Malaysia’s merger and acquisition (M&A) sector is poised for growth as businesses adapt to evolving market dynamics marked by shifting business models, emerging business ownership, and increasing integration of digital technologies and artificial intelligence. This transformation is prompting companies to reevaluate their growth strategies to maintain competitiveness, with M&A seen as a key tool for accelerating expansion into new markets and enhancing capabilities.
The momentum for M&A activity is supported by Malaysia’s Securities Commission (SC) through its Capital Market Masterplan 2026 to 2030, which was launched in March 2026. The masterplan aims to increase the country’s capital market size from RM4.3 trillion in 2025 to between RM5.8 trillion and RM6.3 trillion by 2030. It underscores four strategic pillars: vibrancy, inclusivity, sustainability, and opportunities in the region. Central to this agenda is creating a conducive environment that facilitates business growth and regional expansion, thereby encouraging M&A deals.
For business owners and investors, successful M&A transactions extend beyond simply identifying targets and reaching valuations. The structure, funding, and execution of deals are critical factors that influence the value ultimately realized. Tax considerations, in particular, are increasingly recognized as a strategic component that should be integrated early in the transaction process rather than addressed late in negotiations.
Several tax issues are relevant in Malaysian M&A transactions. These include corporate income tax, capital gains tax (CGT), real property gains tax (RPGT), stamp duty, indirect tax, and transfer pricing challenges. Since the introduction of Malaysia’s new CGT regime on January 1, 2024, disposals of shares in unlisted Malaysian companies are subject to CGT. Shares acquired before this date allow taxpayers to opt between 2% of gross disposal proceeds or 10% of chargeable gains, while shares acquired on or after January 1, 2024, are subject to a 10% CGT rate on chargeable gains.
Real property gains tax rates vary between 10% and 30% depending on the holding period of chargeable assets. Additionally, stamp duty is typically levied at 0.3% for transfers involving shares in unlisted companies, based on the higher value of consideration or share value, while asset transfers generally attract ad valorem stamp duty between 1% and 4%. Stamp duty is usually borne by the buyer unless otherwise agreed.
M&A transactions involving related parties must also consider transfer pricing regulations to ensure that terms comply with the arm’s length principle. Failure to meet these standards could result in additional taxes, penalties, or surcharges imposed by the Inland Revenue Board of Malaysia (IRB).
An important strategic decision in M&A is the choice between share deals and asset deals. Share deals transfer the entire company entity including its historical tax liabilities, making thorough tax due diligence essential. In contrast, asset deals can minimize exposure to past liabilities but may incur higher transaction costs, such as stamp duty and RPGT, depending on the assets involved.
Tax exemptions and reliefs available under Malaysian law provide additional incentives for qualifying M&A and restructuring transactions. For example, the Income Tax (Restructuring of Companies Scheme) (Exemption) Order 2024 offers CGT exemptions for internal restructurings that meet specific criteria, including Malaysian residency of the acquiring company and operational efficiency objectives. Another relief pertains to IPO-related disposals of unlisted shares, with conditions related to timing of disposals, approval of IPO applications, and submission of exemption requests.
Stamp duty reliefs under the Stamp Act 1949 also exist for internal restructuring, particularly under Sections 15 and 15A, which apply to company reconstructions and transfers of property between associated companies. These reliefs require upfront payment of stamp duty, which may be refunded upon approval.
As Malaysia aims to expand its capital markets and regional business presence, understanding the complex tax landscape will be crucial for companies looking to leverage M&A activity for growth in the coming years.