Some property developers are offering discounts and rebates amidst Malaysia’s sluggish property market. However, buyers need to know that they may be required to pay higher taxes despite lower home prices.
This is because home buyers are obliged to pay stamp duty based on the property’s selling price or market valuation, whichever is higher.
At present, the rate stands at one percent for dwellings priced up to RM100,000, two percent for those valued between RM100,001 to RM500,000, and three percent for those costing more than that.
For instance, an anonymous buyer revealed that she paid several thousands of ringgit more in stamp duty, as the Inland Revenue Board (IRB) thought that the transacted price was lower than the market value.
“What is their basis? I have no idea. Where (did) they get their valuation? I also have no idea. They said they just feel that the transaction price is not the market value. So they feel that it (stamp duty) should be raised,” she said.
According to Crowe Horwath KL Tax Sdn Bhd Managing Director S.M. Thanneermalai, IRB’s Director-General has the authority to ignore certain deals if he thinks that it was not based on fair market valuation.
“This is an old law and is nothing new. The legislation is there, they (IRB) have done it in the past, but maybe they are doing it more frequently now.”
He noted that there are many cases when property buyers tried to reduce acquisition expenses, like taxes and stamp duty, by setting the price on a certain threshold and making “under-the-counter” payments for the remaining amount.
“You know what happens, there are people who sometimes agree with one another to show a lower price to understate the tax. And then they pay under the counter,” he explained.
“But if the taxpayers can prove that there was no intention to reduce the price, and it (the transaction) was actually done on an open market basis, they need to prove that they are not in any way colluding to reduce the price and defend themselves in the court.”
While buyers are allowed to object to IRB’s tax assessment by submitting a notice within 30 days, they are still required to pay the originally evaluated stamp duty within 30 days from the date of the notice of assessment and wait for the resolution of the case.
Image sourced from iMoney.
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