New EPF scheme for home purchase

The government will launch a scheme in January allowing Employees Provident Fund (EPF) contributors to use current and future savings in Account 2 to boost house ownership.

The scheme, announced under the 2010 Budget, will help contributors secure higher financing to buy higher-value or more houses. However, it is limited to the purchase of one house at a time.

"While it is a good idea conceptually as it aligns with the goal of 'every Malaysian will own a home', it remains unclear how the future savings in Account 2 will be calculated," PricewaterhouseCoopers Taxation Services Sdn Bhd executive director Ng Say Guat told Business Times.

She said uncertainties such as unemployment, default in future contributions and amount of future salary could impact the future savings.

Meanwhile, property sellers will be disappointed that the Real Property Gains Tax Act 1976 (RPGTA) has been reintroduced, after it was waived two years ago.
Under the 2010 Budget, disposal of real property will be taxed 5 per cent from January 1 next year.

The tax is collected through a withholding mechanism under which the buyer keeps 2 per cent of the purchase value and pays to the Inland Revenue Board.

Individuals will be given an exemption up to RM10,000 or 10 per cent of the gains, whichever is higher.

However existing exemptions under the RPGTA are retained for gifts between parent and child, husband and wife, grandparent and grandchild.

The exemption also applies for the sale of one residential property for a citizen or permanent resident of Malaysia.

"The re-imposition (of RPGTA) is counterproductive to the efforts to stimulate the property market in these trying times," Real Estate and Housing Developers' Association Malaysia president Datuk Ng Seing Liong said.

By Business Times (by Jeeva Arulampalam)