If you sell shares in a Real Property Company (RPC) and part of the sale price goes toward clearing the company’s bank loans, that portion is still counted as part of the taxable “disposal price” under the RPGT Act 1976. A Malaysian High Court decision handed down on 2 March 2026 confirms it — and it’s a costly lesson for anyone structuring a share sale around debt settlement.
The Case at a Glance
In Dato’ Abd Gani Bin Yusof & Dato Azizi Bin Tan Sri Yom Ahmad v. Director General of Inland Revenue (Case No: WA-14-36-12/2022 & Others), three shareholders sold their stake in a company classified as a Real Property Company under Paragraph 34A, Schedule 2 of the RPGT Act 1976.
On paper, the Share Sale Agreement (SSA) put the total consideration at RM28,000,000. But the shareholders argued their real, personal take-home was just RM3 — RM1 each. The rest, they said, never reached their pockets at all; it went straight to the banks to clear the company’s outstanding loans so the buyer could take over a debt-free entity.
The Inland Revenue Board disagreed, and the High Court sided with them, dismissing the taxpayers’ appeal and affirming the earlier decision of the Special Commissioners of Income Tax (SCIT).
What Actually Triggers RPGT on a Share Sale?
Most share sales in Malaysia aren’t taxed as capital gains at all. RPGT only enters the picture because of one specific trigger: RPC status.
Under Paragraph 34A(6), a company becomes an RPC the moment its real property (or shares in another RPC) makes up 75% or more of its total tangible assets. Once that threshold is crossed, the company is permanently “tagged” — and any future sale of its shares is treated, by legal fiction under Paragraph 34A(2), as a disposal of a chargeable asset. That’s what pulls the transaction out of the Income Tax Act and into the far less forgiving RPGT regime.
This is precisely the mechanism the shareholders in this case ran into. Their company held enough real property to qualify as an RPC, so their share sale wasn’t just a private transaction between owner and buyer — it was a chargeable disposal in the eyes of LHDN.
The RM28 Million Question: What Counts as “Disposal Price”?
This is where the case turned. Paragraph 34A(4) defines disposal price as:
“…an amount equal to the amount or value of the consideration in money or money’s worth for the disposal of the shares.”
The taxpayers’ position
The shareholders argued RPGT should apply only to what they personally received — RM3 total. Money paid to banks to clear the company’s debts, they said, was a separate transaction that never became a gain in their hands.
The Inland Revenue’s position
The DGIR read the law literally: the consideration for the shares was the full RM28 million. Who the money was routed to — the sellers directly, or their creditors on their behalf — was simply a “manner of settlement.” It didn’t change the gross value of the shares exchanged.
The court’s reasoning
The High Court agreed with the Revenue on three grounds:
- No statutory basis for deduction. Nothing in the RPGT Act allows company liabilities to be subtracted when calculating disposal price.
- The debt settlement was a condition of sale. Without clearing those loans, the SSA couldn’t have closed. That makes the payment part of the “money’s worth” the sellers received in exchange for their shares — not an unrelated expense.
- Legislative intent. Paragraph 34A exists specifically to stop taxpayers from sidestepping RPGT by wrapping real estate in a corporate shell and selling the “net” equity instead of the property itself. Allowing a debt-settlement deduction would reopen exactly that loophole.
In short: the phrase “money or money’s worth” is intentionally broad, and clearing a company’s encumbrances to make a sale possible falls squarely inside it.
What This Means If You’re Selling (or Buying) RPC Shares
| Old assumption | What the court actually confirmed |
| RPGT applies only to what I personally receive | RPGT applies to the gross consideration stated in the SSA, regardless of where the funds go |
| Settling company debt before a sale reduces my taxable gain | Debt settlement built into the deal is treated as part of the consideration, not a deduction |
| Structuring the SSA cleverly can lower the disposal price | The court looks at total value exchanged to facilitate the transfer — not how the agreement labels it |
Three practical takeaways for high-net-worth individuals, family offices, and corporate investors:
- Know your RPC status before you sign anything. Any share sale in a private company should be preceded by an asset-ratio audit to check whether the 75% real property threshold has been triggered.
- Budget for RPGT on the gross deal value, not the amount that lands in your bank account. If debt settlement is part of the structure, assume it’s taxable.
- Get the SSA reviewed before signing, not after. The High Court made clear it will look at the full economic substance of a deal, not just how the payment stream is worded.
Related Tax Case Studies
RPGT disputes rarely hinge on one issue alone — here are three related rulings worth reading before you structure your next RPC transaction:
- Capital Gain or Business Income? Land Sale Tax Case Study
- Redefining Government Facilitation Funds for Developers: Government Grants Tax Case Study
- Constitutional Supremacy over Tax Legislation: Land Acquisition Compensation Tax Case Study
