Dividend Tax in Malaysia: Single-Tier Dividends and the 2% Rule for Individuals
The short answer
Malaysia uses the single-tier dividend system [1]. From year of assessment 2025, however, a Dividend Tax of 2% applies to individual shareholders whose dividend income exceeds RM100,000 [1][2]. No tax is withheld by the payer; the income is reported in the individual’s tax return [1]. This is general education, not tax advice.
How are dividends taxed in Malaysia?
Under the single-tier system, a company pays tax on its profits and distributes dividends without a further layer of tax being deducted from the shareholder’s payment, so the tax on profits is final [1]. LHDN’s Budget 2025 seminar Q&A confirms the single-tier system continues to apply in Malaysia [1]. It explains that the single-tier system was introduced from year of assessment 2008 to replace the imputation system, so that income tax on company profits is final, at the company tax rate of 24% [1].
What changed is a separate tax on larger dividend receipts by individuals. LHDN’s Borang BE notes call it the Dividend Tax [2]. It is aimed at individuals with high dividend income and does not alter how smaller dividend receipts are treated under the single-tier system [1].
What does the 2% Dividend Tax cover?
According to LHDN’s Borang BE notes, the scope includes [2]:
- Dividend income received by individual shareholders from the profits of companies, covering both listed and unlisted shares in Malaysia;
- Both resident and non-resident individuals;
- Individuals who hold shares through nominees.
The tax rate is 2% on the chargeable income relating to dividend income above the RM100,000 threshold, under Part XXII of Schedule 1 to the Income Tax Act [2]. The determination of that income follows the Income Tax (Determination of Chargeable Income of Individuals in Respect of Dividends) Rules 2025, P.U.(A) 148/2025, gazetted on 7 May 2025 [2].
LHDN’s Q&A adds that the tax applies from year of assessment 2025 and only to individual taxpayers [1]. Companies that receive dividends are not subject to this tax [1].
How does the threshold work?
LHDN’s example involves a resident individual who receives RM2,500,000 in dividends in 2025, which exceeds the RM100,000 threshold [2]. The RM100,000 is deducted from the statutory dividend income, so RM2,400,000 is reported for year of assessment 2025 [2].
Here is an arithmetic illustration using our own invented figures. It is not an LHDN example and is not derived from LHDN’s computation rules: LHDN’s example [2] only shows the threshold being deducted, and the final computation depends on your circumstances and LHDN’s guidelines.
| Item | Hypothetical amount |
|---|---|
| Hypothetical total dividend income in the year | RM150,000 |
| Hypothetical threshold deducted | RM100,000 |
| Hypothetical amount relating to the 2% rate | RM50,000 |
| Hypothetical 2% of that amount (plain arithmetic only) | RM1,000 |
In LHDN’s Q&A, officials noted that the detailed calculation, including whether reliefs can be deducted, would be set out in guidelines to be issued by LHDN [1]. Check LHDN’s published guidance rather than relying on a simple formula.
Does the company withhold the tax?
No. LHDN’s Q&A states that no withholding tax is imposed on dividends received by the taxpayer [1]. Dividend income above RM100,000 is instead reported by the taxpayer in the annual return, using Borang B or BE [1].
What about dividends received through a company?
LHDN’s Q&A gives one example: foreign-sourced dividend income received by a company may be exempt under P.U.(A) 235/2022, subject to conditions, but when the company then distributes dividends to an individual shareholder, those dividends can be subject to the Dividend Tax if they exceed RM100,000 [1]. This shows why the individual’s total dividend receipts matter.
What should an investor do in practice?
- Keep dividend records. Keep notices, bank credits and broker statements for each payment.
- Add up the year. Check your total dividend income against the RM100,000 threshold [2].
- Read LHDN’s published guidance. Rules and guidelines can be updated, and LHDN publishes the authoritative version [3].
- Ask a qualified adviser for questions about your own position.
For the analytical side of dividends, the dividend yield and dividend payout ratio entries explain how to read a payout, and the dividend investors page collects related reading. Remember that dividends are not assured and a company can change its policy.
Why does the single-tier system matter here?
Because the tax on company profits is final under the single-tier system, a dividend you receive has already carried the company’s tax [1]. LHDN’s Q&A also notes that the Dividend Tax is separate from that system and that the single-tier system continues alongside it [1].
For an investor this means two things. First, ordinary dividends below the threshold are not taxed again in your hands. Second, the Dividend Tax only becomes relevant when your total dividend income in a year passes the threshold [1][2], so keeping a running total through the year is more useful than checking each payment on its own.
What this article does not cover
This is an educational summary built from LHDN documents. It does not cover every exemption, the treatment of dividends from particular types of vehicles, foreign-sourced dividends received by individuals, or interaction with other income and reliefs. The Q&A document we cite was produced for a seminar on the Budget proposals, and the Borang BE notes describe the scope in outline [1][2]. Rules can be refined by later guidelines and gazetted orders.
If your dividend receipts are close to or above the threshold, the sensible next step is to read LHDN’s published guidance [3] and, where needed, to consult a licensed tax agent or adviser about your own circumstances.
Frequently asked questions
Are Malaysian dividends taxed for individuals?
The single-tier system continues [1], but from year of assessment 2025 a 2% Dividend Tax applies to individuals with dividend income above RM100,000 [1][2].
Is the 2% charged on all my dividends?
LHDN’s example deducts the RM100,000 threshold from dividend income, so the rate applies to the excess [2].
Does my broker or the company deduct the tax?
No. LHDN states there is no withholding tax on dividends, and income above the threshold is reported in Borang B/BE [1].
Does it apply to companies?
No. The Dividend Tax is imposed on individual taxpayers only [1].
Sources
- LHDN — Budget 2025 seminar Q&A compilation: single-tier system, individuals only, no withholding, reporting in Borang B/BE
- LHDN — Notes for completing Borang BE, Year of Assessment 2025 (Nota BE): Dividend Tax scope, 2% rate, P.U.(A) 148/2025 and worked example
- LHDN (Inland Revenue Board) — official site for guidelines
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