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THE Inland Revenue Board (IRB) has clarified that dividends from government-backed retirement and investment funds are excluded from the new 2% tax on dividend income exceeding RM100,000, addressing confusion among taxpayers.
The board said distributions from the Employees Provident Fund, Amanah Saham Nasional Bumiputera, the Armed Forces Fund Board and unit trust funds are not considered taxable dividend income and will not count towards the 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.
The 2% dividend tax, introduced under Budget 2025, applies to chargeable dividend income above RM100,000 annually after allowable deductions and reliefs.
The measure is aimed at strengthening the tax system and broadening revenue collection while largely sparing the majority of taxpayers.
Authorities said the move also targets higher-income individuals and addresses a gap that previously enabled private company owners to receive untaxed dividends instead of salaries.
IRB stressed that the requirement to declare dividend income exceeding RM100,000 extends beyond personal shareholdings to include dividends received 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,” IRB said.
It added that the rule applies to all individual shareholders, including resident and non-resident individuals as well as those holding shares via nominees.
“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 exempt, including those sourced from outside Malaysia and dividends distributed by companies granted pioneer status or reinvestment allowances.
Other exemptions include dividends from tax-exempt shipping companies, cooperatives and closed-end funds, as well as distributions from Labuan entities to residents and exemptions determined by the Finance Minister.
IRB also confirmed that the 2% tax treatment will be extended to profit distributions from limited liability partnerships from the Year of Assessment 2026.
Individuals receiving more than RM100,000 annually in such distributions will be subject to the 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 said.
For the Year of Assessment 2025, the deadline for filing individual income tax returns is April 30 for residents without business income, with an e-filing grace period until May 15.
Those with business income have until June 30 to file, or July 15 if submitting electronically. - March 25, 2026
