Malaysia - Rules for capital gains tax exemption for gains from disposal of foreign capital assets i

For the three-year period 1 January 2024 to 31 December 2026, gains from the disposal of foreign capital assets that are received in Malaysia by a company, limited liability partnership, trust body and co-operative society are exempt from capital gains tax. The exemption was introduced through the Income Tax (Exemption) (No. 3) Order 2024 issued by the government on 4 March 2024.

The exemption is subject to compliance with the economic substance requirements as specified in the guidelines issued by the Inland Revenue Board of Malaysia on 27 March (and amended on 24 April), which are similar to the economic substance requirements to qualify for the tax exemption on foreign dividend income. Any deduction in relation to exempt gains are disregarded for tax purposes.

The exemption does not apply to:

Gains from the disposal of intellectual property rights where the company, limited liability partnership, trust body and co-operative society is the owner or licensee of the intellectual property rights; and
A person carrying on the business of banking, insurance, sea transport or air transport.

“Intellectual property rights” mean any rights arising from a patent, utility innovation and discovery, copyright, trademark and service mark, industrial design, layout design for integrated circuits, secret processes or formulae and know-how, geographical indications, and the grant of protection of a plant variety, or other similar rights, whether or not registered or registrable.

David Lai
BDO in Malaysia