Malaysia’s national budget for 2024 (“Budget”) was announced by Prime Minister and Finance Minister YAB Dato’ Seri Anwar bin Ibrahim on 13th October 2023 and is themed “Economic Reforms, Empowering the People”. This represents the largest expansionary budget in the country’s history with an allocation of RM393.8 billion with various tax measures aimed at broadening the country’s revenue base. This article aims to highlight some of the new and salient tax measures introduced in the Budget.
- Introduction of Capital Gains Tax
The previously anticipated Capital Gains Tax (“CGT”) will be imposed on the net gains from disposal of unlisted shares in Malaysian companies at the rate of 10% effective from 1st March 2024 onwards. A transitional rule will also apply for any shares acquired before 1st March 2024, whereby the taxpayer may choose to be taxed at either: (i) 10% on the net gain from disposal of shares; or (ii) 2% on the gross sales value.
|Shares Acquisition Date||CGT Rate|
|Before 1st March 2024
|The taxpayer may choose between:
(i) 10% on the net gain from disposal of shares; or
(ii) 2% on the gross sales value.
|From 1st March 2024 onwards
|10% on the net gain from disposal of shares|
The Government has stated in the Budget that it will consider exemptions of CGT in the disposal of unlisted shares related to the following activities:
- Initial Public Offerings approved by Bursa Malaysia;
- Related to an internal group restructuring; and
- Derived by Venture Capital Companies.
Apart from the above, there have not been any further details on the implementation of such CGT regime (such as methods for valuation) or the potential overlap with Real Property Gains Tax (“RPGT”) in respect of the disposal of unlisted shares in real property companies. Greater clarification on practical considerations will likely be provided in later legislation and / or guidelines issued by the relevant authorities.
- Increase in Service Tax
The service tax rate will be increased from the current rate of 6% to 8% commencing from 1st March 2024. This will not be applicable on certain taxable services such as food and beverage, telecommunications, vehicle parking space and logistics services. Apart from such exclusions, there will be an expansion in the scope of service tax to include brokerage, underwriting, logistics and karaoke services. The Budget did provide that mandatory registration by service providers of karaoke centres, delivery services, brokerage, underwriting (other than financial) and logistics is set at a threshold value of RM500,000.
- Global Minimum Tax – Pillar Two
In line with the Organisation for Economic Co-operation and Development’s (“OECD”) Global Anti-Base Erosion Model Rules (Pillar Two) (“GloBE”), Malaysia has reaffirmed its commitment to implement the Global Minimum Tax (“GMT”) by the beginning of 2025. This GMT would be applicable for large multinational enterprises (“MNEs”) with consolidated revenues exceeding €750 million (approximately RM3.7 billion) and would introduce tax rules to ensure that such MNEs pay GMT at the rate of 15%. The Government has also stated in the Budget that it will continue to monitor the development of GMT at an international level.
- Introduction of High Value Goods Tax
Previously referred to in the re-tabled Budget 2023 as “Luxury Goods Tax”, the current Budget has officially announced that new legislation will be enacted to introduce High Value Goods Tax (“HVGT”) which is expected to be implemented effective 1st May 2024. HVGT will be imposed at a rate of 5% to 10% on certain high value goods such as jewellery and watches, based on certain price thresholds. The Government did state that tourists will be allowed to claim the relevant tax refunds before their departure from the country. At this juncture, it remains to be seen what the precise scope and relevant thresholds will be in the implementation of HVGT, all of which will need to be sufficiently addressed in subsequent legislation in order for such HVGT to be effectively enforced.
- Review of Stamp Duty
- Stamp Duty on Transfer of Property Ownership by Renunciation of Rights
The Budget has stated that any eligible beneficiary who renunciates their rights to another eligible beneficiary (whether in accordance with a will, faraid or Distribution Act 1958) will only be charged stamp duty at the fixed rate of RM10. This is intended to apply to instruments transferring property ownership dated from 1st January 2024 onwards. For avoidance of doubt, this is not intended to apply in respect of renunciation of rights to a non-beneficiary (in which case ad valorem stamp duty will be applicable).
|Applicable Stamp Duty|
|Current Stamp Duty Rate||Proposed Stamp Duty Rate
(w.e.f. 1st January 2024)
Ad valorem stamp duty between 1% to 4%
Fixed stamp duty of RM10
- Stamp Duty on Instrument of Property Ownership Transfer by Non-Citizen
Currently, foreign-owned companies and non-citizen individuals are allowed to own properties in Malaysia and are charged the same ad valorem stamp duty rate on instruments of transfer imposed on Malaysian companies / individuals. The Budget proposes to implement a flat rate stamp duty of 4% on instruments of transfer by foreign-owned companies and non-citizen individuals from 1st January 2024 onwards.
|Purchase Price / Market Value||Current Stamp Duty Rate||Proposed Stamp Duty Rate
(w.e.f. 1st January 2024)
|> RM100,000 to RM500,000||2%|
|> RM500,000 to RM1 million||3%|
|> RM1 million||4%|
As mentioned, the above tax measures in Malaysia’s Budget 2024 reflect the Government’s stance in broadening the nation’s tax base through increasing revenue collection by the introduction of CGT and HVGT as well as increasing the service tax rate. Moving forward, we will likely see a large increase in the number of restructurings and equity transfers in anticipation of the implementation of CGT by 1st March 2024. It will also be interesting to see how Malaysia prepares its draft legislation in its eventual adoption and implementation of GMT by 2025 to move it closer in line with international taxation standards and efforts to curb erosion of the global tax base.
Author: Shawn Zachary Tan, LL.B. (Hons) Queen Mary University of London (UK), Middle Temple.
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