Individuals

1. Dividend Income taxable for individuals.

Current System ( till year of assessment (Y/A)2024):

Single-Tier Tax System: Companies pay tax on their profits once, and shareholders don’t pay tax on the dividends they receive.

Effective From 1^st January 2025,

The government imposes a tax on dividend income (DI) of individuals (DI as in para 4(c) of the Income tax Act 1967). DI of more than RM 100,000 will be taxed at 2%. DI received by an individual below or up to RM100,000 per year of assessment (Y/A) is exempted from tax.

Residents and non-resident individuals (including individuals holding shares through nominees) will be subject to the 2% tax on DI distributed by companies in Malaysia. 

However, certain DI is exempted from tax. The list is below:-

1. Dividend income (DI) from outside Malaysia is exempted until 2026. (extended till 2036 for individuals)
2. DI from profits of Pioneer Status Companies and Reinvestment allowance.
3. DI from profits of shipping companies.
4. DI distributed by cooperatives.
5. DI distributed by closed-end funds.
6. DI from domestic companies paid from dividends of Labuan entities.
7. Profit distributed by EPF, KWAP, LTAT, ASNB, or unit trusts.
8. Any exemption granted on DI in the hands of individuals as determined by the Minister of Finance. 

DI tax does not apply to corporate shareholders. No tax credit on DI tax is available for individual shareholders to claim as a deduction. An individual shall report and compute the tax on the dividend income received or credited in his respective tax return forms in the relevant Y/A. Companies receiving exempt dividends can pass them on to their shareholders without additional tax and they will continue to benefit from the single-tier tax system. In contrast, individual shareholders earning above RM100,000 in dividend income will be subject to 2% tax.

2. Expansion of the scope of tax relief for health screening for self, spouse, and children of up to RM1,000. (Full details of reliefs can be found in Public Ruling No. 6/2023 dated 20 November 2023 para 6.7 page 17 onwards.) 

Currently include costs of complete medical examination, fees for COVID-19 detection tests at clinics & hospitals including the purchase of self-test kits, and mental health screening and consultations will be expanded to include, the fee for disease detection tests and the cost of self-diagnostic medical devices registered under the Medical Device Act 2012.

Para 46(1) (h) & 46(1) (g)- RM 1,000 limited subject to RM 10,000 maximum claims.

(Effective from Y/A 2025.)

3. Increase tax relief for children with learning disabilities (Para 46(1) (ha) of ITA 1967)

Currently, up to a maximum of RM 4,000 and with effect from  (WEF) Y/A 2025 deductible up to a maximum of RM6,000 subject to restriction of RM 10,000 under para 46(1) (g) of ITA 1967.

4. Extension of tax relief period for National Education Savings Scheme (SSPN) (Para. 46(1)(k))

Currently, the net deposited amount of RM8,000 is deductible and effective until Y/A 2024, now extended to Y/A 2027 but with the following new conditions: 

1. Either parent can claim regardless of the number of children. Separate assessment is limited to either one parent can claim on net deposited amount, subject to a maximum of RM8,000. If for joint-assessment to a maximum of RM8,000 of net deposits. Divorced parents can claim up to a max of RM8.000 for each.
2. Net deposited amount deductible (NDAD) remained at a maximum of RM 8,000.
3. Computed NDAD should exclude withdrawals to finance tertiary education.

5. Expansion of scope for health care & elderly care and lifestyle/sports. (Para. 46(1)(c) & 46(1)(u))

Currently, Medical expenses for parents (Para. 46(1)(c)) of up to RM 8,000 are limited for:

1. Medical treatment, special needs & carer services (MTSNACS)
2. Dental treatment
3. Full medical examination (FME) limited to RM1,000

WEF Y/A 2025, MTSNACS is expanded to include grandparents & FME includes vaccination.

And, currently, the scope of relief for sports equipment & activities (SEAA) is for self, spouse & children, but WEF Y/A 2025 expanded to include SEAA for parents. (Para. 46(1)(u) of ITA 1967.)

6. Extension of tax relief period for kindergarten/Childcare fees

Presently, the relief for kindergarten/Childcare fees is until Y/A 2024 and is extended to 2027.

7. Increase tax reliefs for persons with disabilities. (Para. 45A(1)/46(1)(e)/47(1)(b)/48(2)(b) of ITA 1967.)

Disabled individual from RM6,000 to RM7,000.
Disabled spouse from RM5,000 to RM6,000.
Disabled children from RM6,000 to RM8,000
(WEF Y/A 2025)

8. Tax relief (TR) for the cost of food waste composting machines (FWCM) for domestic use. (Para. 46(1)(v) of ITA 1967.)

TR for FWCM can be claimed once every 3 years, i.e. from Y/A 2025 to 2027. The relief is restricted to RM2,500 including claims for electric vehicle charging facilities.

9. Tax relief (TR) for interest payments on loans for first residential property. ( Section 46C of ITA 1967.)

1. up to RM500,000 will be eligible for RM7,000; and
2. above RM 500,000 to RM750,000 for RM5,000.

TR on interest payments on loans to finance the purchase of the first residential property prices of:

Applicable for Sale & Purchase agreement executed between 01/01/2025 and 31/12/2027.

10. Increase in Tax relief for Education & Medical Insurance. (Section 49(1B) of the ITA 1967.)

Presently deductible up to a maximum of RM3,000 and w.e.f Y/A 2025 up to 4,000.

11. Extension of tax relief period on contribution to private retirement schemes and deferred annuities. (Section 49(1D) of the ITA 1967.)

The tax relief of RM3,000 is further extended to Y/A 2030.

Tax Administration amendments

1. Currently Tax identification number (TIN) access is limited to registered taxpayers only, but as from 01/01/2025 TIN will be enabled to be accessed by other than taxpayers. However, abuse of TIN information will be subject to a fine of up to RM4,000 or imprisonment not exceeding 1 year or both.
2. The amended tax return forms (ATRF) must be submitted online only for companies, limited partnerships, trust bodies, and cooperative societies. From Y/A 2025, all taxpayers must submit all ATRF online.
3. Amendment of tax estimates issued by the DG be allowed before the 11^th month of the financial year from the current practice before the 9^th month. (section 107C(8) of the ITA.)
4. Currently, a fine is imposed of not less than RM20,000 and not more than RM100,000 if prosecuted for incorrect returns (FATCA), information returns (CSR), or reports (CbCR) & incorrect information on AEOI or CbCR. Proposed that if there is no prosecution, IRB will impose a penalty of the same range as mentioned above & the penalty can be recoverable as part of the tax payable WEF Y/A 2025.

FATCA & CRS apply to financial institutions.
Foreign Account Tax Compliance Act 2010 (FATCA) is intended to capture the United States (U.S.) person’s account information and report to the U.S. Internal Revenue Service (IRS) that may be investing and earning income through non-U.S. institutions. Similar to FATCA, Common Reporting Standard (CRS) is a global standard introduced by the Organisation for Economic Co-operation and Development (OECD) for the automatic exchange of financial information between jurisdictions that have agreed to participate.

Country-by-Country Reporting (CbCR) to facilitate the implementation of global minimum tax (GMT) w.e.f 01.01.2025.

“The Malaysian Income Tax (Country-by-Country Reporting) Rules 2016 (The Rules) P.U.(A) 357/2016 were gazette on 23 December 2016. The Rules apply to Multinational headquartered in Malaysia, having a total group revenue of more than RM3 billion in the year 2016 in which they are required to furnish their aggregate tax jurisdiction-wide information relating to the global allocation of the income, taxes paid and certain indicators of the location of economic activity among tax jurisdictions in which the multinational company group operates. The information to be furnished is about the financial information of 2017 onwards.

The Ultimate Holding entity of the multinational company group headquartered here is responsible for preparing and filing the CbCR to IRBM within one year from the end of their financial year.

Malaysian taxpayers who is a part of the multinational company group that is supposed to prepare CbCR in another country, will need to notify us (IRB) of their reporting entity and its residency, before the end of their financial year.”

( Extracts from IRB website & -full details can be referred to the site https://www.hasil.gov.my/en/international/automatic-exchange-of-information-aeoi/country-by-country-reporting-cbcr/country-by-country-reporting/)

E-Invoice & Appeal

1. Amendment to Subsection 82C(8) ITA and 34B(7) Petroleum (IT) ACT 1967.

Correction Period for errors & mistakes in issuing of e-invoice from 3 days to 72 hours.

2. Amendment to para 12 of Sch. 5 of ITA and para 10 of Sch. 3 of the Petroleum (IT) ACT 1967.

Appeal in Form Q (i.e. amendment to grounds of appeal) are allowed within 6 months from the date of filing Form Q with the special commissioners of income tax (SCIT)

Real Property Gains Tax Act 1976 (RPGT)

Self-Assessment requirements & others

1. At present, in a Y/A, total losses and gains from the disposal of properties are available for setoff to determine the final tax liabilities. Unabsorbed losses are then available to carry forward to the subsequent Y/A.
   From the Y/A of assessment 2025, each disposal shall be treated and taxed separately and losses can only be claimed against subsequent disposals in the same assessment year. Any unabsorbed losses can be carried forward to the following year and set off sequentially.

2.  Implementation of the Self-Assessment system from 01.01.2025.

1. Mandatory submission of CKHT forms for disposer & acquirer online.
2. Mandatory notice of non-taxability to RPGT or exemption from payment of tax online. (Form CKHT3.)
3. Election form for private residence exemption to be filed online.
4. Certificate on the non-chargeability will be deemed to have been issued by IRB to the disposer upon online submission of returns.
5. The payment period for deemed assessment is extended from 60 days to 90 days from the date of disposal. A 10% penalty may be imposed for late payments beyond the specified period.

3. Failure to submit returns & other offenses
   Courts to issue further orders for taxpayers on conviction for failure to submit returns by individuals & nominees. Failure to file returns of assets transfer to the company’s trading stocks or not complying with notice to produce information/documents required by the Director General of IRB under Section 27/28(3) of the RPGT Act 1976.

Tax Incentives

1. Extension of exemption of foreign-source income of individuals to 31^st December 2036.
   Presently, tax-resident individuals are exempt from tax for all foreign-sourced income received (FSIR) in Malaysia. The initial exemption is subject to specific conditions from 1^st January 2022 to 31^st December 2026. With the existing conditions kept, FSIR is exempted for another 10 years to 31^st December 2036.

2. Accelerated Capital Allowance for implementation of E-Invoice.
   Purchase of ICT equipment & computer software package including consultation, licensing and incidental fees related to customized computer software development are allowed to claim initial and annual allowance of 20% and 40% respectively. Not applicable to taxpayers granted concession in e-invoicing implementation. WEF 1^st January 2025.

3. Tax incentive for hiring women returning to work.
   An additional tax deduction of 50% on employment expenses in determining adjusted income with the employee must be employed for at least 12 months and after being unemployed for a minimum of 2 years. WEF for application to Talent Corporation Malaysia Bhd between 01.01.2025 and 31.12.2027.

4. Employer providing paid leave for carer. (New)
   Care for sick/disabled family members of employees for leave benefits up to 12 months of employment, an employer can claim an additional tax deduction of 50% of employment expenses. WEF for application to Talent Corporation Malaysia Bhd between 01.01.2025 and 31.12.2027.

5. Extension period for contribution / sponsorship of smart artificial intelligence driven reverse vending machine (RVM).
   Currently, applications for all contributions/sponsorships are certified by the Ministry of Natural Resources, Environment, and Climate Change. The approval of applications to the Minister of Finance (MOF) must be submitted between 01/04/2023 and 31/12/2024.

For YA 2025 onwards, the application period to MOF is extended from 01/01/2025 to 31/12/2026. The approval threshold relating to Paragraph 34(6)(h) of ITA 1967 is subject to new amendments effective 1/4/2025. The approved contributions are eligible for deduction equivalent to expenses incurred subject to Paragraph 34(6)(h) of ITA 1967.  WEF: 1 January 2025 – 31 December 2026

6. Tax exemption on sports prize rewards (new)

Full tax exemption on special rewards for sports victories:

1. Received by individual athletes or teams; and
2. Rewards granted under Sports Victory Reward Scheme (SHAKAM)  managed by National Sports Council

Details of exemption will be specified in subsidiary legislation
WEF: 1 January 2024.

7.  Allowance for elderly care benefits for parents / grandparents of employees

 Current 

• Income Tax Rules (Deduction for the Provision of Childcare Centres) 2013
  [P.U(A) 15/2013]

• Employers are allowed the following additional deductions:

1. Expenses for provision and maintenance of childcare centers; and
2. Expenses related to childcare allowances for individuals employed by them in the business.

 Proposal WEF from 1^st Jan 2025 allowances above be extended to parental / grandparent care.

8. Elderly care benefits (parents / grandparents) enjoyed by individuals

Current

• Exemption for employees regarding childcare allowance benefits or payments must not exceed RM3,000 per year.
• Income Tax (Exemption) Order 2009(Amendment) 2023 [P.U. (A) 399/2023]
• Income Tax (Exemption) Order 2009 [P.U. (A) 152/2009]

Proposal for Individual income tax exemption for childcare allowances extended to elderly care allowances (parents & grandparents)

• Deduction limit remains capped at RM3,000.
  (WEF from 1^st Jan 2025)

9.  Structured training program

Current

Approved training programs:

1. Malaysian Skills Certificate (Levels 1 to 3)
2. Malaysian Skills Diploma (Level 4)
3. Malaysian Advanced Skills Diploma (Level 5)
   These are courses recognized by the Malaysian Qualifications Agency (MQA) or the Department of Skills Development (JPK). The scope of training programs is expanded to include structured training conducted by Industry Regulatory Bodies WEF from 1^st January 2025.

10.    Tax deduction on cost of developing new courses at private higher education institutions.

To date, the total expenditures towards developing new courses at private higher education institutions (IPTS) are allowed as a prorated deduction over 3 years. New courses must be certified by the Ministry of Higher Education to be eligible for deductions. The scope of eligibility widens for full deduction granted in the current YA for developing new courses at private higher education institutions (IPTS).

New courses include:

• Digital Technology
• Artificial Intelligence (AI)
• Robotics
• Internet of Things (IoT)
• Cybersecurity
• Data Science
• Fintech
• Biotechnology and Sustainable Technology

Wef: YA 2025 – YA 2030

11. Islamic financial activities under labuan international business and financial centre

Expanding the scope of eligible activities.

Qualified Activities

Takaful and Re-takaful Businesses Complying with Shariah Principles:

1. Risk arrangements; or
2. Product development

Takaful and Re-takaful businesses complying with Shariah principles where the takaful participants are: Related companies or associates; or As approved by the Labuan Financial Services Authority (LFSA):

1. Risk arrangements; or
2. Product development

Providing underwriting services, including administration related to Labuan takaful business.

Providing management or administrative services related to Labuan takaful business.

Providing services to:

1. Arranging Labuan takaful and re-takaful businesses; or
2. Conducting financial analysis

Exemption period: YA 2025 to YA 2028

12.    Islamic financial activities under labuan international business and financial centre

Existing exemptions

Tax exemption on any income derived from and eligible activity for the assessment years 2024 to 2028. Eligible entities and activities: Refer to the schedule in P.U.(A)127/2024:

• Labuan Bank, Labuan Investment Bank, Labuan Islamic Bank, or Labuan Islamic Investment Bank 
• Labuan Leasing Company or Labuan Islamic Leasing Company
• Labuan Fund Manager
• Labuan International Financial Exchange

Scope extended to:

Labuan trading entities carrying in Labuan takaful business activities and technology-based Labuan takaful-related activities:

• Labuan insurer, Labuan reinsurer, Labuan takaful, operator, and Labuan retakaful operator
• Labuan captive insurer or Labuan captive takaful operator
• Labuan underwriting manager or Labuan takaful underwriting manager
• Labuan insurance manager or Labuan takaful manager
• Labuan insurance broker or Labuan takaful broker

Exemption period: YA 2025 until YA 2028

13. Smart logistics complex (slc)

Currently

Incentives for Integrated Logistic Services (ILS):

1. Pioneer status, which grants a 70% tax exemption on statutory income for a period of 5 years; or
2. Investment tax allowance of 60% on eligible capital expenditure incurred within 5 years.

✓ Allowance can be offset against up to 70% of statutory income from the business for each year of assessment.

From Y/A 2025 onwards expended scope of tax incentives is extended to Smart Logistics Complex (SLC) – SLC Investor and Operator, and SLC Operator.

On Eligible logistics services:

1. Regional distribution center
2. Integrated logistics services
3. Storage of hazardous goods
4. Cold chain logistics

Investment tax allowance (ITA) of 60% on eligible capital expenditure incurred within 5 years.
✓ Allowance can be offset against up to 70% of statutory income from the business for each year of assessment.

Wef: Application received by MIDA from 1 Jan 2025 – 31 Dec 2027

14. Flexible work arrangements

Currently Double deduction on expenses allowed for employers
✓ Under Income Tax Rules (Deduction for Costs of Implementing Flexible Work Arrangements) 2021 [P.U.(A) 377/2021].
Eligible for applications submitted to Talent Corporation Malaysia Berhad on or after 1 July 2020 but no later than 31 December 2022

From Y/A 2025, additional tax deduction of 50% on eligible expenses for:

• capacity development (training) for flexible work arrangements
• employee training costs
• software acquisition costs

Total expenses must not exceed RM500,000.
✓ one-off basis
✓ must be certified by Talent Corporation Malaysia Berhad.

Wef: Applications received by TalentCorp from 1January 2025 until 31 December 2027.

15. Expansion of the scope of tax incentive for increased exports

Currently, exemption of up to 70% of statutory income equivalent to 50% of increase in export value. Selected service activities include legal, accounting, architecture, marketing, and others.
From 1^st January 2025 the scope of tax incentives for export growth includes Integrated Circuit (IC) Design services

Wef: 1 January 2025

16.  Financing agreements through initial exchange offering (ieo) platform (new)

100% stamp duty exemption
✓ Loan or financing agreements
➢ executed by MSMEs, and investors
➢ through the IEO platforms registered with Securities Commission Malaysia

Wef: For loan or financing agreements executed from 1 January 2025 until 31 December 2026.

17. Stamp duty exemption on loan or financing agreements for micro financing scheme (spm)

• Loan/financing agreement instruments under the Micro Financing Scheme (SPM) approved by the National SME Development Council.
• Financing amount eligible for exemption capped at RM50,000.
• Instruments executed on or after 1 January 2022
• From 1 January 2025 financing instruments executed for amount eligible for exemption increased to RM100,000.

18. Para. 34(6)(h) & 34(6) (ha) of ITA 1967: approval of contribution

Current

Deductions for the following contributions:

1. Provision of services, public facilities, and contributions to charitable and community projects [Paragraph 34(6)(h)]
2. Provision of business-related infrastructure services for the public [Paragraph 34(6) (ha)].
   Projects and contributions sum must obtain the Minister’s approval

WEF 1^St April 2025,

              Contribution Amount                 Project Approval                                             Contribution Approval

              RM300,000 and below               Relevant Government Authority (RGA)

              Exceeding RM300,000                Ministry of Finance (MOF)                                               RGA

Capital Gains Tax (Under the Income tax Act 1967 as amended)

1. “Capital asset” is defined to mean movable or immovable property including any rights or interests thereof. (Please refer to appendix A)

For the purposes of CGT, “shares” mean all or any of the following:

1. stock and shares in a company;
2. loan stock and debentures issued by a company or any other corporate body incorporated in Malaysia;
3. a member’s interest in a company not limited by shares whether or not it has a share capital;
4. any option or other right in, over or relating to shares as defined in paragraphs (a) to (c).

CGT is applicable to the Company, limited liability partnership, trust body or co-operative society (CLLPTBOCS) and the scope  is at the moment limited to the:

1. disposal of shares in unlisted companies incorporated in Malaysia, 
2. shares of a controlled company incorporated outside Malaysia (“Foreign Company”) that owns real property in Malaysia or shares of another controlled company or both, (Section 15C of ITA)
3. disposal of all types of capital assets situated outside Malaysia (not only shares- refer to the definition of “Capital asset” above & Appendix C.)

Individuals are not subject to CGT but would continue to be subject to the provisions of the RPGTA for disposal of real property (DORP) or shares in RPC (real property company), and CLLPTBOCS are subject to RPGTA for DORP.

2. Determining RPC shares date of acquisition for CGT computation during disposal on 1^st January 2025 onwards.

Subsection 15C(2A) and subsection 15C(4A) determination of the date and acquisition price of real property company (RPC) shares under paragraph 34A, schedule 2 of the real property gains tax act (RPGT 1976)

Proposed

Clarification on the application of the date and acquisition price of shares under paragraph 34A, Schedule 2 of the RPGTA 1976 before January 1, 2024 under ITA 1967.  Wef: 1 January 2025
Extracts of the example provided by IRB as illustration 1 below.

3. Subsection 15c (2): determination of relevant company status

Effective from 1^st January 2025,

To clarify the status of non-relevant company when: 

• Defined value (DV) is < 75% of total tangible assets (TTA) after the disposal of real property or shares in another controlled company or both by the relevant company; and
• The Date the company becomes non-relevant company is the date of the disposal

4.  Subsection 15C(3) determination of the acquisition date of the relevant company shares

Share is deemed as share of a relevant company when:
The defined value of real property or shares in another controlled company, or both, is ≥ 75% of the total tangible assets of the relevant company as stipulated under subsection 15C(2).

WEF: 1 January 2025.  

The Controlled company becomes the Relevant Company when, the defined value compared to the total tangible assets becomes ≥ 75% when there is an acquisition (subsequent/additional) of real property or shares or both in another controlled company, by the controlled company
❑ The acquisition date of the shares is defined as the date the controlled company becomes a relevant company.
❑ Applicable to the existing shareholders of the controlled companies

5. SUBSECTION 15C(4) Determination of acquisition price of relevant company shares

Current
Acquisition price is determined:
✓ On the date when the defined value of the relevant company is ≥ 75% of the total tangible assets; or
✓ On the acquisition date of shares of the relevant company from 1^st January 2025, existing shares in the controlled company are deemed to be shares of a relevant company based on the new amendment in subsection 15C(3). The acquisition price of the shares is determined based on the formula in paragraph 15C(4)(a).

6. Subsection 15C(5): new definition of “another controlled company” under section 15c Proviso under Paragraph 15C(2)(b):

The defined value of real property in Malaysia held by another controlled company is ≥ 75% compared to the total tangible assets.

Definition of another controlled company is:
“a controlled company that holds real property in Malaysia or shares in another controlled company, or both, where the defined value is ≥ 75% compared to the total tangible assets.”

1/2024

Appendix A

Extracts of Section 4 of the Income tax Act 1967 (ITA).

4. Subject to this Act, the income upon which tax is chargeable under this Act is income in respect of— 

(a) gains or profits from a business, for whatever period of time carried on;
(aa) gains or profits from the disposal of capital asset; (budget 2024)
 (b) gains or profits from an employment;
 (c) dividends, interest or discounts; 
(d) rents, royalties or premiums; 
(e) pensions, annuities or other periodical payments not falling under any of the foregoing paragraphs; 
(f) gains or profits not falling under any of the foregoing paragraphs.

Capital Asset is defined under amended section 2 of the ITA

Amendment of section 2 (budget 2024)

2. The Income Tax Act 1967 [Act 53], which is referred to as the “principal Act” in this Act, is amended in subsection 2(1) by substituting for the definition of “capital asset” the following definition:
    “capital asset” means—

(a) movable or immovable property situated outside Malaysia including any rights or interests thereof;
or
(b) movable property situated in Malaysia which is a share of a company incorporated in Malaysia not listed on the stock exchange (including any rights or interests thereof) owned by a company, limited liability partnership, trust body or co-operative society;’.

Appendix B

New section 15C (budget 2024 & amendment in Budget 2025)

8. The principal Act is amended by inserting after section 15b the following section:

“Derivation of gains or profits from the disposal of capital assets deriving value from real property in Malaysia

15C. (1) Subject to subsection (2), gains or profits accruing to a company, limited liability partnership, trust body or co-operative society in a year of assessment on the disposal of capital asset which is a share of a controlled company (hereinafter referred to as the “relevant company”) incorporated outside Malaysia shall be deemed to be derived from Malaysia where the relevant company owns real property situated in Malaysia or shares of another controlled company or both.

(2) Subsection (1) shall apply where at the date of acquisition of the shares of the relevant company—

(a) the defined value of the real property situated in Malaysia (including any right or interest thereof) owned by the relevant company is not less than seventy-five per cent of the value of its total tangible asset;

(b) the defined value of shares of another controlled company owned by the relevant company is not less than seventy-five per cent of the value of its total tangible asset:

Provided that the defined value of the real property situated in Malaysia (including any right or interest thereof) owned by another controlled company, is not less than seventy-five per cent of the value of its total tangible asset; or 

(c) the defined value of real property situated in Malaysia and shares of another controlled company referred to in paragraphs (a) and (b) owned by the relevant company is not less than seventy-five per cent of the value of its total tangible asset:

Provided that subsection (1) shall continue to apply notwithstanding that at the time of disposal of shares of the relevant company the defined value referred to in paragraph (a), (b) or (c) is less than seventy-five per cent of the value of its total tangible asset.

(3) The shares of the relevant company in this section shall be deemed to be acquired— 

(a) on the date the defined value of real property or shares or both owned by the relevant company is in accordance with subsection (2); or

(b) on the date of acquisition of the shares of the relevant company.

(4) For the purposes of this section, the acquisition price of shares of the relevant company shall—

(a) where paragraph (3)(a) applies, be deemed to be equal to a sum determined in accordance with the formula:

Where,           A x C /B

A is the number of shares of the relevant company referred to in subsection (1);

B is the total number of issued shares in the relevant company at the date of acquisition of the shares of the relevant company referred to in subsection (1); and 

C is the defined value of the real property or shares or both owned by the relevant company at the date of acquisition of the shares of the relevant company referred to in subsection (1);

(b) where paragraph (3)(b) applies, be determined in accordance with paragraph 65E(2)(b) or subsection 65E(8).

(5) For the purposes of this section—

“defined value” means the market value of real property or the acquisition price of shares of another controlled company as determined under subsection (4);

“value of its total tangible assets” means the aggregate of the defined value of real property (including any right or interest thereof) or shares of another controlled company or both and the value of other tangible assets.”.

Amendment of section 15C (budget 2025)

3. Section 15c of the principal Act is amended— 

(a) in subsection (1), by substituting for the word “person” the words “company, limited liability partnership, trust body or co-operative society”; and
(b) in subsection (5), in the definition of “defined value”, by substituting for the words “subsection (2)” the words “subsection (4)

Appendix C (IRB Guideline issued on 27 MARCH 2024)  

TAX TREATMENT ON GAINS FROM THE DISPOSAL OF FOREIGN CAPITAL ASSETS RECEIVED FROM OUTSIDE MALAYSIA. 

6.3 Examples of foreign capital assets situated outside Malaysia are as follows: 

(a) Immovable property that are physically situated outside Malaysia such as buildings and land; 

(b) Movable property that are physically situated outside Malaysia such as machinery, vehicle, fixtures, fitting, painting and plant; 

(c) Intellectual property rights situated outside Malaysia owned by the owner or licensee of the right who is a resident in Malaysia such as copyright, patent, research and development, computer software and trademark; 

(d) Shares issued by a company incorporated outside Malaysia that are not subject to any provisions under the ITA. 

6.4 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 can be allowed under paragraph 65E(2) ITA. For example, legal fees, appraiser fees, advertising, and expenses to increase or maintain capital value.

Subsection 65E(8) of ITA deeming provision at market value for following types of transactions where,
“the consideration for the acquisition or disposal of a capital asset shall be deemed to be equal to the market value of the capital asset at the time of the disposal” 

1. by way of gifts not at arm’s length;
2. for wholly or partly for a consideration that cannot be valued;
3. in full or part satisfaction of any debt due to the creditors;
4. in a transaction for the transfer of a business for a lump sum consideration ;or
5. in a transaction between connected persons.

 (applicable to all types of capital assets)

Transactions not at arm’s length: If a company, limited liability partnership, trust, or co-op

a) buys or sells an asset without a fair market price negotiation (e.g., a gift), the tax authorities will use the asset’s market value.

b) transfer with unmeasurable consideration: If the value of the payment for an asset cannot be determined, market value is used.

c) acquires from or transfers to creditors: e.g. When a company, etc., receives an asset from a debtor to settle a debt, or transfers an asset to creditors to settle a debt, market value is used.

d) via business transfers: If a company, etc., buys or sells a business as a whole for a single price, the tax authorities will determine the value of individual assets based on their market value.

e) through transactions between related parties: If the buyer and seller are related (e.g., parent and subsidiary), market value is used to prevent potential tax avoidance schemes.

7. FOREIGN TAX CREDIT 

7.1 Gains from the disposal of foreign capital assets received in Malaysia that are chargeable to tax outside Malaysia can claim a bilateral or unilateral tax credit under the provisions of sections 132 and 133 of the ITA. 

7.2 A resident who is claiming the tax credits must keep record that foreign tax has been imposed on that particular income.

7.3 If the tax credit claimed for a year of assessment exceeds the Malaysian tax payable on gains from the disposal of foreign capital assets received in Malaysia, the excess tax credit shall be disregarded.

Appendix D

Tax rates & CGT returns requirements.