Capital Gains Tax Malaysia – Disposal of Foreign Capital Assets

The IRB has issued a guideline dated 27-3-2024 titled “Tax Treatment on Gains from the Disposal of Foreign Capital Assets Received from Outside Malaysia.”

Generally, the disposal of all types of foreign capital assets received in Malaysia by a resident company, resident LLP, resident trust, or resident cooperative society will be subject to Income Tax.

It will be assessed under the newly added provision, Sec 4(aa), which was introduced in Budget 2024 to tax capital gains.

The scope of a capital asset is broad since it has been defined as “movable or immovable property, including any rights or interests thereof.”

Implication: In the past, a company with overseas income might have chosen to use that money to invest in landed property overseas for capital appreciation and, after many years, liquidate it and remit it back to Malaysia as a capital gain. With this new provision, you will now be taxed in Malaysia when such gains are remitted back.

Please note that this only applies to the disposal of foreign capital assets that occur on or after 1-Jan-2024.

As the definition of a capital asset includes movable assets, if you are thinking of storing up your wealth in collectible, high-value paintings, this approach will not work. These, too, would be considered capital assets.

Guidelines issued by IRB:

Source: IRB Website