Unlocking the Impact of the New Dividend Tax

Introduction

Following the introduction of taxes on Foreign Sourced Income in 2022 and the Capital Gains Tax in 2023, share investors are now bracing for another significant tax change: the Dividend Tax on their dividend income. As announced in the 2025 Budget by Prime Minister Dato’ Seri Anwar Ibrahim on 18 October 2024, a 2% Dividend Tax will be imposed on individual shareholders with annual dividend income exceeding RM100,000, starting from the year of assessment 2025.

This new Dividend Tax introduces a slight shift from the Single-Tier Tax System (STTS), which has been in place since 1 January 2008. Under the STTS, companies pay dividends without deducting tax at the corporate level and shareholders are exempt from tax on dividend income, regardless of the amount. However, under the new Dividend Tax regime, dividends would effectively be taxed twice: first at the corporate level and again at the shareholder level on income exceeding RM100,000.

For individual shareholders expecting dividend income above this threshold in 2025, the main concern will be the additional tax burden and how to effectively manage and plan their investments to minimise its impact.

From a company’s standpoint, the Dividend Tax may affect the attractiveness of their shares to larger investors, particularly those who typically earn significant dividend income. As a result, companies might need to reassess their dividend policies and consider alternative methods of rewarding shareholders to maintain the appeal of their stock.
Like any new tax measure, the implementation of the Dividend Tax is likely to raise technical and operational challenges. Stakeholders will require time to adapt and address these issues as the tax comes into effect.

Join our webinar, where our tax experts will explore the complexities and implications of the new Dividend Tax, providing insights for both individual investors and companies.

Fee Structure

• Crowe Client: Complimentary
• Individual rate: RM300nett / pax

Limited seats available. Register now!