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New Section 15C of ITA: Tax of Disposal Gains from Foreign Companies with Malaysian Real Property

Updated: Nov 18, 2023

Overview:

The Income Tax Act 1967 is amended by inserting a new Section 15C after Section 15B.


The introduction of the new provision, Section 15C, in the Income Tax Act marks a significant development in the taxation landscape in Malaysia.


This section specifically addresses the taxation of gains or profits arising from the disposal of shares (a capital asset) in controlled companies incorporated outside Malaysia.


Section 15C(1) outlines the conditions under which such gains are deemed to be derived from Malaysia, emphasising the ownership of real property in Malaysia or shares in another controlled company by the relevant foreign-incorporated entity.


Subsections (2) & (3) provide further criteria related to the acquisition date of shares, the defined value of real property, and the value of shares in other controlled companies.







Here are some key considerations:


Assessment of Real Property Holdings: Foreign Controlled Companies should carefully assess the value and significance of real property holdings in Malaysia and shares of another controlled company.


If the market value of such property or shares of another controlled company constitutes a substantial portion (not less than 75%) of the company's total tangible assets, any gains from the disposal of shares in the company may be subject to Malaysian taxation.


Tax Planning: Businesses should engage in strategic tax planning, considering the implications of Section 15C.


Understanding the tax consequences of disposing of shares in a foreign controlled company with Malaysian real property is crucial for effective tax management.


Documentation and Record-Keeping: Maintaining accurate documentation related to real property holdings, valuations, and share disposals is essential.


Proper record-keeping will facilitate compliance with tax regulations and provide necessary evidence in case of audits.


Professional Advice: Seeking advice from tax professionals and legal experts is recommended to navigate the complexities introduced by Section 15C. Professionals can offer tailored guidance based on the specific circumstances of each business.

  1. Regular Compliance Checks: Businesses should establish processes for regular compliance checks to ensure ongoing adherence to the requirements outlined in Section 15C. Staying informed about any updates or amendments to the provision is crucial.

  2. Impact on Investment Strategies: Companies considering investments in foreign-controlled entities with real property in Malaysia should carefully assess the potential tax implications under Section 15C. This includes evaluating the investment structure and its alignment with tax objectives.

Overall, proactive measures, thorough assessments, and professional advice will be instrumental in adapting to the changes brought about by Section 15C and ensuring compliance with Malaysian tax laws.



Related-Article:

Finance (No. 2) Bill 2023: Amendment of section 2 - https://www.ccs-co.com/post/finance-no-2-bill-2023-amendment-of-section-2


Budget 2024: Further Tax Deduction For Voluntary Carbon Market (VCM) - https://www.ccs-co.com/post/budget-2024-further-tax-deduction-for-voluntary-carbon-market-vcm


Amendment to Section 4 of the ITA 1967 - Gains from the Disposal of Capital Asset - https://www.ccs-co.com/post/amendment-to-section-4-of-the-ita-1967-gains-from-the-disposal-of-capital-asset








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