Capital gains tax in Malaysia

Malaysia historically had no general capital gains tax on financial assets -- a feature that distinguished it from many regional peers. The only gains-specific levy was the Real Property Gains Tax (RPGT) under the Real Property Gains Tax Act 1976, which continues to apply to real estate disposals. From 1 January 2024, however, a new Capital Gains Tax (CGT) regime under the Income Tax Act 1967 introduced taxation on gains from the disposal of unlisted shares in Malaysian companies, certain foreign-company shares linked to Malaysian property, and foreign capital-asset gains remitted to Malaysia. Both regimes now coexist. The starting point for any analysis is identifying which framework applies to a given disposal. For a broader context of Malaysian taxation, see the Malaysia country overview.

What Does the New 2024 Capital Gains Tax Cover?

The new CGT applies to three categories of capital asset. First, unlisted shares in Malaysian-incorporated companies. Second, shares in foreign-controlled companies that derive 75% or more of their tangible-asset value from Malaysian real property (sometimes called Section 15C shares). Third, gains from the disposal of capital assets situated outside Malaysia when those gains are remitted into Malaysia. The CGT applies to companies (both Sdn Bhd and Bhd), limited liability partnerships (LLPs), trust bodies, and co-operative societies. Individuals are explicitly outside the scope of the CGT on share or capital-asset disposals under the current statutory framework, as confirmed in LHDN guidelines published on hasil.gov.my. The practical enforcement date for Malaysian unlisted-share disposals was 1 March 2024; an exemption order covered disposals made between 1 January and 29 February 2024 to allow businesses a transition window. From 1 January 2026 the definition of "disposal" was broadened to include share redemptions, conversions, company winding-up or dissolution, and any other event causing cessation of ownership -- not only outright sales.

What Are the CGT Rates on Unlisted Shares?

For unlisted shares acquired on or after 1 January 2024, the rate is 10% of the net chargeable gain, calculated as disposal proceeds less allowable acquisition cost and qualifying expenses. No alternative rate exists for these shares. For unlisted shares acquired before 1 January 2024, the chargeable entity may elect between two options: 10% of the net chargeable gain, or 2% of the gross disposal proceeds, whichever the taxpayer prefers. The 2% gross-proceeds option is a transitional relief for legacy holdings and typically benefits situations where the net gain is large relative to gross proceeds. Capital losses from one disposal may offset gains in the same year of assessment. Any unabsorbed losses may be carried forward for up to ten consecutive years of assessment before they expire. Filing and payment are made via Form e-CKM on LHDN's MyTax portal, with both the return and payment due within 60 days of the date of disposal. Amendments to a return are permitted within six months of the due date.

How Does Real Property Gains Tax (RPGT) Apply to Real Estate?

RPGT under the Real Property Gains Tax Act 1976 governs gains from the direct disposal of Malaysian real property (land and buildings) and shares in Real Property Companies, which are entities deriving 75% or more of their tangible-asset value from Malaysian real property. Rates depend on both holding period and the category of disposer. For Malaysian citizens and permanent residents (Part I of Schedule 5 RPGTA), the rates effective from 1 January 2022 are: 30% for disposals within the first three years, 20% in the fourth year, 15% in the fifth year, and 0% from the sixth year onwards. Malaysian companies, trustees, and registered bodies (Part II) pay 30% for years one to three, 20% in year four, 15% in year five, and 10% from year six onwards. Non-citizens and non-Malaysian companies (Part III) face 30% for years one through five and 10% from year six onwards. Each individual disposal attracts an automatic exemption equal to MYR 10,000 or 10% of the chargeable gain, whichever is the higher amount. Separately, Malaysian citizens are entitled to a once-in-a-lifetime full RPGT exemption on the disposal of a private residence regardless of holding period. RPGT returns on Form CKHT-1A must be filed within 60 days of disposal.

What CGT Exemptions Are Available?

Several exemptions apply to the new CGT regime. Disposals of unlisted shares to another company within the same Malaysian corporate group (internal group restructuring) are exempt, provided the transferee is incorporated in Malaysia; this exemption is available until 31 December 2028. Disposals connected with initial public offerings approved by Bursa Malaysia are likewise exempt through 31 December 2028. Qualifying resident unit trusts are exempt through 31 December 2028. Transfers of capital assets into approved Single Family Office vehicles carry a 0% CGT rate. Gains from venture capital investments may also qualify for exemption, subject to a confirming gazette order. Exemptions are not automatic in most cases: applications must be made within three years of the disposal date through LHDN's MyTax portal. Separately, listed shares on Bursa Malaysia remain entirely outside the CGT scope for all categories of taxpayer, including companies and individuals.

How Are Foreign Capital Asset Gains Treated When Remitted to Malaysia?

For companies, LLPs, trusts, and co-operative societies, gains from disposing of capital assets situated outside Malaysia are not taxed at the time of disposal but become taxable in Malaysia when the gains are received (remitted) into Malaysia. The applicable rate is the prevailing income tax rate -- up to 24% for standard companies, not the flat 10% CGT rate that applies to Malaysian unlisted-share gains. A transitional Economic Substance Requirements (ESR) exemption was introduced for the period 1 January 2024 to 31 December 2026, with a proposed extension to 2030. To qualify for the ESR relief, the Malaysian entity must maintain an adequate number of employees in Malaysia, incur sufficient operating expenditure locally, and conduct key management and control activities from Malaysia. Foreign-sourced gains that meet ESR conditions and are remitted during the exemption window are sheltered from tax. Gains remitted outside the ESR framework are fully taxable in the year of remittance. Individuals remain outside this framework on capital-asset disposals; any foreign income received by individual residents is assessed under the separate personal income-tax framework.

Determining which regime applies to a particular disposal -- CGT, RPGT, or ordinary income tax -- requires a fact-specific analysis of the asset type, the disposer's legal status, the acquisition date, and the remittance pattern. Consult a qualified tax professional registered with the Malaysian Institute of Accountants (MIA) or the Chartered Tax Institute of Malaysia (CTIM) for guidance specific to your circumstances.