Effective 1 January 2024, Malaysia introduced its Guidelines on Capital Gains Tax (CGT) for Unlisted Shares which imposes CGT applies on certain sellers and with separate tax methods based on when the shares were originally acquired.
For parties looking to sell their shares, our guide explains the essentials of the guidelines and how they may apply to you.
Who is liable for CGT
CGT applies to disposals of unlisted shares by corporate sellers, namely:
- companies
- LLPs
- trust bodies, and
- co-operative societies
Individual owners are fully exempt, and a founder selling shares held in their personal name, for example, owes no CGT.
How it is calculated
For corporate sellers, the tax calculation depends on the date the shares were acquired.
Shares acquired on or after 1 January 2024
Only one method is available: 10% on net gain
(Net Disposal Price – Acquisition Price – Permitted Expenses) × 10%
Permitted expenses include legal fees, stamp duty paid on acquisition, and valuation fees.
The 2% gross disposal method is not available for shares acquired on or after this date.
Shares acquired before 1 January 2024
The seller may elect the method that results in lower tax.
Option A: 10% on net gain
Disposal price minus acquisition cost.
Option B: 2% on gross disposal price
Calculated on total sale value, regardless of acquisition cost.
This option is commonly beneficial where shares were acquired at a very low cost many years earlier.
Example:
Shares acquired for RM2.00 and sold for RM1 million.
10% net gain method: RM100,000 tax
2% gross method: RM20,000 tax
Treatment of capital losses
If shares are sold below cost, the resulting capital loss:
- can be carried forward to offset future capital gains from share disposals, and
- cannot generally be offset against ordinary business income
Losses are ring-fenced to share disposal gains only.
Date of disposal
The date of disposal determines when the 60-day CGT payment deadline begins and it typically the date of the Share Sale Agreement though if government approval is required, the disposal date is the date final approval is obtained.
If there is no agreement, the disposal date is the earlier of two events:
- the date the shares are transferred, or
- the date payment is made
Key takeaway for sellers
Corporate sellers should always compute CGT under all available methods before filing and retain full documentation, as deductible expenses can materially reduce tax payable. Those who require assistance reviewing a valuation or estimating CGT owed are welcome to get in touch with us!
