KL Choo@Sunway: I am thinking of investing in properties. From a tax perspective, should a property investor buy under his own name or through a company name?
RED: If the main activity of the company is property investment, then the company is liable to pay the corporate income tax that could be as high as 26 per cent. The Real Property Gains Tax (RPGT) shall not be applicable under these circumstances. (10 per cent on net gain for disposal within first two years of acquisition and 5 per cent on net gain for disposal in the following 3 years).
RPGT shall only be applicable to property owned by a company that does not invest in property as its main activity.
While there seems like a great disparity of the tax rate, a company can charge out all the expenses relating to the operation to the company as opposed to the net gain concept of RPGT that allows deduction of cost used specifically on the improvement of subject property only. There are pros and cons; and getting proper tax planning consultation would certainly help.
In other words, even if the property investment is transacted too frequently under a personal name, the personal income tax (at the highest bracket of 28 per cent) might still apply in place of the RPGT. By Chris Tan, legal adviser.
Ask the RED expert: Please fax your questions to: 03-2283 1700 or email to nstred@nstp.com.my
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