Capital Gains Tax (Part 2)
Who Needs to Pay Capital Gains Tax?
- Other than individuals, companies may be required to pay Capital Gains Tax (CGT) on gains from the disposal of shares.
Important Document for Share Transfers
- When acquiring or disposing of shares, parties normally sign a Share Transfer Agreement.
- Tax reporting and payment are based on the transaction date stated in the agreement.
What Expenses Can Be Deducted?
- When calculating capital gains, certain transaction-related expenses may be deducted, including:
- Stamp Duty
- Legal Fees
- Brokerage Fees
- Commission
Gains and Losses Can Be Offset
- Losses from the same source of income may be used to offset capital gains before tax is calculated.
Example:
- Investment in 5 companies:
- 3 profitable investments
- 2 loss-making investments
- Total gains: RM190,000
- Total losses: RM50,000
- Taxable capital gain: RM190,000 − RM50,000 = RM140,000
- If the applicable CGT rate is 10%, CGT payable = RM14,000
10 Year Loss Carry Forward Rule
- Losses from the same source of income may be carried forward for up to 10 years to offset future capital gains.
Example:
- A share disposal results in a loss this year.
- Another share disposal generates a gain 5 years later.
- Subject to the applicable rules, the earlier loss may be used to offset the later gain.
Importance of the Year of Assessment (YA)
- The Year of Assessment for CGT is determined by the year in which the share disposal takes place.
- This is important when determining eligibility for the 10-year loss carry-forward period.
Filing and Payment Deadline
- Companies must report each share disposal transaction separately.
- Tax filing and payment must be completed within 60 days from the disposal date.
Summary
- Companies may be subject to CGT when disposing of shares at a profit.
- Eligible expenses and losses may be deducted.
- Losses may be carried forward for up to 10 years.
- Each transaction must be reported and the tax paid within 60 days of disposal.