Partner’s Perspective: Navigating Uncharted Waters with Malaysia's New CGT

While it’s been anticipated — given the Real Property Gains Tax (RPGT) already in place — the new Capital Gains Tax (CGT) zeroes in specifically on the disposal of unlisted shares by companies. Effective 1st March 2024, it marks a significant shift in the business and tax landscape of Malaysia.

Scope & Exemptions: A Call for Readiness

The new CGT narrows in on the disposal of unlisted shares, creating a discernible shift for corporate financial planning. Individual investors, for now, are in safer waters, spared from the tax’s reach. Yet, one can’t help but wonder, is this merely the calm before the storm? The real conundrum lies with family-owned SMEs. These cornerstones of our economy, often sheltered within holding structures, must now grapple with the complexities of CGT. How will this reshape the landscape of family businesses that have long relied on these structures for growth and legacy planning? Fund managers find solace in exemptions, but the broader question remains: Is the market ready to support these changes without unsettling the capital market’s equilibrium?

Impact on Business Transactions: Are Valuations Up to the Task?

Strategic collaborations and equity exchanges are the lifeblood of business growth and innovation, particularly through mergers and acquisitions. The CGT brings an added layer of complexity to these transactions. Are we equipped to handle valuations that are no longer mere handshake deals but intricate financial puzzles? With the business valuation sector in its nascent stages, especially when held against the backdrop of property valuation, it begs the question: Do we have the infrastructure to support this transition? The potential for valuation-related complexities to ripple through the market, altering profitability and outcomes, is a challenge we must anticipate and prepare for.

This evolving tax landscape hints at only the beginning, with the possibility of CGT extending to individual investors in the future. As the business transaction environment transforms, we must ask ourselves: Are our businesses equipped with the navigational tools — the valuation expertise and advisory services — necessary to chart these uncharted fiscal waters?

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