain its potential for capturing larger market share (Shafai, Amran and Ganesan, 2018). To analyze the financial performance of an entity, it is essential to keep a close watch on the tax structure of the country in which the firm is operating its business empire as minute changes in the existing tax structure of the country will directly affect the overall revenues earned by a business. The net profit will get affected with the increasing or decreasing amount of tax as decreasing tax rate will increase the net profit of the company and increasing tax rate will, in turn, decreases the net profit of an enterprise which has several effects on an enterprise (Thompson and Neuzil, 2018). In this assignment, Malaysia taxation is to be discussed by highlighting various concepts such as discussing the nature of stamp duty, real capital gain tax. These will helps in stressing the tax fundamentals for different parties related with the current tax structure such as assesses who is paying the tax which may include all the individuals and the corporate parties that is the company (Lang, Pistone, Schuch and Staringer, eds., 2018). Tax calculations examples are mentioned in the assignment to give a crux about determining a tax return of an entity and lastly, this report will discuss all the exemptions and penalties imposed on a party whose tax is assessed by an assessor.

The term taxation refers to imposition of taxes on all the individuals or corporate entities to fund all the expenditures made by public authorities who may include government, statutory bodies and property head who will collect different kinds of taxes on behalf of the government from all the mentioned parties who are liable to pay tax for a particular year (Adam and Yusof, 2018).

In Malaysia, a tax is collected by the federal government, state, and local Municipal Corporation as per the mention tax slabs for either the individuals or the corporate bodies in determining its annual tax return (Kasim, Umar, Martin and Yassin, 2018). Important and primary tax legislation such as income tax act 1967, Real property gains tax act 1976, Promotion of Investments act and lastly, petroleum income tax act 1967 are considered as the major tax concepts in Malaysia’s taxation structure.

Nature of stamp duty and Real capital gain tax

The government of Malaysia assigns tax base which will include income, property possession, and commodity held by a user for a particular assessment year are categorizes on which tax rate is applied to determines their total return held for that particular period (Hor and Rahmat, 2018). The tax is directly determined by multiplying the tax base with the tax rate applicable to the party whose tax is to be determined by a tax determiner to estimate its tax for an assessment year.

Stamp duty is a legal attested form governs under stamp duty act 1949 which will give legal identity to any agreement to increase its legal value to give those legal rights to a party. It is a written and legal evidence consider as a valid legal instruments used in various events such as creating agreements, mortgaging of a house, building or shops, bill of sale and taking an insurance policies, With the help of a stamp duty an individual can showcase its legality to cross-question in the future in case of any discrepancies (Ismail and et.al., 2018). The stamp duty payable on these instruments is to be payable to three designated parties who are the representatives of the government in collecting the stamp duty revenue includes stamp duty office and Inland Revenue board (Aziz and Hanif, 2018). As per section 33 under the schedule of the stamp duty at, the responsibility of paying the stamp duty by all the parties such as in case of a conveyance, the grantee or the transferee will pay the stamp duty on the legal instruments. In case of a mortgage, the person liable to pay the duty on the mortgage document is the mortgagor who lent its property on a mortgage to the party and in case of the lease agreement the duty will be payable by Lessee. There are two kinds of stamp duties such as Ad-Valorem duty and fixed duty to determine the duty to be payable on different instruments (Guide, 2018). The amount of stamp duty payable by an individual is to be determined by considering the purchase if the property and the lease or tenancy agreement formed by a party with the owner of the premises.

This act will be governed under real capital gains tax act 1976 which is levied by Inland revenue board on the gains incurred on capital assets that is the chargeable asset in the purview of the capital gain tax (Erdem, 2018). The chargeable gains arise when a property is sold in Malaysia by deducting the cost of an improvement on that property is excluded from the selling value or the market value of that asset to determine the chargeable gains which will be taxed under this act. Real property gains tax comes into operation on 7 November 1975 is liable only on the building by excluding the land under this act.

Real Property gains tax

The real property gains tax consists of various terms such as the chargeable person is a person who is a resident or not resident of Malaysia for a particular year is considered as a chargeable person under the real capital gains tax when they dispose of an asset (Alm, 2018).  It is essential to consider all the asset under the real property head to determine the capital gains tax liability on the disposable of real property which consisting of land located in the Malaysia and interest or right over the land in the possession of an individual. The disposal price is the price used to sell the assets by excluding the number of costs incurred in improving the property (Rao, 2018). The Real capital gain tax rate is 5% imposed on the gain arises on the disposal of the capital asset without seeking the life of that asset.

While determining the real proper gains tax, it is also essential to know about all the permitted expenses to get deducted out of the sales consideration in estimating the net capital gain generated from that asset.  Another term which will be discussed is incidental costs incurred by an individual related that particular asset. Permitted expenses include various expense such as expenses charged in accordance with the capital asset, expenses incurred wholly related to an asset for preserving the title of taking the chargeable asset in determining the capital gain arises from it (Zelenak, 2018). Another term is about the incidental costs incurred in a entity related to an asset on which an individual will determine the capital gains tax consisting of fees, commission or salary payable to the surveyor who offers its professional services in estimating the actual worth or value of the property to give a basic input in form of market value of an asset to determine the capital gain tax. This head will also include the expenses incurred in transferring an asset to another party such as paying the stamp duty and this will also cover the cost of giving advertisement in the newspapers to invite the buyers to buy the property which the seller is selling will also cover under this head as incidental costs are that costs which will incur by an entity unintentionally without prior intimation and with no fixed tenure.

Principles of taxation are considered as the tax fundamentals held responsible for creating a strong base and fundamentals which is based on several pillars behind the successful taxation structure such as Fairness, clarity and certainty, convenience, efficiency, and neutrality (Fleurbaey and Maniquet, 2018). The fairness principles depicts the ability to pay and receive the benefits received by an individual in terms of income received by a person for a particular year and at the same time pay back all the expenses incurred for that particular year whether related to an asset when talking about property gains tax in which a particular asset is disposed whole gain arises from that asset is to be generated after deducting all the expenses arises from it (Söllner, 2018). Thus principles depict the honest and fairness maintained by an individual or an entity by maintaining the dignity of the entire taxation structure. Another principle is clarity and certainty which shows the clear taxation rules maintained by an individual for determining the income tax return or capital gain tax earned on an asset for a particular year. It is essential to use a convenience principle in which an individual will be easy to calculate the tax return by using different methods according to its preference and the knowledge as for the sake of all the taxpayers the taxation structure develops various methods to give the extra method for all the individuals. The efficiency principle says that taxation administers efficiently and economically handles the taxation system to determine the overall tax return different from one party to another. The last principle, neutrality depicts that the action of an individual or an entity should not be offended as this will not affect the behaviour of other people like the tax returns calculated by an entity should be as per the taxation rules prepare by an entity (Du Preez, 2018).

Stamp Duty Calculations

References

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