Updates on Capital Gains Tax (CGT)

Following the gazette of the Finance Act, the Income Tax (Exemption) (No. 7) Order 2023 [P.U.(A) 410/2023] (“Exemption Order”) was issued on 29 December 2023 (i.e. on the same day the Finance Act was gazetted).

    

The Exemption Order exempts companies, limited liability partnerships, trust bodies and co-operative societies from Capital Gains Tax on gains or profits received from the disposal of shares of unlisted companies incorporated in Malaysia where the disposal takes place on or after 1 January 2024 to 29 February 2024.

    

The exemption is not applicable to the disposal of shares of unlisted companies incorporated in Malaysia where the gains or profits are considered as business income under paragraph 4(a) of the Income Tax Act 1967.

    

With the issuance of the Exemption Order, the effective date for the implementation of Capital Gains Tax on gains or profits received from the disposal of shares of unlisted companies incorporated in Malaysia is 1 March 2024, which is consistent with the announcement in the 2024 Budget.

    

It is important to note that Capital Gains Tax in relation to gains from disposal of capital assets situated outside Malaysia which is remitted into Malaysia shall be taxable effective 1 January 2024.

     

Following the above, HASiL has published the CGT Return Form Filing Program for disposal with effect from 1 March 2024. 

    

C. Exemption from CGT and foreign source income (“FSI”) on unit trusts

Following the gazette of the Finance Act, unit trust is included under the scope of CGT. This in return means that the income distribution to unit holders will be reduced, taking into account the effect of income tax. Given that more than 90 % of unit trust holders are individuals, the Government is looking into providing exemption on unit trusts.

     

It was made known that CGT will be exempted on gains from disposal of foreign assets including shares listed on foreign stock exchange or real properties where economic substance requirements are met.

     

Further guidance or legislation on this matter will be announced by the government.