Chee Pei Pei
Deloitte Private Tax & Legal Leader
Deloitte Southeast Asia
Shiranee Niles
Director (Business Tax – Malaysia)
Deloitte Tax Services
Malaysia’s Budget 2024, with the theme, “Economic Reform, Empowering the People”, was crafted with the aim to strengthen the Malaysian economy, raise living standards of the people, and broaden the country’s tax base.
One method of broadening the tax base was to introduce a capital gains tax (CGT). Prior to this, there was no CGT in Malaysia except for Real Property Gains Tax (RPGT). The latter was charged on any gains arising from the disposal of real property and shares of a real property company, with rates ranging from 0% to 30%, subject to prescribed conditions.
With effect from 1 January 2024, CGT will be imposed on gains from the disposal of capital assets by companies, limited liability partnerships, co-operatives and trust bodies on capital assets situated in Malaysia (limited to shares in unlisted companies incorporated in Malaysia and shares in foreign incorporated companies deriving value from real property in Malaysia), and gains from disposal of all types of capital assets situated outside Malaysia, remitted to Malaysia.
Certain exemptions are available, subject to conditions. As this is a new tax, clarification on various aspects of CGT is still being obtained from the tax authorities.
Individuals exempt from CGT
At present, individual taxpayers will continue to be exempt from CGT on both Malaysian and foreign assets. They will continue to be subject to RPGT on gains arising from disposal of real property and shares of real property companies unless their period of holding is six years and more.
However, CGT implications will kick in if they use investment holding companies or trusts to hold chargeable assets such as unlisted shares in Malaysia or foreign assets. In terms of estate planning, the devolution of unlisted shares upon the demise of an individual shareholder should not result in CGT. On the other hand, disposal of chargeable assets by a trust will likely attract CGT moving forward.
- Hence, careful consideration is required when planning for succession to ensure tax efficiency is considered in tandem with ensuring core goals of preserving the family legacy for the benefit of future generations.
This article was first published in our newsletter, The Custodian Issue 28. Click here to access our latest newsletter
