Summary
This guide details the recent changes to dividend taxation in Malaysia as introduced in Budget 2025. Effective January 1, 2025, a 2% tax will be imposed on dividend income exceeding RM100,000 for both resident and non-resident individuals. This marks a significant shift from the previous tax-exempt status of dividends, primarily targeting high-income earners. The document outlines the evolution of dividend taxation in Malaysia, beginning with the Imputation System and transitioning to the Single-Tier System in 2008, which eliminated double taxation on dividends. Key features of the new tax include exemptions for various types of dividend income, such as those from foreign sources and certain funds. The rationale behind this tax is to create a more equitable tax structure, ensuring that high-income individuals contribute fairly to national finances. The guide also discusses the legal framework governing dividends, including relevant sections of the Income Tax Act 1967, and emphasizes the importance of financial prudence in dividend distribution.
