Malaysia’s Finance Act 2025 and Measures for Tax Administration 2025 introduce key 2026 updates: a 2% tax on large LLP profits, expanded CGT disposal rules, nine-year RPGT loss carryforwards, and offsetting of excess tax or duty. Labuan business tax rules and stamp duty penalties have also been revised.
Malaysia gazetted the Finance Act 2025 and the Measures for the Collection, Administration and Enforcement of Tax Act 2025 on 31 December 2025. These laws give effect to selected measures announced in the 2026 Budget and additional tax measures.
The key tax measures include:
New taxes and adjustments to income rules
From the year of assessment 2026, individual partners in Limited Liability Partnerships (LLPs) will be subject to a 2% tax on annual profit distributions exceeding MYR 100,000, marking a shift toward broader taxation of partnership income.
Offsetting of excess tax or duty payments
Excess tax or duty paid under various Acts, including Income Tax, Stamp duty, Labuan Business Activity, or Petroleum (Income Tax) Acts, can be refunded or offset against other tax or duty liabilities under the same Acts.
- Labuan business tax changes: Shipping operations are no longer treated as a trading activity. The basis period is now the current year, with 2025 having two assessment years for periods ending 2024 and 2025. From YA 2025, Labuan entities must use self-assessment and submit tax returns electronically within seven months after the end of their accounting period.
- Stamp duty changes: Ad valorem duty applies to real property sales, with new late stamping penalties: MYR 50 or 10% of the deficient duty if stamped within three months late, and MYR 100 or 20% if stamped after that period.
CGT disposal expanded to include company dissolutions, share changes
For capital gains tax (CGT) purposes, “disposal” now includes ending ownership through company dissolution, share capital reduction, share conversion or redemption, or any extinguishment of rights. The disposal date is the earlier of the date ownership ends and the date consideration is received.
Carry forward of real property gains tax losses
Unutilised losses from asset disposals can now be carried forward for up to nine consecutive years. Any remaining balance after this period is disregarded, though transitional rules allow losses from YA 2025 and earlier to be used until YA 2035.
The measures took effect starting 1 January 2026.
Earlier, Malaysia published the Finance Act 2024 and Labuan Business Activity Tax (Amendment) (No. 2) Act 2024 in the Official Gazette on 31 December 2024.
