(TAX UPDATE) What is Capital Gains Tax in Malaysia?

Introduction

I have just completed the LearnaBee Capital Gains Tax (CGT) session, and I must say this is one area many company owners may underestimate until it is too late.

Many still assume CGT only becomes relevant when shares are sold and cash changes hands. But from what I gathered today, that is no longer a safe way to look at it.

With the changes now effective from 1 January 2026, even a winding up exercise, redemption of preference shares, conversion of shares, or an internal group restructuring may carry CGT implications.

The dangerous part is this. A transaction can trigger tax issues even when no real money is received, and if the valuation is weak or unsupported, LHDN may step in with its own view. By the time the documents are signed and the exercise is completed, the 60-day compliance clock may already be running.

Part 1 of LearnaBee session on 17 March 2026

𝐂𝐥𝐨𝐬𝐢𝐧𝐠 𝐝𝐨𝐰𝐧 𝐚 𝐜𝐨𝐦𝐩𝐚𝐧𝐲? 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐠𝐚𝐢𝐧 𝐭𝐚𝐱 𝐦𝐚𝐲 𝐧𝐞𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐜𝐨𝐧𝐬𝐢𝐝𝐞𝐫𝐞𝐝, 𝐞𝐯𝐞𝐧 𝐢𝐟 𝐧𝐨 𝐦𝐨𝐧𝐞𝐲 𝐜𝐡𝐚𝐧𝐠𝐞𝐝 𝐡𝐚𝐧𝐝𝐬.

Many people still think Capital Gains Tax (CGT) only applies when shares are sold for cash. But that may no longer be a safe assumption.

Under the current framework, and with the amendments effective 1 January 2026 under the Finance Act 2025, some routine corporate exercises now clearly fall within the disposal rules.

𝐖𝐡𝐚𝐭'𝐬 𝐮𝐩𝐝𝐚𝐭𝐞𝐝 𝐟𝐫𝐨𝐦 𝟏 𝐉𝐚𝐧𝐮𝐚𝐫𝐲 𝟐𝟎𝟐𝟔:
1. Winding up or liquidating a subsidiary
2. Redeeming preference shares
3. Converting one class of shares into another

It is not only about whether cash changed hands.
A RM1 transfer, a gift, or an internal group restructuring should not be dismissed too quickly from a CGT perspective.

𝐒𝐜𝐞𝐧𝐚𝐫𝐢𝐨𝐬 𝐭𝐡𝐚𝐭 𝐦𝐚𝐲 𝐚𝐭𝐭𝐫𝐚𝐜𝐭 𝐋𝐇𝐃𝐍’𝐬 𝐚𝐭𝐭𝐞𝐧𝐭𝐢𝐨𝐧:

1.share transfers since March 2024 with no CGT filing considered

2. related-party transfers done at nominal value

3. valuation based on book value without proper support

4. restructuring carried out without a defensible valuation basis

𝐖𝐡𝐚𝐭 𝐦𝐚𝐤𝐞𝐬 𝐭𝐡𝐢𝐬 𝐫𝐢𝐬𝐤𝐢𝐞𝐫 𝐭𝐡𝐚𝐧 𝐦𝐚𝐧𝐲 𝐩𝐞𝐨𝐩𝐥𝐞 𝐫𝐞𝐚𝐥𝐢𝐬𝐞:

LHDN can reject your valuation and substitute their own. The burden of proof falls entirely on the taxpayer.

Before executing any corporate restructuring, share transfer, or winding up in 2026, model your tax position and obtain a proper, defensible valuation.

Part 2 of LearnaBee session on 31 March 2026

𝐈𝐧𝐭𝐫𝐚-𝐠𝐫𝐨𝐮𝐩 𝐭𝐫𝐚𝐧𝐬𝐟𝐞𝐫𝐬 𝐚𝐫𝐞 𝐧𝐨𝐭 𝐚𝐮𝐭𝐨𝐦𝐚𝐭𝐢𝐜𝐚𝐥𝐥𝐲 𝐞𝐱𝐞𝐦𝐩𝐭

Many assume share transfers within the same group are automatically exempt from CGT. In practice, the exemption is subject to strict conditions, including the 3-year holding requirement. If the conditions are breached, the exemption may be withdrawn.

𝐎𝐟𝐟𝐬𝐡𝐨𝐫𝐞 𝐜𝐨𝐦𝐩𝐚𝐧𝐢𝐞𝐬 𝐜𝐚𝐧 𝐬𝐭𝐢𝐥𝐥 𝐟𝐚𝐥𝐥 𝐰𝐢𝐭𝐡𝐢𝐧 𝐌𝐚𝐥𝐚𝐲𝐬𝐢𝐚𝐧 𝐂𝐆𝐓

If a foreign company derives 75% or more of its tangible asset value from Malaysian real property, or shares in a Real Property Company, the disposal of its shares may still fall within Malaysian CGT under Section 15C.

In practice, the analysis can involve multiple valuation steps before the tax can be computed properly :
1. 𝘷𝘢𝘭𝘶𝘪𝘯𝙜 𝘵𝘩𝘦 𝘔𝘢𝘭𝘢𝘺𝘴𝘪𝘢𝘯 𝘱𝘳𝘰𝘱𝘦𝘳𝘵𝘺 𝘢𝘵 𝘵𝘩𝘦 𝘢𝘤𝘲𝘶𝘪𝘴𝘪𝘵𝘪𝘰𝘯 𝘥𝘢𝘵𝘦 (if Section 15C applies)
2. 𝘥𝘦𝘵𝘦𝘳𝘮𝘪𝘯𝘪𝘯𝙜 𝘵𝘩𝘦 𝘳𝘦𝘭𝘦𝘷𝘢𝘯𝘵 𝘢𝘤𝘲𝘶𝘪𝘴𝘪𝘵𝘪𝘰𝘯 𝘤𝘰𝘴𝘵 𝘶𝘯𝘥𝘦𝘳 𝘵𝘩𝘦 𝘱𝘳𝘦𝘴𝘤𝘳𝘪𝘣𝘦𝘥 𝘧𝘰𝘳𝘮𝘶𝘭𝘢 (i.e. A/B × C formula)
3. 𝘷𝘢𝘭𝘶𝘪𝘯𝙜 𝘵𝘩𝘦 𝘱𝘳𝘰𝘱𝘦𝘳𝘵𝘺 𝘢𝙜𝘢𝘪𝘯 𝘢𝘵 𝘵𝘩𝘦 𝘥𝘪𝘴𝘱𝘰𝘴𝘢𝘭 𝘥𝘢𝘵𝘦
4. 𝘷𝘢𝘭𝘶𝘪𝘯𝙜 𝘵𝘩𝘦 𝘴𝘩𝘢𝘳𝘦𝘴 𝘢𝘵 𝘵𝘩𝘦 𝘥𝘪𝘴𝘱𝘰𝘴𝘢𝘭 𝘥𝘢𝘵𝘦 𝘵𝘰 𝘥𝘦𝘵𝘦𝘳𝘮𝘪𝘯𝘦 𝘵𝘩𝘦 𝘤𝘩𝘢𝘳𝙜𝘦𝘢𝘣𝘭𝘦 𝙜𝘢𝘪𝘯

𝐌𝐚𝐫𝐤𝐞𝐭 𝐯𝐚𝐥𝐮𝐞 𝐢𝐬 𝐧𝐨𝐭 𝐚𝐥𝐰𝐚𝐲𝐬 𝐭𝐡𝐞 𝐚𝐠𝐫𝐞𝐞𝐝 𝐩𝐫𝐢𝐜𝐞

For tax purposes, the agreed price is not always the same as market value. If a valuation is not properly supported, LHDN may challenge it and substitute its own view of market value, which may result in a higher tax exposure.

That is why proper valuation support is important, especially when applying discounts for factors such as the shares being difficult to sell, or the buyer only getting a minority stake with limited control.

𝟔𝟎 𝐝𝐚𝐲𝐬 𝐢𝐬 𝐚 𝐭𝐢𝐠𝐡𝐭 𝐭𝐢𝐦𝐞𝐥𝐢𝐧𝐞

Once you factor in valuation work, tax computation, review, approval, and payment arrangement, 60 days is really not a long time.

One practical reminder ; even if the tax payable is nil, the filing obligation should not be overlooked.

𝐌𝐲 𝐦𝐚𝐢𝐧 𝐭𝐚𝐤𝐞𝐚𝐰𝐚𝐲

It is always better to consult with your tax adviser before any corporate restructuring or share movement takes place, not after. Once the transaction is executed, the 60-day compliance timeline is already running.

PS : Authored by Ms Lim Qiu Hui, our COO of KTP Group, in her personal LinkedIn post.

This article is provided for general information only and reflects the author’s personal professional view based on the facts described. It does not constitute tax, legal, or other professional advice and should not be relied upon as a substitute for advice tailored to your specific circumstances. Tax outcomes may vary depending on documentation, ownership, beneficial interest, and actual usage. Readers should consult their own tax adviser and/or legal counsel before taking any action or implementing any arrangement described in this article.

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