KUALA LUMPUR: Tax on dividend earned by individuals is double taxation to ensure those in the higher income bracket pay more taxes.
On Friday, Prime Minister Datuk Seri Anwar Ibrahim announced that a dividend tax will be imposed at the rate of two per cent on individuals receiving dividend income of more than RM 100,000, from 2025.
Malaysian law firm Wong & Partners partner in the tax, trade and wealth management practice Yvonne Beh said although the tax may be a form of double taxation on income which has been subjected to Malaysian income tax at the company level, this may be seen as an attempt to ensure that individual shareholders in the higher income bracket, pay additional taxes.
"This is consistent with the objective of closing the wealth gap and ensuring a fairer distribution of wealth in the country," she said in a statement.
Malaysia is expecting to increase its revenue collection to RM 340 billion in 2025.
Beh said the proposal relating to enhancing the taxable scope of the sales and service tax, is one of the measures aimed at boosting revenue collection.
She said the proposals include increasing the scope of taxable services subject to service tax to include commercial services between businesses and increasing sales tax on imported premium goods.
"It would be interesting to consider the details of these proposals, in particular what services will be included as taxable services for service tax.
"As there is no mechanism to claim any credits on service tax incurred, the imposition of service tax on new categories of services, may increase the cost of doing business.
"As Malaysia will be implementing the Global Minimum Tax in 2025, it is much welcomed to hear the government's commitment to streamline existing incentives and to provide incentives other than lowered income tax rates," she said.
Meanwhile, Beh said Budget 2025 also proposes under the New Investment Incentive Framework to enhance high-value activities to be carried out in Malaysia with tax incentives for various industries.
For example, renewable energy, carbon capture, utilization and storage (CCUS) activities and the electric and electronic sector, particularly for integrated circuit design activities.
"Specific location specific tax incentives are proposed to spur economic growth in states such as Perlis, Kedah, Kelantan and Terengganu, in 21 economic sectors is also a lauded move, as this will help to balance the economic development in the country and reduce the economic gap between states in Malaysia," she said.
In addition, Beh said the focus on renewable energy and CCUS is commendable, as this will go some ways in helping Malaysia achieve its zero emissions commitment by 2050.
"Tax incentives such as investment tax allowances or income tax exemptions are proposed for CCUS activities.
"There is a continued focus on encouraging adoption of solar energy in residential buildings and government buildings, demonstrating the government's objective to support the sustainability agenda," she added.