In the 2025 Budget, the Malaysian government introduced a 2% dividend tax on annual dividend income exceeding RM100,000 for individual shareholders, effective from the year of assessment 2025.
Key Points:
• Single-Tier Tax System: Since 2008, Malaysia has operated under a single-tier tax system, where company profits are taxed at the corporate level, and dividends distributed to shareholders are exempt from further taxation.
• New Dividend Tax: Starting from 2025, individual shareholders receiving annual dividend income exceeding RM100,000 will be subject to a 2% tax on the amount surpassing this threshold. Dividend income up to RM100,000 remains exempt.
Exemptions:
Certain dividends are not subject to this tax, including those from:
• Companies with pioneer status or reinvestment allowances.
• Tax-exempt shipping companies.
• Cooperatives.
• Closed-end funds.
• Labuan entities.
• Dividends with specific shareholder exemptions (e.g., Section 127 Ministerial Exemption).
Non-Taxable Profit Distributions:
Distributions from the following are not subject to the 2% dividend tax:
• Employees Provident Fund (KWSP).
• Armed Forces Fund Board (LTAT).
• Amanah Saham Nasional Bumiputera (ASNB).
• Any unit trust.
Recommendations:
To optimize tax efficiency:
1. Dividend Timing: Consider declaring and paying planned dividends before 31 December 2024, to benefit from the current tax-exempt status.
2. Interest Expense Records: Maintain records of interest expenses from personal loans used to purchase shares that generate taxable dividends, as these may be partially deductible against the dividend tax.
For personalized advice on dividend declarations and tax planning, please contact us at 016 323 0990 via WhatsApp or mobile.
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