How are dividends taxed in Malaysia under the single-tier system?
Malaysia taxes company profits once, at the company level. A company pays no withholding tax on dividends it distributes, and shareholders do not receive tax credits. Dividends from single-tier companies are generally exempt in the shareholder's hands, apart from a new 2% tax for individuals receiving over RM100,000 a year.
Malaysia uses a single-tier system for dividends.
For the company:
- Profit is taxed at the company rate (24%, or the SME scale).
- Dividends paid out of taxed profit carry no further tax at company level, and no withholding tax applies on dividends paid to shareholders (including foreign shareholders).
- Dividends can be paid only from profits and subject to the solvency test under company law, which is a corporate law matter.
For the shareholder:
- Companies receiving single-tier dividends treat them as exempt income, and can pass them on to their own shareholders tax-free.
- No tax credit is attached, so there is nothing to claim back.
- From YA 2025, resident individuals pay a 2% tax on total dividend income above RM100,000 a year, according to PwC's summary. See the separate answer on this.
Bonus shares: a distribution of bonus shares is not taxable.
Practical point: because a dividend is not a deductible expense of the company, owners often compare salary (deductible for the company, taxable for the person) with dividends (not deductible but generally exempt). The right mix depends on the SME rate band, EPF and personal reliefs.
Legal basis
- Income Tax Act 1967, s.108 (single-tier dividends)
- Income Tax Act 1967, Schedule 6 (exemptions)
Sources
Applies to YA 2026 · 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.
Related questions
- What is the corporate tax rate for a small company in Malaysia?A Malaysian resident company normally pays 24% income tax. A company that meets the SME conditions pays 15% on the first RM150,000 of chargeable income, 17% on the next RM450,000 (up to RM600,000), and 24% on anything above that.
- What conditions must my company meet to get the SME tax rates in Malaysia?To use the lower 15%/17% rates, the company must be resident, have ordinary paid-up capital of RM2.5 million or less, and gross business income of RM50 million or less. It must also pass the related-company test and, from YA 2024, a foreign-ownership test.
- Does a dormant company with no income still have to file a tax return in Malaysia?Yes. LHDN says companies that are dormant or have not started business must still register a tax file and file returns. A nil return tells LHDN there is no taxable income, and failing to file can be an offence even when no tax is due.
- What is the Year of Assessment and how does it relate to my financial year?The Year of Assessment (YA) is the calendar year in which your company's accounting year (the basis period) ends. A company with a financial year ending 30 June 2025 reports that income in YA 2025.
- How do I file Form C through MyTax e-Filing?Form C is filed online through LHDN's MyTax portal using the company's tax number and login. You complete the company return, attach no paper, submit, and keep the confirmation. Manual paper submission is no longer accepted for companies.