KUALA LUMPUR (Nov 7): The government is expected to generate an additional annual revenue of RM800 million through the implementation of a 10% capital gains tax (CGT), which will come into effect on March 1, 2024, according to the Ministry of Finance (MOF).

The revenue projection is based on the trend of share ownership transfers observed over the past few years, according to the ministry.

“CGT will only be imposed on the disposal of unlisted shares, including those of companies, limited liability partnerships, cooperatives and trusts, whether they are local or foreign entities holding shares in a company.

“For this purpose, relevant legislative amendments are being implemented, and guidelines will also be issued to provide clearer explanations regarding the implementation of the CGT,” MOF said in a written parliamentary response to Datuk Mohd Radzi Jidin (PN-Putrajaya) on Tuesday.

Radzi Jidin inquired whether the government had conducted a comprehensive study regarding the implications of implementing the new tax on unlisted shares, and proposed a timeline for the implementation, as well as a projection for increased revenue resulting from the capital gains tax.

MOF stated that since the capital gains tax was first proposed in Budget 2023, the ministry has conducted a series of studies and engagement sessions with stakeholders. 

The comprehensive study also compared the best practices of capital gains tax implementation in other countries, such as the United Kingdom (UK), Japan, India and Australia.

“The results of the study have been translated into a CGT implementation proposal paper that has been distributed to various associations and other stakeholders, to obtain official feedback.

“Among stakeholders providing feedback were the Malaysian International Chamber of Commerce and Industry (MICCI), The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), and the Malaysian Investment Banking Association (Miba),” the ministry said.

After considering the stakeholders’ views and feedback, the ministry believes that the initial step of implementing the capital gains tax, with a focus on the disposal of unlisted shares in local companies by taxpayers other than individuals, is appropriate.

MOF added that this step aligns with the direction of simplifying and improving aspects of tax administration, in addition to being one of the efforts to diversify the sources of national income.

“The government’s decision not to impose CGT on listed shares is also aimed at ensuring the continued growth of the capital market for existing listed companies, and maintaining investor confidence. This step will also enhance the competitiveness of the country’s capital market at the global level,” the ministry added.

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