PETALING JAYA – House buyers looking for discounts in a slow property market need to beware of the taxman who may come a-calling.
Currently, stamp duty is charged at 1% on properties worth up to RM100,000, 2% for homes valued at RM100,001 to RM500,000 and 3% for homes worth more than RM500,000.
With the current soft property market, there are more opportunities now for buyers to find discounted assets.
However, most buyers are not aware that the stamp duty is based on the market value of the property and not the selling price. As a result, buyers need to bear the increased stamp duty, notwithstanding the willing buyer-seller clause, in the event the market rate assessed is higher than the selling price.
A buyer who declined to be named told SunBiz recently that she needed to fork out several thousand ringgit more to pay for higher stamp duty as the Inland Revenue Board (IRB) believes that the transacted price was too low.
“What is their basis, I have no idea. Where they get their valuation also I have no idea. They said they just feel that the transaction price is not at the market value. So they feel that it (stamp duty) should be raised,” she added.
When contacted, IRB declined to respond to queries, saying no comment will be made on a particular case.
Crowe Horwath KL Tax Sdn Bhd managing director S.M. Thanneermalai noted that the IRB director-general has the right to disregard certain transactions if he believes the transaction is not conducted on market price basis.
Thanneermalai said the authority also has the right to make adjustments on the transactions as he thinks fit.
“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 said.
Traditionally, Thanneermalai said, many people have been trying to keep costs down by buying properties under a certain price threshold and make “under-the-counter” payments.
“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.
“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,” he said.
Even though buyers may oppose the authority’s assessment by submitting notice within 30 days, they are still not exempted from paying the original duty within 30 days from the date of the notice of assessment. This means that buyers still need to pay for the duty under protest while proceeding along with the objection.