Capital Gains Tax (CGT)

Although commonly referred to as capital gains tax (CGT), gains from the disposal of capital assets are treated as ‘income’ and subject to income tax under the Income Tax Act 1967 (ITA 1967).

For this purpose, a new class of income described as ‘gains or profits from the disposal of capital asset’ was introduced under a new section 4(aa) of the ITA 1967.

Understanding the basics
Compliance obligations and exemptions Calculate your CGT

This site is a quick reference guide outlining information based on tax legislation as at 1 January 2025. This site is intended to provide a general guide to the capital gains tax and should not be regarded as a basis for determining capital gains tax liability in specific circumstances. No responsibility for loss to any person acting or refraining from acting as a result of any material on this site can be accepted by PwC. Users should not act on the basis of this information without seeking professional advice.

Understanding the basics

Who are the taxable persons?

Companies
Limited liability partnerships (LLPs)
Co-operatives

Trust bodies

(Individuals are excluded)

What are taxable capital assets?

Unlisted shares: Shares of unlisted companies incorporated in Malaysia

Section 15C shares: Shares of a foreign controlled company deriving value from real property in Malaysia under section 15C of the ITA 1967. See examples below

Foreign capital assets: Movable or immovable property situated outside Malaysia including any rights or interest thereof, such as shares of companies incorporated outside Malaysia, intellectual property, buildings and land, paintings, and so on

Where the gains or profits from the disposal of shares are revenue in nature, such gains or profits are treated as business income under section 4(a) of the ITA 1967 and are subject to tax at the prevailing income tax rate of the disposer.

How are shares defined?

Shares, in relation to a company, includes stock other than debenture stock.

What is the CGT tax rate?

Taxable assets

Unlisted shares and section 15C shares

Foreign capital assets

CGT rate

10% on net gain (chargeable income)

OR

2% on gross disposal price

(optional rate for shares acquired before 1 January 2024)

Prevailing income tax rate on gains received in Malaysia

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

Section 15C shares: Illustrative examples

Disposal of section 15C shares
The 75% threshold test

The gains from the disposal of shares of a controlled company incorporated outside Malaysia (‘Foreign Controlled Company’) shall be deemed to be derived from Malaysia if the Foreign Controlled Company derives value from real property in Malaysia pursuant to section 15C of the ITA 1967.

For illustration purposes, the scenarios under section 15C can be depicted as follows. Please note that permutations are non-exhaustive.

Foreign Controlled Company owns real property situated in Malaysia

Shares in a Foreign Controlled Company are in-scope shares for CGT purposes if the defined value (i.e., market value) of real property situated in Malaysia (including any right or interest thereof) owned is not less than 75% of the value of its total tangible assets (TTA) at the relevant date of acquisition.

Foreign Controlled Company owns shares in another controlled company (‘Another Controlled Company’)

Shares in a Foreign Controlled Company are in-scope shares for CGT purposes if the defined value of shares of Another Controlled Company owned by Foreign Controlled Company is not less than 75% of the value of Foreign Controlled Company’s TTA at the relevant date of acquisition.

“Another Controlled Company” means a controlled company which owns real property situated in Malaysia (including any right or interest thereof) or shares in another controlled company, or owns both, where the defined value of the real property or shares, or both, is not less than 75% of the value of its total tangible asset.

The assessments are based on the ‘defined value’ of shares or real property owned by the tested entities. ‘Defined value’ means ‘the market value of real property or the acquisition price of shares of another controlled company as determined under section 15C(4)’.

Foreign Controlled Company owns both real property situated in Malaysia and shares in Another Controlled Company

Shares in a Foreign Controlled Company are in-scope shares for CGT purposes if the defined value of real property situated in Malaysia and shares of Another Controlled Company owned by Foreign Controlled Company is not less than 75% of the value of Foreign Controlled Company’s TTA at the relevant date of acquisition.

“Another Controlled Company” means a controlled company which owns real property situated in Malaysia (including any right or interest thereof) or shares in another controlled company, or owns both, where the defined value of the real property or shares, or both, is not less than 75% of the value of its total tangible asset.

The assessments are based on the ‘defined value’ of shares or real property owned by the tested entities. ‘Defined value’ means ‘the market value of real property or the acquisition price of shares of another controlled company as determined under section 15C(4)’.

Foreign Controlled Company was a real property company under the Real Property Gains Tax Act 1976

If the disposer is disposing shares owned prior to 1 January 2024 and the shares were shares in a real property company (RPC) under the Real Property Gains Tax Act 1976 (RPGT Act), the disposal of such shares are subject to CGT and the acquisition date and acquisition price of those RPC shares based on RPGT Act will be adopted for CGT purposes.

The example below illustrates the timing to perform the 75% threshold test based on the CGT Guideline issued by the Inland Revenue Board of Malaysia. Here are the scenario and key facts around the disposer, Sweetgo.

Acquisition of real property or shares in another controlled company by Sweetgo (relevant company)	Date of acquisition / revaluation	Market value of asset acquired / revalued (RM)	TTA (RM)
Land in Kulim	1.4.2024	4.3 million	4.5 million
	Revalued in 2025	6.1 million	8 million
	1.6.2026	7 million	13 million
Shares of Giant Panda*	1.6.2026	4.5 million	13 million

_{* At the date of acquisition of shares of Giant Panda by Sweetgo, the defined value (i.e. market value) of real property situated in Malaysia owned by Giant Panda exceeded 75% of the Giant Panda’s TTA.}

Determination of section 15C shares status of Sweetgo

On 1.4.2024 (Acquisition of land)	The defined value of real property owned is less than 75% of its TTA [4.3 million ÷ 7.5 million ⨉ 100% = 57.33%] Shares of Sweetgo are not section 15C shares
2025 (Revaluation of land)	Determination of section 15C status is irrelevant as there was no acquisition of real property or shares of another controlled company
On 1.6.2026 (Acquisition of shares)	The defined value of real property and shares of another controlled company owned is more than 75% of its TTA [(7 million + 4.5 million) ÷ 13 million ⨉ 100% = 88.46%] Shares of Sweetgo are section 15C shares

CGT returns are to be filed as follows:

Taxable assets	Unlisted shares and section 15C shares	Foreign capital assets
Disposed between 1 January 2024 to 29 February 2024	CGT return is not required	Foreign capital gains are to be declared in the annual income tax return form of the respective chargeable person. For companies, this will be the Form e-C
Disposed on 1 March 2024 or later	CGT return (e-CKM Form) is to be filed electronically and CGT is to be paid within 60 days from the date of each disposal

Gains arising from disposal of foreign capital assets received into Malaysia are eligible for exemption if economic substance requirements (ESR) are met.

Economic substance requirements

Key conditions

The key conditions to be met by the disposer to qualify for exemption are:

employ adequate number of employees with necessary qualifications to carry out the specified economic activities in Malaysia; and
incur adequate amount of operating expenditure for carrying out the specified economic activities in Malaysia.

What if the prescribed adequacy thresholds are not met?

In the absence of prescribed adequacy thresholds, the IRB has stated in the Guideline for CGT on Foreign Capital Assets that factors which will be considered for each taxpayer are:

number of employees, considering the capital or labour intensity requirements of the business
whether the employee works full-time or part-time
whether office premises have been used or is sufficient for the activity.

Outsourcing impact on ESR

Specified economic activities of a taxpayer which are outsourced will be taken into account for ESR adequacy purposes. Key conditions to observe include:

activities are to be carried out in Malaysia
the taxpayer implements sufficient monitoring and control
the outsourcing entity is generally expected to charge an arm’s length price for performance of the functions
the number of employee and operating expenses incurred by the outsourcing entity is equivalent to the level of specified economic activity and there is no double counting if the outsourcing entity provides services to more than one person.

Examples:

Manufacturing business

A manufacturing company in Malaysia which the IRB considers to have adequate ESR is one which hires 150 employees and incurs operating expenditure of RM1 million

Investment holding company

A resident investment holding company, which does not employ any employee, could meet the ESR adequacy tests when it outsources its investment and asset management activities.

Businesses which require certainty especially in a self-assessment environment can consider approaching the IRB for a confirmation on its compliance with the ESR conditions prior to filing their tax return.

Calculating your CGT

Use our interactive calculator to estimate your CGT for year of assessment (YA) 2024

Which taxable person are you?

Estimated CGT based on the information provided

Disposal price

RM

Less: Acquisition price

RM

Estimated gain / (loss)

RM

_{Note: The above calculation is for illustrative purposes only. In determining the gains from the disposal of foreign capital assets that are chargeable to tax, expenses wholly and exclusively incurred for the acquisition and disposal of capital assets are allowed under section 65E(2) ITA 1967. For example, legal fees, appraiser fees, advertising, and expenses to increase or maintain capital value.}

How we've worked this out

Disposal price

RM

Tax rate

RM

CGT payable

RM

Estimated CGT based on the information provided

Consideration value for disposal

RM

Less: Expenditure incurred for enhancing / preserving the value of defending the title or rights over the assets

RM

Less: Incidental costs on disposal

RM

Disposal price

RM

Consideration value for acquisition

RM

Add: Incidental costs on acquisition

RM

Acquisition price

RM

Estimated chargeable gain / (capital loss)

RM

Tax rate

CGT payable

RM

_{Disclaimer:

This CGT calculator does not constitute legal, accounting or other professional advice. It is intended only as a general illustrative guide and is neither a definitive nor exhaustive analysis / discussion of the law nor a substitute for professional advice.

Users should discuss with professional advisers how the information may apply to their specific situations.

PwC does not collect or store any information entered into the CGT calculator. All of the entered data appears only on the user's end and is automatically deleted once the calculator is closed. Unauthorised reproduction is expressly prohibited.}

Taxable events

A taxable event is triggered upon:

Disposal of the following capital assets
- unlisted shares of a company incorporated in Malaysia
- section 15C shares
The gains from the disposal of foreign capital assets are received in Malaysia

Meaning of ‘disposal'

‘Disposal’ means to sell, convey, transfer, assign, settle or alienate whether by agreement or by force of law and includes a reduction of share capital and purchase by a company of its own shares.

Meaning of ‘received in Malaysia’

‘Received in Malaysia’ means transferred or brought into Malaysia whether in the form of cash or through electronic funds transfer, or both.

Disposal date

Generally, the date of disposal is determined as follows:

Where there is a written agreement for the disposal, the date of such agreement.
Where there is no written agreement, the date of completion of the disposal which is the earlier of the following dates:
- transfer of ownership; or
- receipt of full consideration by the disposer

Conditional contracts

Where the disposal or acquisition is subject to approval from the government or a state government, the disposal or acquisition date will be the date of such approval, or where the approval is subject to conditions, the date of the last of all such conditions being satisfied.

Market value of capital asset

Under certain circumstances, the consideration for acquisition or disposal shall be equal to the market value of the capital asset. These circumstances include:

disposals not at arm's length,
disposals by way of gift,
disposals wholly or partly for a consideration that cannot be valued,
disposals between connected persons,
assets taken into trading stock.

Valuation of shares

The CGT Guideline provides that the net tangible assets (NTA) based on the financial statements of the company is an acceptable valuation method in determining the market value of shares.

How can we help you?

As the pace and complexity of tax laws continue to increase, professional advice is essential. Let our experienced professionals manage your compliance matters while you grow your business.

Get in touch with us