1. Tax returns for CGT will need to be filed electronically within 60 days from the date of disposal of capital asset and the tax must be paid within 60 days from the date of disposal. The 60-days rule applies to disposal of unlisted shares of a company incorporated in Malaysia and disposal of Section 15C shares.
For disposal of foreign capital assets, we understand that the gains arising from the disposal is only subjected to CGT when remitted into Malaysia. However, we are still awaiting further clarification on the reporting / declaration mechanism and whether the 60-days rule is applicable.
2. The law requires the market value be taken as the disposal and acquisition consideration in certain circumstances where the transactions are not at arm’s length, or between connected persons, or by way of gift, or the consideration cannot be valued.
The market value of transfer prices is an obvious area of scrutiny by Malaysia’s Inland Revenue Board (IRB). We foresee that the valuation of shares in unlisted companies would attract disputes where the IRB may impute its own market value if they believe the prices are distorted.
Also, where it’s an internal restructuring transaction, it’s common for transfer to be effected at Net Tangible Asset. To require valuation for companies would be additional cost to businesses.
3. Although the tax net has been widened to capture gain on disposal of Section 15C shares (i.e., shares of a controlled company incorporated outside Malaysia which owns real property situated in Malaysia or shares of another controlled company, subject to meeting the 75% threshold conditions), there are questions about how IRB intends to capture this tax revenue. This is especially if the transaction takes place entirely outside Malaysia between two foreign parties. A clear and well-thought-out mechanism must be put in place to enable effective tax collection by the IRB in this context.