An important announcement regarding the capital gains tax (CGT) marked a significant development in taxation policy during the 19th Royal Government-Private Sector Forum in 2023. The decision to postpone the CGT until the end of 2024 generated keen interest from both the private sector and the public. The question of whether CGT may be postponed again is not addressed in this article. Instead, we delve into the scope of the current postponement. Despite its age, this topic remains relevant as a reminder for shaping your investment strategies.

This current postponement encompasses the gain generated from a broad spectrum of assets, reflecting the government’s aim to provide relief and support to various sectors of the economy. Among the assets affected are real estate properties, leases, investment instruments, goodwill, intellectual property, and foreign currencies.

Of particular note is the impact on investment assets, such as shares in companies. The decision to maintain tax-free status for gains from the transfer of shares until the specified deadline is significant for investors. It provides them with a window of opportunity to conduct transactions without immediate tax implications, potentially encouraging increased investment activity within the country.

Despite the postponement, concerns have been raised regarding the applicability of the current CGT delay to non-resident taxpayers. Historically, non-residents holding shares in resident companies have faced CGT obligations, with resident companies required to declare CGT at 20% rate. This has led to uncertainty among investors regarding their potential tax liabilities and the potential impact on their investment strategies. In addition, in certain cases, due to the lack of a clear mechanism for collecting CGT from outgoing non-resident shareholders, it indeed shifted the burden of addressing CGT implications onto resident companies or incoming shareholders.

While the government’s decision to postpone the CGT reflects a prudent approach to taxation policy, investors including targeted resident company, particularly those involved in share transfer transaction, should proceed with caution. It is crucial for investors to seek guidance from tax experts who can offer precise and practical advice on navigating these changes. Specifically, investors should consult experts who can clearly address the following questions for their share transfer transaction: Will outgoing non-resident shareholder benefit from the current CGT delay, or will CGT obligations continue to apply for the case of non-residents holding shares in resident companies? Given the current CGT delay, what steps can investors or the targeted resident company take to ensure clarity and certainty regarding their tax obligations and risk regarding share transfers?

Furthermore, it is essential to recognize that regardless of whether the non-resident could benefit of the CGT delay or not, in the case of share transfers involving non-residents, resident companies are still obligated to withhold taxes if the company has retained earnings at the time of the transfer. The guidelines for this withholding tax are outlined in Prakas no. 372 on rules and procedures on taxation on dividend distribution.

For additional information, please contact our expert VANN Sinat.

The content shared here is for informational purposes only and should not be interpreted as a legal advice. Legal matters can be complex and may vary based on individual circumstances. For personalized guidance on specific legal issues, we recommend consulting with our qualified legal professionals.