Following a new gazette on 29 December 2023, the effective date for the capital gains tax on gains or profits received from the disposal of shares of unlisted companies formed in Malaysia will start from 1 March 2024, in line with the original announcement in the Malaysia’s Budget 2024. To recap, a capital gains tax of 10% will be enforced against gains or profits received pursuant to the shares disposal.
There are still many questions that need to be answered with respect to the proposed capital gains tax. For example, it is unclear if founders and angels may also be subject to capital gains tax or not as venture funds are likely to be exempt from such tax. The government also said that companies that get listed on the local stock exchange may also be exempted from capital gains tax. These exemptions are not mentioned in the recent bill so it may be likely to be included in a subsidiary legislation this year.
The new tax may likely impact the local startup scene. I have met several investors and founders that mentioned that they may be redomiciling the entity elsewhere to avoid the tax exposure. To illustrate, in Asia, only Singapore and Hong Kong do not tax capital gains.
As a founder, you will need to stay up to date and take decisive steps to manage any potential tax implications that may be impacted by the new proposed tax.