Solution 1:

The former is correct, if arg accepts an instance of CustomClass:

def FuncA(arg: CustomClass):
    #     ^ instance of CustomClass

In case you want the class CustomClass itself (or a subtype), then you should write:

from typing import Type  # you have to import Type

def FuncA(arg: Type[CustomClass]):
    #     ^ CustomClass (class object) itself

Like it is written in the documentation about Typing:

class typing.Type(Generic[CT_co])

A variable annotated with C may accept a value of type C. In contrast, a variable annotated with Type[C] may accept values that are classes themselves - specifically, it will accept the class object of C.

The documentation includes an example with the int class:

a = 3         # Has type 'int'
b = int       # Has type 'Type[int]'
c = type(a)   # Also has type 'Type[int]'

Solution 2:

Willem Van Onsem's answer is of course correct, but I'd like to offer a small update. In PEP 585, type hinting generics were introduced in standard collections. For example, whereas we previously had to say e.g.

from typing import Dict

foo: Dict[str, str] = { "bar": "baz" }

we can now forgo the parallel type hierarchy in the typing module and simply say

foo: dict[str, str] = { "bar": "baz" }

This feature is available in python 3.9+, and also in 3.7+ if using from __future__ import annotations.

In terms of this specific question, it means that instead of from typing import Type, we can now simply annotate classes using the built-in type:

def FuncA(arg: type[CustomClass]):