Malaysia's Budget 2024: A Glimpse into Capital Gain Tax Updates (Part I)

Malaysia's Budget 2024: A Glimpse into Capital Gain Tax Updates (Part I)

In line with the Budget for 2024, Malaysia is poised for significant changes in its taxation landscape, particularly in the realm of Capital Gains Tax (CGT). The proposed amendments are expected to impact various sectors and types of taxpayers.

Here's a summary of the key takeaways:

1. Types of Capital Asset

The new proposed CGT focuses on

1.1 Capital assets situated in Malaysia :

• Unlisted shares of companies Incorporated in Malaysia

• Shares in foreign incorporated companies deriving value from real property in Malaysia

1.2 All types of capital assets situated outside Malaysia

2. Eligible Taxpayers

There are 4 categories listed below:

  • Company

  • Limited Liability Partnership (LLP)

  • Cooperative

  • Trust Body (including unit trusts)

3. Effective date

1 January 2024

The Ministry of Finance (MOF) has clarified the effective date of capital gains tax (CGT) imposition:

  • CGT is to be imposed with effect from 1 January 2024 as indicated in the Finance Bill (No. 2) 2023.

  • Notwithstanding the above, the imposition of CGT on gains or profits from disposal of local companies’ unlisted shares will commence from 1 March 2024. This will be implemented through subsidiary legislation.

4. Tax Rate

4.1 Shares acquisition date :

• Before 1 March 2024 * :

The taxpayers may choose either

• 10% on the net gain of the disposal of shares; or

• 2% on the gross sales value.

• From 1 March 2024 *

10% on the net gain of the disposal of shares ;

4.2 All types of capital assets situated outside Malaysia are based on the prevailing income tax rate of the taxpayer.

• Companies, LLP’s and trust bodies: 24%

• Co-operative : 0% to 24%

*See clarification from MOF from Effective date under Point #3 as above

5. Exemptions

Transactions exempted from CGT

  • Initial Public Offering (IPO) approved by Bursa Malaysia; and

  • Restructuring of shares within the same group.

  • Venture capital companies

  • Gains from disposal of foreign capital assets from outside Malaysia which meet economic substance requirement (ESR)

  • Individual

6. Date of Disposal and Acquisition

There are 2 points in time to determine the date of disposal and acquisition

  • With a written agreement: Date of the agreement

  • Without a written agreement: Date of completion of the disposal

7. Basis period

Reporting must be done for each disposal transaction.

8. Allowable expenses

Expenses related to the acquisition or disposal of capital assets such as stamp duty, legal fees, broker fees and commission fees. It is important to keep track of these expenses related to the acquisition or disposal of capital assets.

9. Losses

Taxpayers are allowed deductions from the same sources. Any unabsorbed capital losses can be carried forward for a limited period of 10 years.

10. Tax reporting

Submission of the prescribed form through e-filing within 60 days from the date of disposal.

11. Tax payment

Any payment should be made within 60 days from the date of disposal, emphasizing the need for timely compliance.

12. Profits Derived from Foreign Sources

The following conditions apply:

  • Exemptions are given on remittances that meet the economic substance requirements;

  • Gains from the disposal of shares by a controlled company incorporated outside Malaysia.

13. Deemed to be acquired from Malaysia

Shares in a company will be considered acquired from Malaysia if it owns:

  • real estate located in Malaysia; or

  • shares in another controlled company; or

  • both

where the market value of the real estate or shares or both is more than 75% of the value of its tangible assets.

In conclusion, these proposed changes to Malaysia's Capital Gains Tax system are expected to have a far-reaching impact on businesses, investors, and various taxpayers. Staying informed, seeking professional advice, and ensuring compliance will be key to navigating this evolving tax landscape effectively.

Budget 2024 Highlights - Past Updates

Individual : https://www.ktp.com.my/.../malaysias-budget-2024.../17oct23

Companies : https://www.ktp.com.my/.../malaysias-budget-2024.../18oct23

Tax Exemptions : https://www.ktp.com.my/.../malaysias-budget-2024.../19oct23

Tax Incentives : https://www.ktp.com.my/.../malaysias-budget-2024.../20oct23

Stamp Duty & Indirect Tax https://www.ktp.com.my/.../malaysias-budget-2024.../23oct23

Payroll (EPF & SOCSO) https://www.ktp.com.my/blog/malaysias-budget-2024-a-glimpse-into-epf-socso-updates/24oct23

Others https://www.ktp.com.my/blog/malaysias-budget-2024-others-important-updates/26oct23

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