(TAX UPDATE) IRB Gave You RPGT Clearance. Three Years Later, a RM7.23 Million Tax Bill Arrived.

Introduction

Your company buys a warehouse. You fix it up, find a solid multinational tenant, sign an 8.5-year lease, and carry it on your books as a long-term asset. You are not flipping it. You are holding it.

Two years later, the very REIT you bought it from comes back and makes you an offer you did not go looking for. The price is too good to turn down. You sell. Because the buyer is a REIT, the disposal is exempt from RPGT, and IRB confirms that with a certificate of clearance.

You assume that settles it. It did not.

That is what happened to Exceptional Landmark Sdn Bhd. On Monday, 17 August 2026, the Court of Appeal ruled on what IRB tried to do next.

At a glance

Exceptional Landmark bought a warehouse in July 2012, repaired it, and leased it to a multinational tenant for 8.5 years, holding it as a long-term asset.

In August 2014, the same REIT it had bought from approached the company with an unsolicited offer of RM52.5 million, more than double the purchase price. The company sold.

Because the buyer was a REIT, the disposal was exempt from RPGT. IRB issued a certificate of clearance confirming that exemption.

In November 2017, without first discharging that certificate, IRB reclassified the entire gain as business income under Section 4(a) of the Income Tax Act 1967, and issued an additional assessment with penalties for YA2014.

The Special Commissioners of Income Tax, the High Court, and now the Court of Appeal have all ruled against IRB. IRB must refund the income tax collected, totalling RM7.231 million, by 31 December 2026.

What IRB actually argued

IRB's case did not rest on the sale alone. It pointed to the company's paid-up capital of just RM2, the two-year holding period, the size of the profit, the distribution to shareholders afterward, and the fact that the company went quiet once the deal closed. On its own, that reads like a company set up to flip one asset and disappear.

IRB added a sharper point. A director of Exceptional Landmark also sat on the board of the purchasing REIT and held real estate and REIT industry expertise. IRB argued this meant the company was positioned to engineer a favourable sale without needing to market the property at all, which looked less like a passive investor waiting for an offer and more like an insider arranging his own exit.

Why the company's actual conduct mattered more

The Special Commissioners of Income Tax looked past the structure and asked what the company had actually done with the asset. The warehouse was the company's only property. It underwent genuine repair and maintenance work to make it fit for a tenant. It was let out under a real 8.5-year lease to a multinational company, not a short-term arrangement designed to be unwound quickly. On the balance sheet, it sat as a non-current asset the whole time, not stock held for resale. There was no marketing, no listing, no attempt to shop the building around for a buyer.

On the director's dual role, the company's answer was specific. When the REIT's board considered whether to buy back the warehouse, that director abstained from voting. The transaction still had to clear the Securities Commission and get approval from the REIT's own unit holders, an independent layer of scrutiny that left no real room for one person to steer the outcome.

That left the sale itself resting on one fact: the REIT made the approach, not the company. The company's lawyers pointed to ALF Properties Sdn Bhd v Ketua Pengarah Jabatan Hasil Dalam Negeri [2005] 3 CLJ 936, where the courts held that selling a property in response to an unsolicited, hard-to-refuse offer can be exactly what an ordinary investor does, and does not by itself turn a disposal into trading.

The Special Commissioners weighed all of this together and found the gain was capital in nature, not a trading profit. The High Court agreed. IRB's appeal to the Court of Appeal did not challenge these facts. It argued the lower courts had misapplied the law to them. The three-member bench disagreed, holding that where a tribunal has properly weighed the full set of facts, known as the badges of trade, and reached a supportable conclusion, an appellate court will not disturb it.

Why the exemption certificate did not settle anything

Here is the part worth sitting with. IRB never withdrew or discharged the RPGT certificate of clearance it had already issued. It simply opened a second front three years later, arguing the same gain should have been taxed as business income under Section 4(a) all along.

A certificate of clearance confirms how RPGT was treated on the facts disclosed at the time. It does not stop IRB from later arguing the transaction was never a capital disposal in the first place, and taxing it under an entirely different provision, years after the RPGT position looked closed.

KTP's View

What won this case was not the exemption certificate. It was the paper trail the company had built years before IRB ever asked a question: repair invoices, a genuine long lease, non-current asset treatment on the books, board minutes showing a director's abstention, and regulatory approvals that left no room to argue the deal was engineered.

If your company holds a property that could later attract this kind of scrutiny, short holding period, related-party buyer, a director wearing two hats, the facts that will matter are the ones you documented before anyone came asking. A clearance certificate confirms a position taken at one point in time. It is not a shield against a different tax being raised on a different provision years later.

This article summarises a reported Court of Appeal decision and is general educational content, not a legal or tax opinion on any specific transaction. The classification of a property disposal as capital or revenue in nature is highly fact dependent. Speak to your tax adviser before treating any disposal as a capital gain.