Following the Finance (No. 2) Act 2023 that was gazetted on 29 December 2023, the Government has, on the same day, gazetted the Income Tax (Exemption) (No. 7) Order 2023 [P.U.(A) 410/2023] (“Exemption Order”). The Exemption Order will be in force from 1 January 2024 to 29 February 2024.
 
The Exemption Order specifies that companies, limited liability partnerships, trust bodies and co-operative societies are exempt from capital gains tax on gains or profits received from the disposal of shares of unlisted companies incorporated in Malaysia. The key condition for the exemption is that the disposal of shares must occur during the period from 1 January 2024 to 29 February 2024.
 
Importantly, the Exemption Order does not apply to the disposal of shares of unlisted companies incorporated in Malaysia where gains or profits are considered as business income under paragraph 4(a) of the Income Tax Act 1967.
 
Commentary
 
With the issuance of the Exemption Order, the effective commencement date for the imposition of capital gains tax on gains or profits received from the disposal of shares of unlisted companies incorporated in Malaysia is 1 March 2024, in line with the original announcement in the Malaysian Budget 2024.
 
However, it must be noted that the imposition of capital gains tax on gains or profits received by companies, limited liability partnerships, trust bodies and co-operative societies from the disposal of shares of a controlled company¹ incorporated outside Malaysia that owns real property in Malaysia or shares in another controlled company or both, will commence on 1 January 2024, in accordance with the provisions of the Finance (No. 2) Act 2023.
 
As there has not been any deferment of the commencement date of 1 January 2024 for the amendments that disapply the provisions of the Real Property Gains Tax Act 1976 to the disposal of shares in a real property company by companies, limited liability partnerships, trust bodies, and co-operative societies, it appears that such disposals during the period commencing from 1 January 2024 to 29 February 2024 will not be subject to real property gains tax or capital gains tax.
 
Our previous articles relating to the Malaysian Budget 2024 and capital gains tax can be accessed here and here respectively.
 
Alert by Victoria Low (Associate) of the Tax Practice of Skrine.
 

---