Malaysia Single Tier Dividend System
Malaysia introduced the Malaysia single tier dividend system in 2008 to prevent double taxation on corporate profits.
Under this system:
- Companies pay corporate income tax on their profits.
- Dividends distributed from those profits are generally exempt from tax for shareholders.
Because tax has already been paid at the company level, shareholders usually do not pay additional tax when receiving dividends.
However, the government introduced a new rule to tax very high dividend income received by individuals starting in 2025.
Malaysia Dividend Tax 2025
Beginning 1 January 2025, Malaysia introduced a 2% dividend tax on individual shareholders who receive high dividend income.
The dividend tax Malaysia individual shareholders rule applies to:
- Resident individuals
- Non-resident individuals
- Individuals holding shares through nominees
The tax is imposed on chargeable dividend income, and the determining factor is the date the dividend is paid to the shareholder, not the date it was declared.
For example, if a company declares a dividend in 2024 but pays it in 2025, it may still fall under the Malaysia dividend tax 2025 rules.
Dividend Tax Threshold Malaysia
The government introduced a threshold to ensure the tax only affects individuals with significant dividend income.
The dividend tax threshold Malaysia works as follows:
- Only individuals with annual dividend income exceeding RM100,000 are affected.
- Dividend income below RM100,000 remains tax-exempt.
The 2% tax is applied only to the chargeable portion of dividend income after deductions and allowances.
For instance, if a shareholder receives RM150,000 in dividends during a year, the first RM100,000 is exempt while the remaining amount may be subject to the 2% tax depending on the final chargeable income.
Dividend Tax Exemption and Planning
Although the new rules introduce dividend income tax Malaysia, several exemptions and planning strategies still exist.
Dividend Tax Exemption Malaysia
Certain dividend income remains exempt from the new tax, including:
- Dividends received from foreign sources
- Dividends from companies with pioneer status or reinvestment allowances
- Dividends distributed by cooperatives
- Dividends from shipping companies that enjoy tax exemptions
- Dividends from closed-end funds
- Dividends received from Labuan entities
In addition, profit distributions from institutions such as KWSP, LTAT, ASNB, and unit trusts are not subject to the dividend tax.
Dividend Tax on Individual Shareholders in Malaysia: Complete Guide