Will Malaysia’s new tax on dividends backfire on businesses? Could the 2% tax drive investors and businesses to rethink their strategies—or even push Malaysia’s wealthy to look elsewhere? Or is it simply a symbolic move that adds little to tax revenue while creating an administrative headache? In this episode of P&L, we dive into Malaysia’s new 2% dividend tax on dividend income exceeding RM100,000 for individual shareholders.

Joining us is Dr. Veerinderjeet Singh, Senior Advisor on Tax Policy at KPMG Malaysia, who breaks down the tax’s scope, potential revenue impact, and key concerns surrounding it—including possible double taxation, implementation complexities, competitiveness with tax-free regions like Singapore and Hong Kong, and potential shifts in investor and business behaviour.

Dr. Veerinderjeet sheds light on several core issues, including:

- Progressive Taxation Goals: How does this tax fit into Malaysia’s broader aim to make its tax system more progressive, especially with an eye on wealth redistribution?

- Double Taxation Concerns: Dr. Veerinderjeet discusses whether taxing dividends—derived from already-taxed corporate profits—constitutes double taxation and examines the philosophical justifications behind it.

- Global Competitiveness: How Malaysia’s dividend tax compares to tax-free regions like Singapore and Hong Kong, and why Malaysia may not be able to mirror their tax structures.

- Scope and Exemptions: A look at who is affected, including exemptions for EPF, LTAT, unit trusts, and dividends from companies with tax incentives.

- Investor Behaviour: Will high-net-worth individuals shift portfolios toward capital gains over dividends, or will this 2% rate be too low to drive significant change?

- Business Policy Impacts: Whether the tax might affect business dividend practices, particularly for SMEs and private companies.

- Administrative Complexity: Potential administrative burdens for taxpayers and the government, along with Dr. Veerinderjeet’s suggestion of a withholding tax as a simpler alternative.

- Long-Term Tax Strategy: The need for a clear, long-term fiscal strategy to prevent disruptive, unexpected tax changes for businesses and investors.

Produced by: Roshan Kanesan

Presented by: Roshan Kanesan

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Categories:  economy,  Corporates,  government,  investments

Tags:  double taxations,  dividend tax,  Budget 2025,