PETALING JAYA: Extra care is needed when filing for the year of assessment 2025, tax experts warn, as it marks the first year a 2% tax is imposed on dividend income exceeding RM100,000 – a change that could catch many off guard.
Owen KLCA PLT managing director Datin Christine Koh said even a simple review can help taxpayers avoid common pitfalls such as undeclared side income, overstated relief claims and errors linked to the new dividend tax.
“Unlike previous years, dividend income is no longer fully exempt and now carries tax and planning implications.
“Taxpayers must also consider how personal reliefs are allocated, as dividend income forms part of total taxable income. As a result, tax filing has become more complex for individuals with dividend income,” she said.
Introduced under Budget 2025, the 2% tax applies to chargeable dividend income exceeding RM100,000 annually, after allowable deductions and reliefs, as part of efforts to broaden the revenue base without significantly affecting most taxpayers.
Koh also cautioned e-commerce sellers against under-reporting income, noting that digital platforms may issue self-billed e-invoices.
“Do not try your luck by under-reporting, as the data trail is already there,” she said, adding that the Inland Revenue Board (LHDN) can impose penalties of up to 200% for incorrect returns and up to 300% for wilful tax evasion.
She added that poor record-keeping remains a key issue during audits, including missing documents, discrepancies with submitted returns and illegible receipts.
Meanwhile, senior tax policy adviser Dr Veerinderjeet Singh said rushing through filings could result in taxpayers missing out on legitimate reliefs or claiming incorrect amounts.
“One commonly overlooked relief is the lifestyle relief, which covers items such as newspapers, tablets or smartphones, as well as certain medical expenses. Its wide scope makes it easy to miss eligible claims,” he said.
“Common mistakes include failing to claim reliefs one is entitled to, or claiming the wrong amount due to rushed submissions.
“Taxpayers should always review their returns carefully, as an audit by LHDN can be costly.”
The deadline for filing individual income tax is May 15, while those with business income have until July 15.
Earlier this week, LHDN urged taxpayers to update their tax information regularly instead of waiting until the e-filing season, warning that failure to meet obligations could lead to enforcement action.
