Tax by what you do · Investors · Dividend income
Dividend tax Malaysia: who pays the 2%.
For almost everyone, the answer is nothing. Malaysia's new 2% dividend tax, which starts in Year of Assessment 2025 and shows up the first time you file in 2026, only bites on dividend income above RM100,000 a year. Even then it is just 2%, and only on the part over that line. The big sources most Malaysians actually hold, like EPF and ASB, are exempt and do not count at all.
Who actually pays the 2%?
Resident individual shareholders, but only once your taxable dividend income for the year goes past RM100,000. If your dividends for the year add up to RM100,000 or less, this tax does not touch you, and there is nothing extra to declare. It was introduced by the Finance Act 2024 (Part XXII of Schedule 1 of the Income Tax Act 1967) and applies from YA 2025, so 2026 is the first filing where it appears.
It is a small, targeted tax on high dividend income, not a tax on ordinary investors. Below the line, dividends from Malaysian companies stay under the single-tier system: taxed once at the company, and not again on you.
The RM100,000 you deduct yourself
Here is the part that trips people up. On Form BE, LHDN does not do the RM100,000 subtraction for you on screen. Its own guide notes (Nota BE, item B2) tell you to deduct the first RM100,000 yourself from your statutory dividend income and enter only the excess. In LHDN's own worked example, someone who receives RM2,500,000 in dividends reports RM2,400,000.
This is why an early reading of the portal looked like there was no threshold at all: the portal shows no subtraction because the subtraction is meant to happen before you type the number in. Get this wrong and you over-declare. MyTaxMate applies the RM100,000 deduction automatically, so the figure it prepares for your Form BE is already the correct net.
What is exempt (which is a lot)
This is the part most headlines skip. Several of the biggest sources of dividend income are exempt, and they do not count towards the RM100,000 at all:
Dividend income
Counts towards the RM100,000
Then 2% on the excess
- Dividends from Malaysian companies paid to you
- Whether held directly or through a nominee
- Only the slice above RM100,000 a year
Exempt, never counts
Ignore these entirely
- EPF (KWSP) dividends
- Unit trusts: ASB, ASN and other ASNB / PNB funds
- Cooperative dividends
- Most foreign-sourced dividends
- Pioneer-status, Labuan and closed-end fund dividends
EPF caused real confusion when this first landed, so LHDN said it plainly in early 2026: EPF dividends stay tax-free. If your dividends are mostly EPF, ASB or other unit trusts, you can stop here.
Worked example · RM250,000 in Malaysian dividends
So on RM250,000 of dividends, the tax is RM2,820, not RM5,000, because the first RM100,000 comes off and reliefs still apply to what is left. Someone with RM80,000 of dividends declares nothing and pays RM0. Want to sanity-check your own numbers? Our free tax calculator runs the current rates.
How to report it
It goes through self-assessment, on the same annual Form BE you already file, not as a separate payment during the year the way an employer deducts PCB. You enter the net dividend figure (after the RM100,000 deduction) in the dividend box, and the 2% is settled when you file. If you also run a business, the same dividend rule applies on your Form B instead. Keep your dividend vouchers and statements, and remember records are kept for 7 years.
What to do next
First, add up only your taxable dividends, leaving out EPF, ASB and other exempt sources. If that total is RM100,000 or less, you are done. If it is more, subtract RM100,000 and it is the balance that gets the 2%. New to putting investment income on a return? The side income guide shows where it sits alongside a salary, and the relief checklist covers the reliefs that still reduce the bill.
Frequently asked questions
I only get EPF and ASB dividends. Do I pay this?
No. EPF (KWSP) payouts and unit trust distributions like ASB and ASN are exempt, and they do not count towards the RM100,000 at all. For most people this is where their dividends come from, so the tax never touches them.
My dividends are RM120,000. How much tax?
Only the RM20,000 above the line is in play. You declare RM20,000, and 2% of that is RM400 at most, before reliefs. For many filers the RM400 rebate or their reliefs bring even that down to zero.
Do I enter the full dividend, or just the excess?
Just the excess. LHDN's Form BE (Nota BE, item B2) tells you to subtract the first RM100,000 yourself and enter only the balance. In LHDN's own example, RM2,500,000 received is reported as RM2,400,000. MyTaxMate does this subtraction for you.
Are my foreign dividends taxed here?
Most foreign-sourced dividends received by a resident individual stay exempt under the current order, so they do not count towards the RM100,000 either. It is Malaysian company dividends that this tax is about.
Is this a second tax on the same dividend?
It is a new, separate 2% charge that starts from YA 2025 on the slice of your dividends above RM100,000. Below that line, dividends from Malaysian companies stay taxed once at company level and not again on you.
