The Income Tax (Exemption) (No. 2) Order [P.U.(A) 57/2024] (“Exemption No. 2 Order”) was gazetted on 23 February 2024. The Exemption No. 2 Order has effect from 1 January 2024 to 29 February 2024 (“Exemption Period”).
 
The Exemption No. 2 Order exempts companies, limited liability partnerships, trust bodies and co-operative societies from payment of capital gains tax on gains or profits received from the disposal of shares made during the Exemption Period under (“section 15C”) of the Income Tax Act 1967.
 
Section 15C, inter alia, imposes 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 company incorporated outside Malaysia that owns real property in Malaysia or shares in another controlled company or both, where the defined value of the real property in Malaysia or the shares of the other controlled company, or both, is not less than 75% of the total tangible asset of the foreign incorporated controlled company.
 
The Exemption No. 2 Order does not apply to the disposal of shares made during the Exemption Period where gains or profits from the disposal of shares is chargeable as a business income under paragraph 4(a) of the Income Tax Act 1967.
 
Comments
 
The Government had on 29 December 2023 gazetted the Income Tax (Exemption) (No. 7) Order 2023 [P.U.(A) 410/2023] (“Exemption No. 7 Order”) which is effective for the period corresponding to the Exemption Period. The Exemption No. 7 Order, inter alia, exempts companies, limited liability partnerships, trust bodies and co-operative societies from payment of capital gains tax on gains or profits received from the disposal of shares of unlisted companies incorporated in Malaysia made on or after 1 January 2024 to 29 February 2024.
 
With the issuance of the Exemption No. 7 Order and the Exemption No. 2 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 and controlled companies incorporated outside Malaysia is 1 March 2024, in line with the original announcement in the Malaysian Budget 2024.
 
Our previous articles relating to the introduction of capital gains tax in Malaysia can be accessed here, here, here, and here.
 
 
Alert by Victoria Low (Associate) of the Tax Practice of Skrine.