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SP Setia up on property tax news

SP Setia Bhd rose in Kuala Lumpur trading, leading gains by Malaysian developers, after the government scaled back the applicable period of a property sales tax that will be re-imposed next month.

SP Setia, the country’s biggest, rose 1.6 per cent to RM3.74 at 11:41 a.m. local time, set for its highest close since Nov 25. Eastern and Oriental Bhd surged 4.1 per cent. The FTSE Bursa Malaysia KLCI Index was little changed.

Prime Minister Najib Razak said yesterday a 5 per cent capital gains tax on property will apply only to homes sold within five years of their purchase, government spokesman Akmar Hisham said today.

Najib “presented the perfect Christmas gift to the Malaysian property market,” ECM Libra Capital Sdn Bhd said in a report today, maintaining its “overweight” rating on the industry. The move “sends an affirmative signal that the government will adopt an accommodative stance to support growth in the property sector,” ECM said.

The re-imposition of the capital gains tax was announced by Najib in October as part of plans to cut the budget deficit to 5.6 per cent of gross domestic product in 2010 from a 22-year high of 7.4 per cent this year. The tax was originally scrapped in 2007 to help clear a housing backlog.

 

Before the government removed the tax, the levy was 30 per cent within the first two years, falling to 5 per cent by the fifth year.

The decision to limit the scope of the tax means the government will have to forego about RM200 million (US$58 million) in potential revenue next year, the official Bernama news agency reported last night, citing Najib. - Bloomberg

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