On 29 December 2023, Malaysia released the Income Tax (Exemption) (No. 7) Order 2023 in the Official Gazette, which provides a deferral of capital gains taxation on the disposal of unlisted shares.
Earlier, Malaysia’s new Finance (No. 2) Act 2023 law implemented new regulations from 1 January 2024, which proposed the taxation of gains on the sale of capital assets, including foreign capital assets. The new rules include a general exemption for profits from selling capital assets in Malaysia, with a few exceptions. These are:
- gains from the disposal of shares of a Malaysian company not listed on the stock exchange.
- gains from the disposal of shares of a foreign company but derives value directly or indirectly from real property in Malaysia.
Under the provisions of the Income Tax (Exemption) (No. 7) Order 2023, companies, limited liability partnerships, cooperative societies, and trust bodies will be exempted from paying income tax on profits and gains from the disposal of shares of a Malaysian company that is not listed on the stock exchange. This exemption rule only applies to share disposals between 1 January 2024 and 29 February 2024.
However, this exemption will not apply if the gains from the disposal of shares are subject to tax as business income under section 4(a) of the Income Tax Act 1967, which pertains to income earned by non-residents in Malaysia.
