A Bad Case For The 7% Retention Sum For RPGT
How the 7% retention sum came about
The 7% retention sum is part of the tax obligation for foreigners selling Malaysia property. In my previous post, I have mentioned that this is a new amendment law to the RPGT by the ex-Finance Minister, Mr Lim Guan Eng in 2018 when he was newly elected then.
He has inserted one new requirement of a 7% retention sum that impacted foreigners and left them hanging high and dry. This sum would be held by LHDN and within 2 months would be used to pay for the RPGT. LHDN would assess the RPGT due and refund the balance which would be in almost all cases. The reason being that it is a hefty 7% of the selling price by comparison with a 10% of profit on gain in my case. My working example has shown that it is 5 times more than my probable RPGT.
However in an unlikely case that it is less than the RPGT, LHDN would send you an assessment notice to pay the difference coming with a penalty charge of 10% for late payment. For the calculation of your RPGT obligation, the profit you make is after deducting all your costs. Your costs includes your RM10,000 State consent levy, bank loan legal fees and stamp, expenditure on enhancing/preserving the value of the asset (renovation), agent’s commission and lawyer’s fees.
The claim was that this is to make sure that foreigners honour their tax obligation with their property investments in Malaysia.
How the 7% retention sum can be abused
For an unfortunate situation of being not able to access my property since April 2018, I got it sold in 2019. The sales was completed and LDHN collected the 7% retention sum before the completion date.
In early June 2020, I received in my normal mail letters from LHDN demanding payment for RPGT. LHDN had assessed that I owes them from selling my property. The letter was dated 14th May and the envelope was date-stamped by Johor Post as 1st June 2020.
An actual case documented
Above is a screenshot of a snapshot of the lawyer’s letter.
What was in the assessment notice was shocking. Why was it shocking?
1. There was totally no deduction for all the costs in acquiring the property allowed at all.
2. It also arbitrary slap me a late payment penalty of 10% of the tax payable when there is no prior notice received at all.
3. My appointed Power of Attorney who acted for me since I am blacklisted was assessed as well at 30% RPGT. So for the same property two person have to pay the RPGT.
4. I cannot help noticing that the sum claimed from me comes to about the hefty 7% retention figure. It seems like someone did a deliberate calculation to work out the number from the 7% and how to match it to the RPGT since the money is already in their hand.
These are the glaring issues
So the first order of the day was to shoot out an email to the lawyer to clarify on what is actually happening, giving LHDN the benefits of doubt and clarify matters up.
From the urgent appeal email sent out by my lawyer on 4th June 2020 to LHDN, I came to understand the following:
1. The lawyer stated there is two assessment to me and my power of attorney on the same property.
2. That no RPGT should be chargeable to the Power of attorney and the notice to be cancelled and repealed.
3. We have issue with the disposal price used
4. We have issue with the consideration price used
5. We have issue with the gain claimed by LHDN
6. We have issue with the wrong tax rate used
7. We have issue with no deduction at all for renovations supported by receipts
8. We have issue with the amount remitted that was a big difference (much more) to what LHDN claimed
9. Appeal to waive off the 10 % penalty as money was remitted within the 60 days. The 7% retention money was stated remitted on 23.09.2019 to LHDN, KL
10. And now the most important part is : my lawyer has not received the official receipt acknowledging the 7% retention sum mandated under Section 21B of CKHT Act 1976.
11. My lawyer categorically requested for the official receipt in this correspondence dated 4th June 2020
All inaction when it comes to foreigners
It has been a duration of 8 months from the payment date of 29.09.2019 to 4.06.2020 is a duration of 8 months and my money is still held in their account. The current situation is we have to literally beg them in the manner of “writing appeal after appeal”.
Despite numerous reminders and chasers by me trying to close up this issue and recover my money, we are still hitting a wall.
As at the time of posting, it is already ten months and according to my lawyer, we are awaiting for LHDN to clear up all those issues. To close out, LHDN has to send us a corrected Notice for the RPGT for this property.
The saga continues and this is posted for foreigners staying in Malaysia to be aware of the perils and pitfalls one may faced.
On this day, 17th Dec 2020, I am able to do an updates on this saga with two posts here & here. Indeed the facts are laid out on how I am at the mercy of LHDN with their manipulations because of the retention sum.
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