Relevant to those sitting ATX-MYS in December 2025 or March, June or September 2026

Introduction

This is the second of two articles provided by the ATX-MYS examining team to update candidates on the legislation and related resources pertaining to advanced taxation in Malaysia, covering areas which are included in the ATX MYS syllabus.

These articles should be read by candidates who are preparing for the ATX-MYS exam in the period from 1 December 2025 to 30 September 2026.

Part 1 provides an overview of the main features of the Malaysian tax system included in the ATX-MYS syllabus as at 31 March 2025.

This article considers the changes brought about by:

• Finance Act 2024, Act 862, gazetted on 31 December 2024
• Measures for the Collection, Administration and Enforcement of Tax Act 2024, Act 863, gazetted on 31 December 2024, and
• Several gazette orders.

It should be noted that the subject matter of tax on gains or profits from the disposal of capital assets (capital gains), which was introduced in Act 851 but amended by the Income Tax (Amendment) Act 2024, continues to be specifically excluded from the ATX MYS syllabus for the exam year of December 2025 to September 2026. This is in view that as at the cut-off date 31 March 2025, the subject matter remained fluid and continues to evolve. Given the exclusion, capital gains will not be discussed in detail beyond a cursory mention in these two articles.

Any reference to a section or schedule in this article refers to a provision of the Income Tax Act 1967 (ITA), unless otherwise specified.

The abbreviations used in this article are:

• CI - Chargeable Income
• DGIR - Director General of Inland Revenue
• EPF - Employees’ Provident Fund
• FSI - Foreign-Sourced Income
• IHC - Investment Holding Company
• IRB - Inland Revenue Board
• LLP - Limited Liability Partnership
• MoF - Minister of Finance
• NR - Non-resident
• RPGT - Real Property Gains Tax
• SAS - Self-assessment system
• SSPN - National Education Savings Scheme
• w.e.f. - with effect from
• YA - Year of Assessment

Finance Act 2024 (Act 862) and Measures for the Collection, Administration and Enforcement of Tax Act 2024 (Act 863)

A. Overview
This Part presents an overview of the measures brought about by Budget 2025 as legislated in the Acts 862 and 863. It refers only to the subject matter included in the ATX MYS syllabus and detailed study guide. Where deemed necessary, further discussion is followed up in Part B.

B. Amendments in detail
Discussed below in further details are some of the budget measures that directly relate to the areas of focus in the ATX MYS syllabus.

1. Tax on individuals on dividends exceeding RM100,000
Prior to YA 2008, income tax on distributed dividends by companies was based on the full imputation system – ie tax imposed at the company level was imputed to the shareholder through tax credits carried by dividends.

YA 2008 saw the introduction of the single-tier tax system: income tax was imposed at a single level (single-tier) on the profits of the company. The tax on company profits is final, and dividends distributed are exempted from tax at the shareholder level.

To broaden the tax base, w.e.f. YA 2025, Finance Act 2024 (Act 862) introduced a Dividend Tax, details of which are as follows:

i. Chargeable Income (CI) from dividend (paid, credited or distributed, in monetary form or otherwise) in excess of RM100,000 received by an individual shareholder is subject to income tax at 2%. The exemption of the first RM100,000 is effected by an exemption [in Paragraph 12B(2), Schedule 6 of the Income Tax Act 1967] which reads:

'Any dividend paid, credited of distributed to an individual, whether in monetary form or otherwise, amounting to RM100,000 or less ......'

ii. Individual shareholders consist of resident and NR individuals, who hold shares directly or through nominees.

iii. The dividend subject to tax is the dividend distributed by a resident company (including a public-listed company) and which is deemed to be derived from Malaysia under section 14. It has been clarified that distribution by an LLP does not constitute a dividend per se, and is thus not subject to dividend tax.

iv. If the taxpayer has dividend income and other than dividend income, the determination of the amount of CI from dividends is based on the following formula¹: 

A  x  C
B                    

Where:             

• A is Dividend statutory income
• B is Aggregate income
• C is Chargeable Income

 In determining the value for A, the following dividends, inter alia, are excluded²:

• Dividend income received from outside Malaysia until 31 December 2036
• Dividend distributed out of an exempt account of a pioneer company or a company granted with the reinvestment allowance
• Dividends distributed by a domestic company out of dividends from Labuan entities
• Profits distributed by the EPF etc or unit trusts
• Dividend (received by an individual) which has been specifically exempted by the Minister of Finance, and
• Etc.

v. Administratively, contrary to expectations, the 2% dividend tax is NOT collected by way of withholding at source. The 2% tax is imposed on the CI from dividends when the annual tax return is submitted by the resident individual (vide Form B or BE) or the NR individual (vide Form M).

The CI on the income from non-dividend sources will continue to be subject to tax at the prevailing rate applicable to the individual under scale rates (for resident individuals) or fixed rate (of 30% for NR individuals).

Illustration 1

Facts
Richie provided the following details:

Required: Calculate the tax payable by Richie for the YA 2025 and YA 2026.

Richie - Calculation of tax payable

2. Exemption of FSI
PU(A) 234 of 2022 granted an exemption to resident individuals in respect of income arising from outside Malaysia and received in Malaysia, as seen below:

'3. (1) The Minister exempts a qualifying individual from the payment of income tax in respect of the gross income from all sources of income under section 4 of the Act, excluding a source of income from a partnership business in Malaysia, which is received in Malaysia from outside Malaysia in the basis period for a year of assessment.

The exemption period was from 1 January 2022 to 31 December 2026.

PU(A) 451 of 2024 extended the exemption by ten years, from 31 December 2026 to 31 December 2036.

The conditions stipulated for the exemption remain as before.

3. RPGT
(a) Carry forward of allowable loss
Up to 31 December 2024, an allowable loss in respect of a disposal may be allowed as a deduction to reduce the total chargeable gain of a person for a YA in which the disposal was made.

W.e.f. 1 January 2025, section 7(4) (a) is amended so that an allowable loss may only be absorbed by a subsequent profitable transaction. The provision now reads as follows:

'7(4)  Where -

(a) There is an allowable loss in respect of a disposal, such allowable loss shall be allowed as a deduction to reduce the chargeable gain of a person in the subsequent disposal of a chargeable asset in the same YA in which the disposal was made;'

This means that the loss may no longer be carried back: it can only be carried forward in the same YA.

If the loss is not absorbed in that YA, the unabsorbed amount may be carried forward, as before, and be absorbed in the first subsequent YA for which there is a chargeable gain, until fully absorbed.

Illustration 2

Facts
Landed Sdn Bhd (LSB) made the following disposals:

(b) SAS for RPGT
W.e.f. 1 January 2025, disposals subject to RPGT come under the SAS. Act 863 introduced the various SAS provisions in the RPGT Act 1976 to facilitate the operation of SAS.

(c) Due date for payment of RPGT
Under the SAS, the RPGT under the deemed assessment upon the electronic furnishing of the RPGT return is due and payable within the period of 90 days from the date of disposal [section 21(4) of RPGT Act 1976].

Note however, the duty of the acquirer to retain and pay part of the consideration [under section 21B, RPGT Act 1976] to the DGIR remains unchanged: the acquirer is required to pay over the tax deducted to the DGIR within 60 days after the date of disposal.

References
1. The formula is stipulated in PU(A) 148 of 2025 Income Tax (Determination of CI of an individual in respect of dividend) Rules.
2. The source of this information is from various clarifications by the IRB.  As at the time of writing, other than the first item, the relevant supporting legislations have not been published yet.

Written by a member of the ATX-MYS examining team