MALAYSIA’S imputation system of taxation has served the country well over many years. Under this system, tax paid by companies on profits is imputed to shareholders when dividends are paid.
A shareholder is taxed in Malaysia on dividends received at his marginal rate and is credited for tax paid by the company on its profits in so far as imputed to the shareholder when dividends are paid. A foreign shareholder may be treated differently in his home country in respect of the tax deducted from the gross dividend; that is a shortcoming of the imputation system.