By Samuel Lai, Director of StanleyCo Tax Consultants Sdn Bhd
Written on 29 October 2023
As announced in Budget 2024, the government will implement the new Capital Gain Tax (CGT) on the sale of unlisted shares for companies. And based on the announcement from the Ministry of Finance, the following tax measurements may be implemented:
a. The new CGT will only apply to the sale of unlisted company shares. Gains from trading shares of listed companies are not subject to this new CGT.
b. Shares sold or transferred as part of an Initial Public Offering (IPO) approved by Bursa Malaysia will be exempt.
c. Transactions involving the transfer of shares during restructuring within the same group of companies will also be exempt.
d. The CGT rate(s) to be imposed will depend on when the shares were acquired:
Shares Acquisition Date | CGT Rate |
Before 1 March 2024 | The taxpayers may choose: i. 10% on the net gain of the disposal of shares;or ii. 2% on the gross sales value. |
From 1 March 2024 | 10% on the net gain of the disposal of shares |
Based on the proposed tax measures, if the taxpayer acquired shares in a private company before 1 March 2024, and decides to sell them, the taxpayer can opt to pay either a 10% tax on your profit or a 2% tax on the total sale price. However, for shares purchased on or after 1 March 2024: when the taxpayer sells, a 10% tax will be imposed on the profit.
At present, it's uncertain whether the following types of share acquisitions will be liable for Capital Gains Tax (CGT), and what specific rules will apply:
a. Shares received through inheritance (for example, from parents).
b. Shares that are bought by a family member (such as parents) and later gifted to their children at no or minimal cost.
c. Bonus shares granted for free by a company to its current shareholders.
d. Shares distributed to employees as part of a company's incentive plan.
e. Hybrid or preference shares.
And, in relation to Real Property Companies - we can reasonably expect that disposals of RPC shares would not be taxed twice under RPGT and CGT.
Please refer to our article on Capital Gain Tax published on 13 October 2023 to explore more about the possible issues and expected measurements.
Planning ahead
The new Capital Gains Tax (CGT) will take effect starting 1 March 2024. While we await further specifics from the government, we invite our clients who are considering buying or selling shares in private companies to connect with us. Our team is ready to provide expert guidance and support to align your investment actions with the forthcoming tax changes, ensuring you make informed and strategic decisions. Let's discuss how you can best prepare for the implementation of the CGT.