Do I pay tax on dividends from my own company as an individual shareholder?
Usually no for single-tier dividends, but from YA 2025 individuals pay 2% tax on dividend income above RM100,000 a year (Schedule 1, Part XXII). It applies to resident and non-resident individuals and to Malaysian-source dividends. Where there is other income, a formula in the 2025 Rules sets the dividend share. Announced exclusions include distributions by KWSP, ASNB and unit trusts.
Dividends paid by a Malaysian company under the single-tier system are exempt in the shareholder's hands, so most small owners historically paid nothing on them. That changed from the 2025 year of assessment.
The 2% tax (Schedule 1, Part XXII)
- It applies to individuals, resident or not, on dividend income above RM100,000 in a year.
- It covers dividends treated as derived from Malaysia (s.14). Foreign-sourced dividends are outside it.
- Where the individual also has other income, the Income Tax (Determination of Chargeable Income of an Individual in Respect of Dividend) Rules 2025 [P.U.(A) 148/2025] fix the dividend share of chargeable income with the formula A / B x C: A is statutory dividend income, B is aggregate income and C is chargeable income. Under joint assessment, the spouse's income is added to B.
- It is collected through the annual return, not withheld at source.
Example. An owner with dividends of RM300,000 and no other income pays 2% on the RM200,000 above the threshold, which is RM4,000. With other income, the formula apportions chargeable income, so get a computation from a tax agent.
Exclusions. Budget 2025 announced that dividends from pioneer-status or reinvestment-allowance companies, shipping companies, co-operatives, closed-end funds and Labuan entities, and distributions by KWSP, LTAT, ASNB and unit trusts, would be excluded, to be given effect by exemption orders. Read the order that applies to your dividend.
Planning point. Compare salary and dividends including this 2% tax, EPF contributions and personal reliefs.
Non-resident shareholders are not subject to withholding tax on single-tier dividends.
Legal basis
- Income Tax Act 1967, Schedule 1, Part XXII (2% tax on dividend income above RM100,000)
- Income Tax (Determination of Chargeable Income of an Individual in Respect of Dividend) Rules 2025 [P.U.(A) 148/2025]
Sources
Applies to YA 2025 onwards · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
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