Nation

Govt cuts dividend tax to 2 pct after appeals from MSMEs

KUALA LUMPUR: The government had decided to reduce the dividend tax to two per cent from five per cent, after considering the views and appeals from micro, small, and medium enterprises (MSMEs), the Dewan Rakyat heard today.

Prime Minister Datuk Seri Anwar Ibrahim said he took note of the grouses voiced by MSMEs on the dividend tax, which he announced during the tabling of the 2025 Budget.

"Yes, there have been appeals from MSMEs to exempt them because they are different from listed companies.

"They sometimes take relatively small salaries, which they save to invest in their own companies, so there is some justification for this.

"That's why we initially decided on five per cent, but then reduced it to two per cent considering the appeals that have been submitted.

"We think that for a year, those with a shareholding of RM2 million, they will be taxed two per cent which is around RM700 - RM800, and I don't think this is too burdensome."

He said this during Prime Minister Question Time when replying to Khoo Poay Tiong (Pakatan Harapan-Kota Melaka) who had asked about the mechanism for implementing the dividend tax on income exceeding RM100,000 for individual shareholders.

Meanwhile, Anwar said while the government was ready to consider proposals on the implementation of the tax, the administration would not allow for exemptions.

"If there is a proposal for something else, that's fine., but don't propose that we cannot tax the wealthy.

"I find that this is something very strange and contrary to our principle of fair wealth distribution," he added.

When tabling the 2025 Budget on Oct 18, Anwar, who is also the Finance Minister, said the government planned to gradually expand the tax base by introducing a two per cent tax on dividend income exceeding RM100,000 for individual shareholders, beginning in the 2025 assessment year.

Anwar said this was to diversify income tax sources, ensuring that revenue is not solely reliant on contributions from wage earners, but also included earnings from company owners and individuals with substantial shareholdings.

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