Malaysia’s parliament approved two laws – the Income Tax (Amendment) Bill 2024 and the Labuan Business Activity Tax (Amendment) Bill 2024. The two bills received approval from the House of Representatives on 26 March 2024 and by the Senate on 3 April 2024.
The key provisions of the Income Tax (Amendment) Bill 2024 clarify the new regulations concerning the taxation of capital gains from the sale of capital assets, effective from 1 January 2024.
This legislation also expands the scope of “capital assets” to include:
- Any movable or immovable property located outside Malaysia, along with any associated rights or interests; or
- Movable property within Malaysia that constitutes a share of a company incorporated in Malaysia but not listed on the stock exchange. The movable property also has no rights or interests or is owned by a company and has no limited liability partnership, trust body, or cooperative society.
Regarding the taxation of the profits gained from the disposal of shares in a controlled company outside Malaysia and deriving value from Malaysian real estate, it is specified that this regulation applies to disposals conducted by a “company, trust body, limited liability partnership, or co-operative society,” instead of an individual. Amendments have been introduced to clarify the rates applicable to capital gains from assets acquired before and on/after 1 January 2024. These are as follows:
For disposals of movable property as defined in paragraph (b) under the “capital asset” definition in subsection 2(1) (i.e., unlisted shares in an unlisted Malaysian company) or disposals of shares outlined in section 15c (i.e., shares in a controlled company based outside Malaysia) acquired before 1 January 2024:
- The rate will be 10% of the chargeable income from such disposals; or
- The rate will be 2% of the gross disposal price of such movable property or shares; and
- For disposals of movable property as defined in paragraph (b) under the “capital asset” definition in subsection 2(1) or disposals of shares outlined in section 15c, acquired on or after 1 January 2024, the rate will be 10% of the chargeable income from such disposals.
