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How Does the Capital Gains Tax Work in Malaysia? This Guide Will Explain

Capital Gains Tax in Malaysia Before any investor can begin to do business in Malaysia, it is important to understand every aspect of the tax system. This guide will focus on the capital gains tax in the country.

 

How the Capital Gains Tax Works

Previously, there is no capital gains tax in Malaysia except for real property gains tax (RPGT).

RPGT is imposed on gains from the disposal of real property and shares in real property companies at a rate of 10% to 30% depending on the holding period. There is no tax imposed on gains from the disposal of shares except shares in real property companies.

Effective 1 January 2024, Malaysia introduced a capital gains tax (CGT) through the Finance (No. 2) Act 2023 under which gains or profits from the disposal of capital assets are subject to tax under the Income Tax Act, 1967.

 

Real Property Gains Tax (RPGT)

In Malaysia, RPGT will be the form of capital gains tax that you would need to pay as a homeowner. As a business owner, you would also need to pay these taxes when you are disposing of your property in the country. This means that if you do decide to sell your property one day, any profit that is made on the property will be taxed.

 

What Happens if I Sell My Home at a Loss?

If you sell your home or your property at a loss, then you do not need to pay the RPGT. The RPGT is only applicable if you have made a profit on the sale. Your RPGT must be paid within 60 days from the time you make your sale.

For more information about RPGT, please refer to Real Property Gains Tax (RPGT) in Malaysia.

 

Capital Gains Tax (CGT)

CGT will be imposed on gains from the following:

  • Disposal of shares of an unlisted companies incorporated in Malaysia,
  • Disposal of shares of a foreign incorporated company that derives value from real property in Malaysia,
  • Disposal of capital assets situated outside Malaysia remitted into Malaysia.

It is applicable to a company, limited liability partnership, trust body and co-operative society. It does not apply to disposal made by individuals.

The tax rate for CGT for the disposal of capital assets situated in Malaysia is as follows:-

Acquisition date of capital asset Tax rate

 
Before 1 January 2024 10% of chargeable income or 2% of gross disposal price

 
On or after 1 January 2024 10% of chargeable income

 

 

Gains from disposal of capital assets situated outside Malaysia, remitted into Malaysia are subject to the prevailing rate of tax.

 

Effective Date

CGT will be effective from 1 January 2024.

However, the Exemption Order provides an exemption to a company, LLP, trust body or co-operative society in respect of any gains or profits from the disposal of unlisted shares in Malaysian companies during the period from 1 January 2024 to 29 February 2024. Hence, CGT will only be payable on disposals of unlisted shares in Malaysian companies from 1 March 2024.

For CGT on the disposal of foreign assets, the effective date remains as 1 January 2024.

On 16 January 2024, it was announced that unit trusts will be exempted from income tax on foreign-sourced income and CGT. The exemption from income tax on foreign-sourced income takes effect from 1 January 2024 to 31 December 2026, while the exemption on CGT is effective from 1 January 2024 to 31 December 2028.

 

Filing

A company, LLP, trust body or co-operative society is required to file a CGT return and pay the CGT within 60 days from the date of disposal of a capital asset. Taxpayers are required to submit the return electronically (e-CKM Form) on the MyTax portal.

Capital Gains Tax in Malaysia