Malaysia Defers Capital Gains Tax – Introduction
In a significant move, the Malaysian government, through the Finance (No. 2) Act 2023 and the Income Tax (Exemption) (No. 7) Order 2023, has deferred the commencement of capital gains tax on the disposal of shares in unlisted Malaysian companies to March 1, 2024.
This exemption is effective from 1 January 2024, to 29 February 2024.
Understanding the Exemption Order
The Exemption Order offers a temporary reprieve from capital gains tax.
It applies for companies, limited liability partnerships, trust bodies, and co-operative societies on profits gained from the disposal of unlisted Malaysian company shares within the specified period.
Critical Points to Note
Exemption Conditions
The shares must be disposed of between 1 January 2024, and 29 February 2024 to qualify for the exemption.
Exceptions
This order does not apply to disposals where gains are considered business income under the Income Tax Act 1967.
Capital Gains Tax Commencement
Following this order, the capital gains tax will commence on 1 March 2024, aligning with the original announcement in the Malaysian Budget 2024.
Controlled Companies Outside Malaysia
The imposition of capital gains tax on disposals of shares in controlled companies outside Malaysia (owning real property in Malaysia or shares in another controlled company) still commences on 1 January 2024.
Real Property Gains Tax Act 1976
Disposals from 1 January 2024, to 29 February 2024, are not subject to the Real Property Gains Tax Act 1976 or capital gains tax.
Implications for Stakeholders
This strategic deferment allows a window for entities to plan and adjust to the impending tax changes.
Businesses and investors involved in the Malaysian market must be aware of these updates to optimise their tax strategies and compliance.
Malaysia Defers Capital Gains Tax – Conclusion
This deferment represents an important transitional period in Malaysia’s tax landscape, especially for stakeholders in unlisted companies.
It reflects the government’s efforts to streamline tax policies while considering the impact on businesses.
Final thoughts
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