The clarification by LHDN is aimed at addressing confusion among some taxpayers over taxable dividends, noting that dividends distributed by the Employees Provident Fund (EPF), Amanah Saham Nasional Bumiputera (ASNB), the Armed Forces Fund Board (LTAT) and unit trust funds are excluded.
The board said such distributions are not considered taxable dividend income and therefore do not count towards the RM100,000 threshold.
“Such payments do not fall under the Statutory Income from Dividends Derived from Malaysia (Pendapatan Berkanun Dividen Punca Malaysia) section.
“They are therefore not required to be declared and will not be taken into account in determining whether the RM100,000 threshold has been exceeded,” the board said in a statement to The Star.
The 2% dividend tax was introduced under Budget 2025 as part of efforts to strengthen Malaysia’s tax system and broaden the revenue base without significantly affecting most taxpayers.
It applies to chargeable dividend income exceeding RM100,000 annually, after allowable deductions and reliefs.
The measure also targets higher‑income individuals and addresses a loophole that previously allowed private company owners to receive untaxed dividends in lieu of salaries.
Meanwhile, LHDN said the requirement to declare dividend income exceeding RM100,000 is not limited to dividends derived from personal shareholdings.
It applies broadly to all dividend income received by an individual, including those held through nominee arrangements.
This follows the gazettement of the Income Tax (Determination of Chargeable Income of an Individual in Respect of Dividend) Rules 2025.
“The dividend tax applies to dividends paid, credited or distributed out of a company’s profits to individual shareholders, regardless of whether the shares are held directly or through a nominee arrangement,” LHDN said.
This applies to all individual shareholders, including resident individuals, non-resident individuals and individuals holding shares via nominees, added LHDN.
“Under this measure, a 2% tax is imposed on chargeable dividend income exceeding RM100,000 annually, after taking into account allowable deductions and reliefs.
“This reflects the government’s intention to make the individual income tax structure more progressive while broadening the tax base,” said the board.
Several categories of dividend income remain exempted, including dividends sourced from outside Malaysia, those distributed from companies granted pioneer status or reinvestment allowance.
Also exempted are dividends from tax-exempt shipping companies, cooperatives and closed-end funds, distributions from Labuan entities by residents, as well as exemptions determined by the Finance Minister.
The 2% tax treatment, LHDN added, will be extended to profit distributions from limited liability partnerships (LLPs) beginning the Year of Assessment 2026.
This means individuals receiving more than RM100,000 annually in LLP profit distributions will also be subject to the 2% tax.
“Taxpayers who receive both dividend income and LLP profit distributions exceeding the threshold are required to declare both sources in their income tax return forms,” it added.
The deadline for filing individual income tax for the Year of Assessment 2025 (YA 2025) is April 30 for residents without business income (Form BE), with an e-filing grace period until May 15.
Those with business income (Form B) have until June 30 to file or July 15 for e-filing.
