In Malaysia, Capital Gains Tax (CGT) is typically not applicable, except for profits derived from the sale of real estate within the country, which may be subject to Real Property Gains Tax (RPGT) at a maximum rate of 30%. Broadly, CGT is a tax imposed on the profits generated from the sale of various investments such as shares, bonds, cryptocurrencies, precious metals, real properties, and more. This tax is applied when these investments are sold or disposed of.
While Capital Gains Tax (CGT) typically encompasses a broad range of assets, the forthcoming CGT in Malaysia, as outlined in the Budget 2024, will specifically apply to capital gains arising from the sale of unlisted shares by entities such as companies, limited liability partnerships, trust bodies, or cooperative societies. This tax will be applicable to gains or profits generated from the disposal of capital assets on or after January 1, 2024. It’s important to note that individuals who sell unlisted shares are exempted from this CGT provision.
The seller has the option to offset capital losses from the sale of shares in other unlisted local companies against the net gains from the sale of shares in a company, thereby minimizing the capital gains tax on unlisted shares.
In the event of a capital loss from the disposal of shares, it is possible to carry forward this loss for ten consecutive assessment years. This period begins immediately after the relevant assessment year. Any remaining amount that is not deductible at the end of this period will be disregarded.
Gains on disposal of foreign shares or equity
Before January 1, 2024, profits from the sale of foreign shares or equity were not subjected to Malaysian tax. However, a significant change has been implemented. Starting from January 1, 2024, any gains or profits resulting from the disposal of shares in a controlled company incorporated outside Malaysia will be considered as derived from Malaysia if the said company owns real property located in Malaysia, provided that the market value of this real property is not less than seventy-five percent of the value of its total tangible assets. This type of entity is referred to as a real property company (RPC).
Taxable gains in this context encompass various entities, such as companies, individuals, limited liability partnerships, and corporation soles. This is in contrast to gains from the disposal of domestic unlisted shares.