KUALA LUMPUR (Jan 13): Beginning Jan 1, the capital gains tax (CGT) took effect. Many were under the impression that it would be limited to gains or profits from the disposal of unlisted shares in Malaysia based on the Budget 2024 announcement.

However, when the draft Finance (No 2) Bill 2023 was tabled in November last year, it turned out to be much more than just taxing gains from the disposal of unlisted shares. The CGT taxes, among others, gains from indirect transfers and from disposal of foreign capital assets.

Those who will be subject to the CGT laws include companies, limited liability partnerships, trust bodies and cooperative societies. Individuals have been excluded.

Branded Image
Branded
Realising global clean energy potential
The year 2023 was not an easy one for businesses. With interest rate hikes up to 3% while inflation remained above its long-term average since the pandemic, businesses had to fight against currency fluctuation and gain a competitive advantage in the market to survive.

Companies and the accounting industry are in the midst of working out the effects of the new tax with many uncertainties awaiting clarification from the relevant authorities.

The industry is also waiting upon the exemptions that the government had announced or communicated would be granted — such as the exemption on gains on disposal of shares from initial public offerings approved by Bursa Malaysia, intergroup reorganisation and venture capital companies.

Understandably, the fund management industry has been shaken by the CGT law. As the law stands, without any further clarification or exemptions, the gains brought back to Malaysia or from unlisted shares in the country will be taxed at prevailing income tax rates, which ultimately mean that returns to unit holds would be smaller going forward.

The other pressing concern is whether companies with overseas assets such as shares on foreign stock exchanges or properties would be subject to CGT on gains from the disposal of the foreign asset.

In the latest issue of The Edge, we spoke to tax consultants and chief executive officers of asset management firms on the implications of CGT.

Tax consultants believe that the recent tax law amendments will benefit companies disposing of real property company (RPC) shares. RPCs are companies that derive at least 75% of their total tangible assets from real property in Malaysia.

When comparing tax jurisdictions like Singapore which also implemented CGT on the same date as Malaysia, we seem to be lagging behind in providing comprehensive guidelines and exemptions to taxpayers.

Taxpayers are looking for clarity to be given soon so that they can move forward with certainty.

By ESTER LEE. 13 January 2024.