{"id":315,"date":"2026-02-26T12:01:00","date_gmt":"2026-02-26T12:01:00","guid":{"rendered":"https:\/\/hba.com.my\/tax\/?p=315"},"modified":"2026-04-01T12:17:12","modified_gmt":"2026-04-01T12:17:12","slug":"the-shares-that-carried-a-hidden-cost","status":"publish","type":"post","link":"https:\/\/hba.com.my\/tax\/the-shares-that-carried-a-hidden-cost\/","title":{"rendered":"The Shares That Carried a Hidden Cost"},"content":{"rendered":"\t\t
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The Taxpayer’s Investment<\/h3>

\"\"<\/p>

In April 2014, two taxpayers made what seemed like a strategic investment. For RM100, they acquired 100 shares in Impian Dupleks, a company soon to acquire a one-and-a-half-story factory, transforming it into a Real Property Company (RPC). The taxpayers\u2019 stake grew as they purchased an additional 99,900 shares for RM99,900.<\/p>

Four years later, in March 2018, they sold their entire 100,000 shares to Merit Energy Sdn Bhd for RM4.2 million. The profit seemed straightforward\u2014until the tax authorities intervened.<\/p>

The Taxman\u2019s Notice<\/h3>

\"\"<\/p>

Based on the Real Property Gains Tax Act 1976 (RPGTA), the Director General of Inland Revenue (DGIR) issued Notices of Additional Assessments to both taxpayers under Paragraph 34A(4), Schedule 2, RPGTA. The additional tax amounted to RM368,631 each.<\/p>

The taxpayers, however, pushed back. They argued that the DGIR had miscalculated the acquisition price. \u201cThe correct acquisition price is RM4,056,888,\u201d they claimed, linking it to the factory\u2019s acquisition price in 2014. They contended that Paragraph 9, Schedule 2 of the RPGTA should apply, as the transaction was conducted at arm\u2019s length under Paragraph 23.<\/p>

The Clash of Interpretations<\/h3>

\"\"<\/p>

The DGIR was resolute. \u201cThe wording of Paragraph 34A(4) is explicit,\u201d the DGIR\u2019s representative stated. \u201cThe disposal price is the amount or value of the consideration in money or money\u2019s worth for the chargeable asset. Paragraph 9 is irrelevant here because the acquisition and disposal prices were clearly documented.\u201d<\/p>

The taxpayers maintained that the DGIR\u2019s calculation was flawed and that Paragraph 34A(4) shouldn\u2019t override the broader context of the RPGTA.<\/p>

The Judgment<\/h3>

\"\"<\/p>

On 22 April 2024, the High Court upheld the SCIT\u2019s decision, confirming that the DGIR had applied the law correctly. \u201cThe disposal price under Paragraph 34A(4) is based on the documented consideration,\u201d the judge ruled. The taxpayers\u2019 appeal was dismissed, with costs of RM2,500 each.<\/p>

The Lesson Learned<\/h3>

This case underscores the critical importance of understanding tax provisions related to property and share disposals. In transactions involving Real Property Companies, the calculation of acquisition and disposal prices hinges on specific provisions, such as Paragraph 34A(4), which prioritize documented values over other interpretations.<\/p>

For taxpayers, the takeaway is clear: robust documentation and a deep understanding of the applicable tax rules are crucial in structuring and reporting transactions. Misinterpretations or reliance on provisions that don\u2019t apply can lead to costly disputes and penalties.<\/p>

In the complex landscape of real property gains tax, precision and adherence to statutory provisions are not just advantageous\u2014they\u2019re essential.<\/p><\/div><\/div><\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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