2% Dividend Tax On Dividend Income Exceeding Rm100,000 Received By Individual Shareholders

[2% Dividend Tax On Dividend Income Exceeding Rm100,000 Received By Individual Shareholders]

As announced in the 2025 Budget, the government introduced a 2% dividend tax on dividend income exceeding RM100,000 received by individual shareholders, effective from the year of assessment 2025.

💥With effect from the YA 2008, Malaysia has switched to the single-tier tax system. Under the current system, the tax on the company’s profit is FINAL and Dividends are tax-exempted.

💥With effect from the YA 2025 (ie from 01.01.2025 onwards), 2% dividend tax will be charged on annual dividend income exceeding RM100,000 (RM100,000 and below is exempted)

Below are the exemption from dividend tax

Take notes that the following dividends are not taxable:
✔️ Dividends from aboard
✔️ Dividends from companies with pioneer status or reinvestment allowance
✔️ Dividends from tax-exempt shipping companies
✔️ Dividends from cooperatives
✔️ Dividends from closed-end funds
✔️ Dividends from Labuan entities
✔️ Any dividends that already have specific exemptions for shareholders (eg. S127 Ministerial Exemption)

Please Pay Attention❗❗ Dividend tax will not apply to profit distributions from:

✔️KWSP (Kumpulan Wang Simpanan Pekerja)

✔️LTAT (Lembaga Tabung Angkatan Tentera)

✔️Amanah Saham Nasional Bumiputera (ASNB)

✔️Any unit trust

To further explain, we provide three examples for your reference

👉Example 1

Mr. A earns a total chargeable income of RM300,000 in YA2025, no dividend income received.

The chargeable income to be taxed at scale rate is RM300,000.

👉Example 2
Mr. J earns a total chargeable income of RM300,000 which includes total dividend income of RM80,000 in YA2025.
The dividend income of RM80,000 does not exceed RM100,000, it is exempted from his personal income tax.
The chargeable income to be taxed at scale rate is RM220,000.

👉Example 3

Mr. Z earns a total chargeable income of RM300,000 which includes total dividend income of RM150,000 in YA2025.

The first RM100,000 of dividend income is exempted, and the balance RM50,000 of dividend income is subject to the 2% dividend tax.

The chargeable income to be taxed at scale rate is RM200,000 and 2% dividend tax on RM50,000 of dividend income

In light of this, we suggest you to:

(1) Declaring and paying any planned/available dividends before 31 December 2024

(2) Keep the record of interest expenses from a personal loan which is used to purchase shares that generate dividend tax, it’s partially deductible against the dividend tax.

If you are considering dividend declaration in the near future, please reach out to us for further guidance on how to proceed before 31 December 2024.