Dividend Tax Malaysia 2026: The New 2% Rule Explained (YA 2025)
Malaysia's tax landscape changed in YA 2025. For the first time since the single-tier dividend system was introduced in 2008, individual shareholders receiving large dividend income will pay additional tax — a flat 2% on dividends exceeding RM 100,000 per year. If you invest in Bursa-listed stocks, receive company dividends, or hold shares in private companies, here is exactly what changed, what's exempted, and how to declare it.
The RM 100,000 annual exemption means only investors receiving large dividend income (roughly RM 8,333+ per month in dividends) face any tax. EPF dividends, ASB/ASN distributions, and all dividends below the RM 100,000 threshold remain fully tax-free. The 2% rate is capped — it does not escalate with your income bracket.
What Changed: Old Rule vs New Rule
| Item | Before YA 2025 | From YA 2025 Onward |
|---|---|---|
| Dividend tax rate | 0% (single-tier system, fully exempt) | 0% on first RM 100,000; 2% on excess |
| Annual exemption | Full (all dividends exempt) | RM 100,000 per individual per year |
| EPF dividends | Fully exempt | Still fully exempt (no change) |
| ASB/ASN distributions | Fully exempt (unit trust income) | Still fully exempt (no change) |
| Bursa-listed company dividends | Fully exempt | Exempt up to RM 100,000; 2% above |
| Private company dividends | Fully exempt (single-tier profits) | Exempt up to RM 100,000; 2% above |
| Declaration in Form BE | Required (Section C) but tax = RM 0 | Required; 2% charged on excess only |
| Corporate tax on profits | 24% paid by company (unchanged) | 24% paid by company (unchanged) |
Which Dividends Are Taxable vs Exempt
| Dividend Type | Taxable Under 2% Rule? | Notes |
|---|---|---|
| Bursa Malaysia company dividends (e.g. Maybank, Petronas) | Yes (above RM 100K) | Most common investor income — 2% applies to excess |
| Private company dividends | Yes (above RM 100K) | Single-tier company distributions from after-tax profits |
| REIT (Real Estate Investment Trust) distributions | Partial — check REIT type | REITs that distribute as dividends count; some distribute as rental income (different treatment) |
| EPF / KWSP annual dividend | No — fully exempt | Explicitly excluded; no threshold applies |
| ASB / ASN distributions | No — fully exempt | Unit trust income, not company dividends |
| Unit trust distributions (other than ASB/ASN) | Depends on source | If the unit trust distributes company dividends, those counts; if it distributes interest or gains, different rules apply |
| Foreign dividends remitted to Malaysia | Yes (above RM 100K total) | Foreign-sourced income rules apply; consult a tax agent if your foreign dividend income is significant |
| Dividend income received pre-2025 | No — old rule applies | 2% only applies from YA 2025 (calendar year 2025) onward |
How to Calculate Your Dividend Tax
The calculation is straightforward: add up all eligible dividend income received in calendar year 2025. Subtract RM 100,000. Apply 2% to the remainder.
| Scenario | Total Dividends 2025 | Taxable Amount | Dividend Tax Owed |
|---|---|---|---|
| Small retail investor | RM 5,000 | RM 0 (below threshold) | RM 0 |
| Active dividend investor | RM 50,000 | RM 0 (below threshold) | RM 0 |
| High-income investor | RM 120,000 | RM 20,000 | RM 400 |
| Major shareholder | RM 300,000 | RM 200,000 | RM 4,000 |
| Business owner + investment portfolio | RM 500,000 | RM 400,000 | RM 8,000 |
Note on EPF + ASB: If you receive RM 60,000 in ASB distributions, RM 30,000 in EPF dividends, and RM 80,000 in Bursa stock dividends — only the RM 80,000 Bursa dividends count toward the RM 100,000 threshold. Total taxable dividends = RM 80,000 (below threshold). Dividend tax = RM 0.
6-tab Excel: annual tax calculator, all 24 reliefs tracker, PCB monthly planner, freelancer income planner, joint vs separate assessment comparator, and e-filing checklist. Includes dividend income section.
Download Malaysia Tax Planner 2026 — RM 42 →How to Declare Dividend Income in Form BE (YA 2025)
Even if your dividend income is below RM 100,000, you must still declare it in Form BE. Here is where it goes:
| Step | Action | Location in Form BE |
|---|---|---|
| 1 | Gather all dividend vouchers / statements from your stockbroker, company secretary, or CDP account | Preparation before logging in |
| 2 | Log in to mytax.hasil.gov.my → e-Filing → Form BE | MyTax portal |
| 3 | Navigate to Part C: Statutory Income from Dividends, Interest and Discounts | Section C, Form BE |
| 4 | Enter total gross dividend income received (before any tax). If multiple companies, total them all first | C1 (Malaysian dividends) |
| 5 | The system automatically applies the RM 100,000 exemption and calculates 2% on any excess | Auto-calculated |
| 6 | The dividend tax (if any) is added to your total chargeable tax before the rebate deduction step | Part J (Total Tax Payable) |
| 7 | Keep all dividend vouchers for 7 years (LHDN audit window) | Your records |
What Counts as the "Gross Dividend"?
The RM 100,000 threshold applies to gross dividend income — the full amount distributed by the company before any withholding, not the net amount you received. For most Malaysian single-tier dividends, gross = net (because no withholding is deducted at source). The gross amount is shown on your dividend voucher as "Gross Dividend."
For foreign dividends: the gross amount is the declared dividend before any foreign withholding tax. If the company withheld 15% overseas and you received 85%, you still declare the full 100% gross amount — you may be able to claim a foreign tax credit for the withheld portion. If you receive significant foreign dividends, consult a licensed tax agent.
Impact on Common Investor Types
Retail Investor (Bursa Malaysia Stocks)
The average Malaysian retail stock investor who receives under RM 100,000/year in dividends — likely around 95% of all individual investors — faces zero new tax burden. The RM 100,000 threshold is designed to exempt the vast majority of ordinary investors. At typical Bursa blue-chip yields of 4–6%, you would need a portfolio worth approximately RM 1.7–2.5 million to generate RM 100,000/year in dividends. The new rule primarily affects high-net-worth investors and business owners receiving company dividends.
Business Owner / Majority Shareholder
If you own a private company that distributes dividends from its after-tax profits, and you draw RM 200,000+ per year in dividends (a common tax-efficient structure for SME owners), the 2% tax on the RM 100,000 excess costs you RM 2,000. This is still tax-efficient compared to drawing salary (which would attract personal income tax at your marginal rate, potentially 24–26%). The dividend structure remains advantageous even with the 2% top-up.
ASB and EPF Investors
Zero impact. ASB/ASN distributions are unit trust income (not company dividends) and explicitly excluded. EPF dividends are statutory dividends on your retirement savings, also explicitly excluded. A Malaysian who holds exclusively ASB and EPF savings could receive RM 500,000 in annual distributions and face zero dividend tax. This was a deliberate policy choice to protect the Bumiputera wealth vehicle and the national retirement system.
REIT (Real Estate Investment Trust) Investors
REITs in Malaysia distribute income in two ways: rental income distributions (your share of rental collected from tenants — taxed at your marginal income tax rate) and capital gains distributions (currently tax-exempt). Some REITs also pass through dividend income if they invest in subsidiary company shares. The 2% rule applies only to the dividend component, not the rental distribution component. Check your REIT's annual distribution breakdown (usually provided in the distribution letter) to see how much is classified as dividends vs rental income.
Planning Your Dividend Strategy Around the RM 100,000 Threshold
If your dividend income is close to or exceeds RM 100,000/year, there are legitimate strategies to manage your tax exposure:
| Strategy | How It Works | Tax Impact |
|---|---|---|
| Shift to EPF / ASB | Redirect investment capital from direct Bursa stocks into EPF voluntary contributions (i-Saraan if self-employed) or ASB top-ups | EPF/ASB distributions exempt from 2% rule; EPF voluntary contributions also get RM 4,000 tax relief |
| Hold growth stocks over dividend stocks | Focus portfolio on capital-appreciation stocks rather than high-dividend-yield stocks; shift to dividends only after FIRE (financial independence) | Capital gains from stock sales are currently tax-exempt in Malaysia (no CGT); defers dividend tax to a future year |
| Spread holdings across spouses | Transfer some Bursa holdings to spouse's name (via beneficial ownership, consult a lawyer for tax implications of actual transfer) | Each spouse has their own RM 100,000 exemption — a couple can receive RM 200,000/year tax-free |
| PRS (Private Retirement Scheme) contributions | Contribute up to RM 3,000/year to PRS; the PRS fund invests in equities and returns are reinvested tax-free until withdrawal | Reduces taxable income by RM 3,000 AND defers dividend income inside the PRS wrapper |
| Charitable donations | Donate to approved LHDN-registered charities; deductible up to 10% of aggregate income | Reduces overall taxable income, which also reduces the marginal rate applied to your dividend excess |
Dividend Tax vs Capital Gains Tax: Key Distinction
Malaysia does not have a Capital Gains Tax (CGT) on shares. If you sell Bursa-listed shares at a profit, the gain is tax-free. Only Real Property Gains Tax (RPGT) applies on property sales, not shares. The new 2% dividend tax does not change this — capital appreciation from selling shares remains exempt. This makes a mix of dividend-growth and pure-growth stocks still highly tax-efficient compared to most developed markets.
For investors who receive large dividend income, one legitimate structure is to selectively trim high-dividend-yield positions and reinvest in growth positions before dividend declaration dates — thus reducing the declared dividend income in any given year. However, this must be driven by genuine investment decisions, not solely by tax avoidance. LHDN can challenge transactions that lack commercial purpose.
The 6-tab Excel includes a dividend income tracker section: enter dividends received per company, threshold calculation (RM 100,000), and tax liability for YA 2025. Know your exact dividend tax before filing.
Download Malaysia Tax Planner 2026 — RM 42 →Frequently Asked Questions
What is the new dividend tax in Malaysia and when does it apply?
Starting from Year of Assessment (YA) 2025 — declared in Budget 2025 — Malaysian resident individuals who receive dividend income exceeding RM 100,000 per year must pay a 2% tax on the excess. Example: if you receive RM 150,000 in dividends in 2025, only RM 50,000 (the amount above RM 100,000) is taxed at 2%, resulting in a RM 1,000 dividend tax liability. Dividends below RM 100,000 remain completely tax-free under the single-tier system. The 2% rate is flat — it does not increase with income bracket.
Are EPF (KWSP) dividends subject to the new 2% dividend tax?
No. EPF dividends are explicitly exempt from the 2% dividend tax, regardless of amount. This is confirmed by LHDN. EPF declared a 5.50% (simpanan konvensional) and 5.40% (simpanan shariah) dividend for 2024 — these are still 100% tax-free and do not count toward the RM 100,000 threshold. You do not declare EPF dividends anywhere in your Form BE. Only dividends received from Malaysian companies (company distributions from after-tax profits) and applicable foreign-sourced dividends fall under the new rule.
Do I need to declare dividends in my income tax return (Form BE)?
Yes, but only the dividends above the RM 100,000 annual threshold — and only in YA 2025 onward. The dividend is declared in Section C of Form BE (Statutory Income From Dividends, Interest and Discounts). If your total dividend income for 2025 is below RM 100,000, you still list it but your dividend tax will be RM 0 due to the full exemption. The RM 100,000 threshold is per individual, per year — it is not split with your spouse, and it resets each calendar year.
Which dividends count toward the RM 100,000 threshold?
Dividends from Malaysian resident companies under the single-tier system count toward the threshold. This includes: Bursa Malaysia listed company dividends (e.g. dividends from Maybank, Petronas, etc.), unit trust/REITs distributions declared as dividends, private company dividends if paid from single-tier profits, and foreign-sourced dividends that were previously exempt under the remittance exemption but have since been brought into Malaysia's tax net. Dividends explicitly excluded from the threshold: EPF/KWSP dividends, Amanah Saham Nasional (ASN/ASB) dividends, and dividends from companies under the old credit (section 108) system.
How do ASB and Amanah Saham Nasional dividends work under the new rule?
ASB (Amanah Saham Bumiputera) and other Amanah Saham Nasional products are unit trust funds — their annual income distributions are classified as unit trust income, not company dividends. They are not subject to the 2% dividend tax and do not count toward the RM 100,000 threshold. This is a critical distinction: many Bumiputera investors receive RM 50,000–200,000 per year from ASB and ASN products, and all of this remains fully tax-exempt. Only direct company share dividends (e.g. from Bursa-listed stocks you hold directly) count toward the new rule.
What is the 'single-tier' dividend system and why does it matter?
Malaysia moved to the single-tier dividend system in 2008, replacing the old imputation (Section 108) credit system. Under single-tier: companies pay corporate tax on their profits at source (24%), and dividends distributed to shareholders come from after-tax profits — shareholders receive dividends tax-free (no further personal tax). The 2% rule introduced in YA 2025 is a partial reversal: high-income shareholders receiving more than RM 100,000/year in company dividends now pay an additional 2% on the excess. The single-tier logic still applies to the first RM 100,000 (tax-free), but the excess is now taxed at the individual level.
Is the 2% dividend tax retroactive? Does it affect dividends received before 2025?
No. The 2% dividend tax applies only from Year of Assessment 2025 onward — meaning dividends received during the 2025 calendar year (1 January 2025 to 31 December 2025), declared in your Form BE filed by 15 May 2026. Any dividends received in 2024 or earlier are not subject to the 2% rule, regardless of amount. If you received a very large dividend in late 2024 (e.g. a special year-end company dividend), that falls under the old single-tier exemption with no dividend tax. YA 2025 (calendar year 2025) is the first tax year the new rule applies.