Muhammad Izwan Atx-C 1811170224 December 2018

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MUHAMMAD IZWAN ATX-C 1811170224

DECEMBER 2018

4. a) Mas and Selamat Datang Sdn Bhd (SD).


i) RPGT of office block.

According to the rule, where there is transfer of chargeable asset, made by an individual, to
a controlled company, with at least 75% of the total consideration received is in form of shares, the
transaction shall be regarded as a no gain no loss transaction (NGNL).

A controlled company is defined as a company which is being controlled by not more than 5
person and having not more than 50 members. In this case, SD fits the definition of a controlled
company as it is being controlled by Mas and her daughter, Linda, only.

Thus, the transfer of office block, which is a chargeable asset, owns by Mas to SD, which is a
controlled company, where the transfer condition will be wholly satisfied in the form of shares in SD,
will be treated as a no gain no loss transaction. This is because it does satisfy all the conditions
needed to be treated as a no gain no loss.

However, the shares that Mas acquires in exchange for the office block will be treated as a
chargeable gain. This will attract RPGT when Mas decide to dispose or transfer the shares.

Upon subsequent disposal of the office block by SD, it will use the acquisition price incurred
by Mas eight years ago, RM 6 million, as this is a no gain no loss transaction. This will result in higher
RPGT rate that might be incurred by SD as the acquisition price is lower than the actual
consideration paid by SD. For the date of acquisition, it will be base on the date the office block was
transferred.

ii) Alteration to achieve greater tax efficiency on future disposal by SD.

Firstly, Mas should realise that the no gain no loss transaction made is not worthy both for
her and the company. The reason is that Mas had acquire and hold the office block for eight years
which indicates that the RPGT charge is at 0% as it was held for more than five years. So even if the
no gain no loss transaction does not take place, she will not have to pay for the RPGT.

The reason it is not worthy for SD is that the acquisition price will be lower under no gain no
loss transaction. This would result into higher RPGT payable if SD decided to dispose the asset. Thus,
the no gain no loss transaction should not be executed, and the condition should not be satisfied.

To do this, Mas should change the transfer condition. Instead of receiving it wholly in the
form of shares in SD, she should only receive the shares lesser than 75% or receive it wholly in cash.
Even though there will be RPGT charge on the chargeable gain that she made, it will not be payable
as the RPGT rate will 0%. SD acquisition price will also be valued at its consideration paid rather than
Mas consideration paid.

JUNE 2014

3. Beli-Jual Sdn Bhd (BJSB)


a) Date BJSB become a Real Property Company (RPC)
To become an RPC, the company must be a controlled company holding real property, or
shares in another RPC, and their value should not be less than 75% of the value of the
company’s total tangible assets.
- Before 1 July 2010
BJSB is a controlled company but it does not have any investments. So, it does not
become an RPC.
- On 1 July 2010
On this date, BJSB acquired its first real property which is a 90-acre plantation. As
BJSB only have minimal tangible assets on this date, it is likely that the real property
value exceeds 75% of BJSB total tangible assets.
- On 1 December 2012
BJSB is an RPC on this date and had acquired a further 20 acres of land which
increases its real property assets. No disposal was made or any indication that the value
is lower than 75% of BJSB total tangible assets. Hence, BJSB remains as an RPC.
- On 1 July 2014
If BJSB decided to sell or dispose off the entire 110 acres of land, it will not be an
RPC anymore as there are no real property being held by BJSB.

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