Broadening revenue base

Anwar said the tax will be on the disposal of shares of domestic companies based on their net profit at a rate of 10% beginning March 1, 2024.

PETALING JAYA: The government will enforce the implementation of the capital gains tax (CGT) as announced during Budget 2024 by Prime Minister Datuk Seri Anwar Ibrahim yesterday.

He said the tax will be on the disposal of shares for domestic companies based on their net profit at a rate of 10% beginning March 1, 2024.

Malaysia currently does not have CGT, with the exception of the real property gains tax (RPGT) at a rate of 30% for the sales of properties.

Within Asia, Singapore and Hong Kong are the only other countries that do not tax capital gains.

Anwar added that this tax will not affect listed shares or disposals of unlisted shares for approved initial public offerings, as well as internal restructuring and venture capital companies that are subject to certain conditions.

Thannees Tax Consulting Services Sdn Bhd managing director Thanneermalai Somasundaram tells StarBiz that CGT is long overdue.

He says the 10% rate is reasonable , and will not affect the ordinary man on the street unless he or she is an investor.

“At the moment, capital gains tax is only confined to unlisted shares sold by companies.

“But it is only a matter of time before it is extended beyond unlisted shares in the future.

“This will increase the tax revenue of the government but initially there will be pushback from taxpayers as there is a tendency for this with the introduction of any new tax,” he says.

On whether the tax will discourage foreign investors, Thanneermalai says he does not expect that to happen.

“In my view, it will not discourage foreigners and foreign direct investors as these are people who are well versed with capital gains outside of Malaysia. Practically every country in Asia and every major economy globally has CGT,” he points out.

Another change to the tax system in Malaysia that was announced during the Budget 2024 announcement is the plan to increase the sales and services tax rate from 6% to 8%.

“This will not include in food and beverage and telecommunications, so as to not burden the people,” the prime miniter said during his speech.

Anwar added the government will expand the scope of taxable services to include logistics, brokerage, underwriting and karaoke services.

Thanneermalai says the increase from 6% to 8% is not very significant and will not have any impact directly on the public, particularly for the Bottom 40 and Middle 40 groups.

“It is a pity Budget 2024 did not bring back the goods and services tax. It instead widened the scope to include other taxable sectors,” he says.

Malaysians will also likely have to deal with a new tax on luxury goods.

The luxury tax had been proposed previously under the re-tabled Budget 2023.

Anwar said in his speech the tax of 5% -10% will only apply to certain high-value items such jewellery and high-end watches based on a threshold price although no specifics have been revealed yet.