“I already sold the property and my lawyer filed RPGT!
Why are you saying my company needs to pay income tax?”

That was how one director shouted at me.
I smiled and asked, “Then why did you buy five properties under your Sdn Bhd? For profit, right?”

This is one of the biggest misunderstandings among SME owners.
When your Sdn Bhd sells land or property, should it be taxed under Real Property Gains Tax (RPGT) or Income Tax?

IRB decides this using something called the Badge of Trade. A test of your company’s real intention and behaviour.

IRB look at things like:

1. Did you buy to hold or to sell next next year?
2. How often do you sell?
3. Did you renovate or market the property?
4. Was it financed by short-term loans?
5. & more

If these point to trading, IRB can ignore RPGT and charge income tax instead!

Even if your lawyer filed RPGT forms correctly.
In the Kind Action Sdn Bhd case, the Federal Court ruled IRB cannot impose both RPGT and income tax on the same sale.

Before you sell, ask : Will IRB see my company as investor or trader?
It could mean a six-figure difference in your tax bill.

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