Selling Shares in a Sdn Bhd: Capital Gains Tax and Stamp Duty in Malaysia

Who pays capital gains tax on shares?

Capital gains tax took effect on 1 January 2024. It applies to companies, limited liability partnerships, trust bodies and co-operative societies that dispose of shares in a company incorporated in Malaysia that is not listed on the stock exchange. It also reaches shares in some foreign companies whose value comes mainly from Malaysian real property. Disposals made between 1 January and 29 February 2024 were exempt.

Individuals are outside the capital gains tax regime. An individual who sells private company shares held as an investment is generally not taxed on the gain, unless the company is a real property company or the individual trades in shares as a business. This difference matters where a holding company, rather than the individual, owns the shares.

How is capital gains tax calculated?

For shares acquired on or after 1 January 2024, the tax is 10% of the chargeable income from the disposal, broadly the disposal price less the acquisition cost and permitted expenses. For shares acquired before 1 January 2024, the seller may instead elect to pay 2% of the gross disposal price.

For example, if a company sells shares for RM10 million that it bought for RM7 million before 2024, the 10% method gives tax of RM300,000 on the RM3 million gain, while the 2% method gives RM200,000. Where the gain is large compared with the price, the 2% option can cost less. Where the gain is small, or there is a loss, the 10% method is usually better.

When must capital gains tax be declared and paid?

The seller must generally file a capital gains tax return and pay the tax within 60 days from the date of disposal, electronically through the e-CKM service on LHDN’s MyTax portal. Supporting documents, such as the share sale agreement, the valuation and proof of the acquisition cost, do not normally have to be submitted with the return, but must be kept for seven years and produced if LHDN asks for them.

Exemptions are available for qualifying restructurings within a group and for certain disposals connected with an initial public offering, subject to conditions. These should be checked before the transaction is signed, not after.

Do individual shareholders pay any tax on the sale?

Usually not on an investment holding of private company shares, but there are two important exceptions:

• where the company is a real property company, which LHDN describes as a controlled company whose land, or shares in other real property companies, make up at least 75% of the value of its total tangible assets, its shares are chargeable assets under the Real Property Gains Tax Act 1976, and an individual who sells them may be liable to RPGT on the gain;
• where the individual buys and sells shares as a business, the profits may be taxed as income.

Shares in a real property company remain chargeable assets even if the company has ceased to be one by the time the shares are sold. Check the company’s asset profile and history before agreeing a price, because an RPGT liability can change the net proceeds significantly.

How much stamp duty is payable on a share transfer?

An instrument of transfer of shares in an unlisted company is subject to stamp duty of RM3 for every RM1,000, or part of it, of the consideration or the value of the shares, whichever is greater. Value is commonly assessed by reference to the company’s net tangible assets, so transferring at a nominal price does not avoid duty if the company’s assets are worth more.

Stamp duty on securities moved to self-assessment from 1 January 2026, so the parties are responsible for assessing and paying the correct duty, and under-stamping can attract penalties. The buyer usually pays the duty, but the agreement should say so. Companies will generally require a properly stamped instrument of transfer before registering the transfer.

How does tax affect shareholder exits and buy-outs?

In a negotiated exit or a court-ordered buy-out, the headline price is only part of the picture. A corporate shareholder may face capital gains tax on the sale, an individual selling real property company shares may face RPGT, and stamp duty must be paid on the transfer. Valuations prepared for a dispute should take these costs into account, and the agreement or court order should say who bears them.

A buy-out ordered by the court under section 346 of the Companies Act 2016 is still a disposal of shares, so the same rules apply. See How to Exit a Sdn Bhd as a Minority Shareholder in Malaysia and Shareholder Disputes in Malaysia: A Practical Guide.