Taxes on capital gains

1. Capital gains tax

Scope

Capital gains tax (CGT) is imposed on the gains from disposal of capital assets by companies, limited liability partnerships (LLP), co-operatives and trust bodies as follows:

a)   Capital asset situated in Malaysia

• Shares in unlisted companies incorporated in Malaysia**
• Shares in a foreign incorporated company deriving value (directly or indirectly) from real property in Malaysia**

^{** Exemption is given in the case of resident unit trust (which is not a Real Estate Investment Trust (REIT) or Property Trust Fund (PTF) listed on Bursa Malaysia) for disposals made on or after 1 January 2024 to 31 December 2028, where the gains are not treated as business income.}

However, subject to conditions, CGT exemption will be given for disposal of shares relating to:

• Initial Public Offering approved by Securities Commission (SC) or Bursa Malaysia, where applicable,
• Restructuring of shares within the same group,

for disposals made from 1 March 2024 to 31 December 2028, subject to approvals by the authorities.

It is also proposed that CGT exemption be given for disposal of shares relating to venture capital companies.

b) Gains from disposal of all types of capital assets situated outside Malaysia, remitted into Malaysia

Based on prevailing income tax rate of the taxpayer, for example:

• Companies, LLPs and trust bodies: 24%
• Co-operatives: 0% - 24% (scaled rates)

However, gains remitted into Malaysia from 1 January 2024 to 31 December 2026 (Budget 2026 proposed extension to 31 December 2030) are eligible for CGT exemption subject to meeting economic substance requirements.

c) Other events subject to CGT

Budget 2026 proposed, w.e.f. 1 January 2026, that the following events are specified as disposals for CGT purposes:

• Extinguishing of any rights due to the dissolution of or winding up of a company
• Conversion of shares
• Redemption of shares
• Other circumstances resulting from the cessation of share ownership

2. Real Property Gains Tax

Scope

Every person whether resident or not resident is chargeable to Real Property Gains Tax (RPGT) on gains arising from disposal of real property, including shares in a real property company (RPC). Real property is defined as any land situated in Malaysia and any interest, option or other right in or over such land.

RPC is a controlled company where its total tangible assets consist of 75% or more in real property and / or shares in another RPC. A controlled company is a company owned by not more than 50 members and controlled by not more than five persons. With the introduction of CGT (refer to Capital gains tax), the disposal of shares in an RPC by persons subject to CGT from 1 January 2024 will be subject to CGT instead of RPGT.

Disposal is generally triggered upon transfer of ownership from one person to another whether by way of sale, conveyance, assignment, settlement, alienation, etc.

RPGT rates

Returns and assessment

For each disposal, both the disposer and acquirer are required to submit RPGT returns respectively within 60 days from the date of disposal. Under the self-assessment system, the returns furnished will be deemed as assessments raised by the Director General of Inland Revenue (DGIR).

Date of disposal

The date of disposal is taken as the date of the written agreement of the disposal. In the absence of a written agreement, the date shall be taken as the earlier of full payment of the purchase consideration or the date when all things which are necessary for the transfer of ownership of the real property under any written law has been done. Where the disposal is subject to approval from the Government or State Government, the date of disposal is the date of such approval or if the approval is conditional, the date when the last condition is satisfied.

Withholding by acquirer

Where the purchase consideration consists wholly or partly of cash, the acquirer is required to withhold the lower of:

(i) the entire cash consideration,

(ii) as proposed under Budget 2026, the amount based on the self-assessed RPGT payable (w.e.f. 1 January 2026), or

(iii) a percentage of the total acquisition price, depending on the profile of the disposer:

• 7% of the total acquisition price where the disposer is not a citizen and not a permanent resident, or an executor of estate of a deceased person who is not a citizen and not a permanent resident, or a company not incorporated in Malaysia;
• 5% of the total acquisition price where the disposer is a company incorporated in Malaysia, or a trustee of a trust, or a body of person registered under any written law in Malaysia and the disposal is made within three years of acquisition; or
• 3% of the total acquisition price in all other cases.

That amount, whether or not withheld by the acquirer, is to be remitted to the DGIR within 60 days from the date of disposal. The amount remitted to the DGIR is to be applied against the RPGT payable by the disposer.

Payment by disposer

The disposer is required to settle the balance of RPGT payable within 90 days from the date of disposal.

Exemptions

The following are some examples of exemptions from RPGT:

• an amount of RM10,000 or 10% of the chargeable gain, whichever is greater, accruing to an individual.
• gain accruing to an individual who is a citizen or a permanent resident in respect of the disposal of one private residence.
• disposal of assets in connection with securitisation of assets.
• disposal of assets to REITs and PTFs.

The following are some examples of transactions where the disposal price is deemed to be equal to its acquisition price:

• devolution of assets of a deceased individual.
• transfer of assets (owned by a citizen) between spouses.
• gifts made to the Government, State Government, local authority or approved charity.
• disposal of asset as a result of compulsory acquisition under any law.
• disposal of chargeable asset pursuant to a scheme of financing approved by Bank Negara Malaysia, Labuan Financial Services Authority, Malaysian Co-operative Societies Commission or the SC as a scheme which is in accordance with the principles of Syariah.

The following are some examples of transactions where the disposer is treated to have received no gain and suffered no loss:

• transfer of real property with prior approval of the DGIR by a company to companies in the same group to bring about greater efficiency in operation for a consideration consisting of not less than 75% in shares.
• transfer by way of gift between husband and wife, parent and child, or grandparent and grandchild, provided the donor is a citizen.
• transfer between former spouses pursuant to a court order in consequence of a dissolution / annulment of marriage, where the transferor is a citizen.