If you inherit a property from a deceased person and later dispose of it, you are required to submit a valuation report to determine the “Acquisition Price” for Real Property Gains Tax (RPGT) purposes.
The good news is that the valuation fees incurred can be claimed as incidental costs, in accordance with sub-paragraph 6(1)(a) of Schedule 2 of the RPGT Act 1976. These costs are deductible from the disposal price under sub-paragraph 5(1)(c) of the same schedule, which effectively reduces your chargeable gains and overall RPGT liability.
To help you better understand how Real Property Gains Tax (RPGT) applies to inherited property, we have outlined several important provisions below:
1.Under sub-paragraph 3(1)(a) of Schedule 2 of the RPGT Act 1976, the disposal price of a property transferred from a deceased person to the estate’s executor or beneficiary (legatee) is deemed equal to the acquisition price. As a result, no gain arises from the transfer, and no RPGT is chargeable at this stage.
2.Subsequently, if the property is disposed of by the estate’s executor, the executor is deemed to have acquired the property on the date of the deceased’s death.
3.If title of the property has been transferred to the beneficiary (legatee) and the beneficiary disposing of the property subsequently, it is deemed to be an acquisition by the beneficiary at a value equal to the property’s market value on the date of the ownership transfer.
4.As outlined in items 2 and 3, RPGT becomes chargeable if there is a gain arising from the disposal of the property.
5.As we know, a gain is the difference between the disposal price and the acquisition price, after accounting for allowable incidental costs. The acquisition price is determined based on the market value as certified in a valuation report prepared by a registered valuer.
6.For Item 2, where the property title is transmitted to the estate’s executor, the valuation date is the date of the deceased person’s death. In contrast, for Item 3, where the title is transferred / registered under the legatee (beneficiary), the valuation date is the date ownership is transferred to the beneficiary.
If there is a gain from the disposal of the property, RPGT is payable at rates that vary depending on the status of the disposer (Malaysian, foreigner, or company) and the length of ownership prior to disposal. Please refer to the below detailed RPGT rates.
Frequently Asked Questions
FAQ 1: Why is a valuation report required when disposing of inherited property in Malaysia?
A valuation report is required to determine the acquisition price of the inherited property for the purpose of calculating Real Property Gains Tax (RPGT).
When a beneficiary or executor later disposes of an inherited property, the acquisition price is based on the market value of the property at the relevant valuation date, which must be supported by a valuation report prepared by a registered valuer. This ensures the correct calculation of the chargeable gain and the RPGT payable.
FAQ 2: What is the valuation date for inherited property under RPGT rules?
The valuation date depends on the stage of ownership transfer:
If the property is disposed of by the executor of the estate, the valuation date is the date of the deceased’s death.
If the property has been transferred to the beneficiary (legatee) and is later sold, the valuation date is the date ownership is transferred to the beneficiary.
A professional valuation report prepared by a registered valuer certifies the market value at the relevant valuation date.
FAQ 3: Can valuation fees be claimed as a deduction for RPGT in Malaysia?
Yes. Under Schedule 2 of the Real Property Gains Tax Act 1976, the valuation fees incurred for determining the acquisition price of inherited property can be treated as incidental costs.
These costs are deductible from the disposal price when calculating the chargeable gain, which can reduce the overall RPGT payable.
FAQ 4: Who can prepare a valuation report for RPGT purposes in Malaysia?
A valuation report for RPGT purposes must be prepared by a registered property valuer licensed by the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEP).
Valuation firms registered with BOVAEP are authorised to prepare official valuation reports that are accepted by tax authorities, auditors, and legal professionals for RPGT calculations.
FAQ 5: When should I engage a property valuer for inherited property disposal?
You should engage a professional property valuer before disposing of an inherited property, especially if the acquisition price needs to be determined for RPGT purposes.
A valuation firm can help:
Determine the market value at the correct valuation date
Prepare a compliant valuation report for tax submission
Provide supporting documentation and market evidence
Ensure the RPGT calculation is accurate and defensible
Early engagement of a valuation firm helps ensure a smooth tax submission process and avoids disputes over property value.
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