Market Insights: Made Bitesize. Vol3 Malaysia's Capital Gains Tax (CGT)

Are the latest amendments to Malaysia's Capital Gains Tax (CGT) leaving you confused? Fear not! Let’s delve into the intricacies of Malaysia's Capital Gains Tax, which officially came into effect on January 1, 2024 together! Let's start by gaining a broad understanding of the Capital Gains Tax! Launched at the beginning of this year, it has faced initial challenges due to ambiguity and continuous legislative updates. Overview of CGT and Filing Rules Tax returns for CGT must now be filed electronically within 60 days from the disposal of a capital asset. Additionally, tax payment is required within 60 days from the date of disposal. This rule is applicable to unlisted shares of a Malaysian-incorporated company and Section 15C shares. For foreign capital assets, clarity is awaited on reporting and whether the 60-day rule applies.

Market Value Considerations and IRB Scrutiny In certain situations, market value is crucial, as per the law – including non-arm's length transactions, dealings with connected persons, gifts, or transactions with unvalued considerations. The Inland Revenue Board (IRB) in Malaysia is set to scrutinize transfer prices, especially in unlisted companies, potentially increasing costs for businesses undergoing internal restructuring. Section 15C Shares and Tax Collection Challenges As Section 15C shares fall under the tax net, there's uncertainty on the IRB's strategy to capture revenue, especially in transactions involving foreign parties outside Malaysia. A robust mechanism must be in place for effective tax collection in such scenarios.

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