Malaysia's 2025 fiscal budget! Don't say it doesn't concern you!
In the budget proposal, what topics are worthy of attention?
KPMG Malaysia believes that the Finance Minister, Datuk Seri Anwar, presenting the 2025 budget proposal demonstrates a serious determination to expand the tax base, ease national debt, and reform the economy.
PricewaterhouseCoopers Malaysia tax director Su Liansheng commented that those earning dividends of 0.1 million ringgit or more will have to pay a 2% dividend tax next year, which is a unique idea of the Chang Ming government, obviously targeting the country's wealthiest 15% cohort.
PricewaterhouseCoopers Malaysia tax director Su Liansheng commented that those earning dividends of 0.1 million ringgit or more will have to pay a 2% dividend tax next year, which is a unique idea of the Chang Ming government, obviously targeting the country's wealthiest 15% cohort.
It is called unique because this tax system cleverly avoids the majority of over 85% of the domestic population, making the disadvantaged groups exempt from the burden of the new tax system.
Su Liansheng also believes that the budget clarifies more details on the carbon tax, will introduce a sugar-sweetened beverage tax, and will reform the Sales and Services Tax (SST) in stages, all of which are expected to bring positive benefits to the country's economic development.
It is called unique because this tax system cleverly avoids the majority of over 85% of the domestic population, making the disadvantaged groups exempt from the burden of the new tax system.
Su Liansheng also believes that the budget clarifies more details on the carbon tax, will introduce a sugar-sweetened beverage tax, and will reform the Sales and Services Tax (SST) in stages, all of which are expected to bring positive benefits to the country's economic development.
However, he hopes that after the above tax measures are proposed, clear regulatory guidelines will be issued, and a careful transition plan will be arranged to ensure the effective implementation of the tax system.
Su Liansheng also appreciates that small and medium-sized enterprises will receive tax incentives and financial support.
Furthermore, the relatively complex tax incentives for "smart logistics," the Johor Forest City Family Office initiative, tax exemptions for electric vehicles, etc., are all measures that he specifically praised.
Su Liansheng also appreciates that small and medium-sized enterprises will receive tax incentives and financial support.
Furthermore, the relatively complex tax incentives for "smart logistics," the Johor Forest City Family Office initiative, tax exemptions for electric vehicles, etc., are all measures that he specifically praised.
Even though a new investment incentive framework will be introduced in the third quarter of 2025, PricewaterhouseCoopers believes that after the implementation of the Global Minimum Tax (GMT), it is still necessary to observe whether our country will lose competitiveness in the international market.
In the eyes of KPMG, the tax exemptions have been expanded to consider the disabled and the elderly, and the minimum wage has been raised to 1,700 ringgit. This budget is obviously people-oriented.
With the consideration of the well-being of the people, the government's series of tax incentives aim to narrow the income gap among the citizens, thereby easing the impact of rising living costs.
In the eyes of KPMG, the tax exemptions have been expanded to consider the disabled and the elderly, and the minimum wage has been raised to 1,700 ringgit. This budget is obviously people-oriented.
With the consideration of the well-being of the people, the government's series of tax incentives aim to narrow the income gap among the citizens, thereby easing the impact of rising living costs.
How is the 2% dividend tax calculated?
Prime Minister and Finance Minister Datuk Seri Anwar said that the scope of this new dividend tax system will cover individual distributions of dividends from listed companies, as well as dividends received through agent holdings.
Subsequently, Anwar further explained the threshold for dividend tax, whereby dividend income exceeding 0.1 million ringgit will be subject to relevant taxes.
It consists of four components in its formula:
A - Statutory dividend income
It consists of four components in its formula:
A - Statutory dividend income
B - Total income
C - Taxable Income
D - Taxable Dividend Income
C - Taxable Income
D - Taxable Dividend Income
Equation for Dividend Tax Calculation:
A/B x C = D
7 Exemption Cases
Also, this tax rate has 7 exemption cases:
1. Overseas dividends;
2. Enterprise dividends with Pioneer Status and reinvestment incentives;
3. Dividends distributed by tax-exempt transportation companies;
4. Dividends distributed by cooperatives;
5. Dividends issued by closed-end funds;
6. Dividends received by residents from Inland Revenue Board of Malaysia;
7. Any exemptions given to shareholders at the shareholder level.
At the same time, this dividend tax also does not apply to four institutions, namely Employees Provident Fund (EPF), Armed Forces Fund Board (LTAT), Amanah Saham Nasional Berhad (ASNB), and any trust units.
Looking back at the existing system, before the evaluation in 2008, the income tax on company dividend distributions was based on a full exemption system. According to this system, dividend taxation is levied at both the company and shareholder levels, but the tax imposed on shareholders will be adjusted based on the tax paid through tax exemptions.
From 2008 onwards, dividends distributed by the company are subject to single-tier income tax. Under this single-tier tax system, the tax on company profits is the final tax, and the dividends distributed to shareholders are exempt from tax at the shareholder level.
A/B x C = D
7 Exemption Cases
Also, this tax rate has 7 exemption cases:
1. Overseas dividends;
2. Enterprise dividends with Pioneer Status and reinvestment incentives;
3. Dividends distributed by tax-exempt transportation companies;
4. Dividends distributed by cooperatives;
5. Dividends issued by closed-end funds;
6. Dividends received by residents from Inland Revenue Board of Malaysia;
7. Any exemptions given to shareholders at the shareholder level.
At the same time, this dividend tax also does not apply to four institutions, namely Employees Provident Fund (EPF), Armed Forces Fund Board (LTAT), Amanah Saham Nasional Berhad (ASNB), and any trust units.
Looking back at the existing system, before the evaluation in 2008, the income tax on company dividend distributions was based on a full exemption system. According to this system, dividend taxation is levied at both the company and shareholder levels, but the tax imposed on shareholders will be adjusted based on the tax paid through tax exemptions.
From 2008 onwards, dividends distributed by the company are subject to single-tier income tax. Under this single-tier tax system, the tax on company profits is the final tax, and the dividends distributed to shareholders are exempt from tax at the shareholder level.
The budget is not friendly to the stock market.
Hoe Leong Investment Bank's retail research director Wu Junsheng told Nanyang Siang Pau in an interview that this is a budget that cares for the people, with no major surprises overall, mainly laying the foundation for our country's economy, with little impact on the stock market.
IFAST research analyst Xu Kaisheng believes that this budget is not very friendly to the market, mainly because the highly anticipated large infrastructure projects were not mentioned, coupled with the bearish news brought by the minimum wage adjustments and additional dividend taxes.
"Projects like the much-anticipated MRT 3, Johor Bahru new transit, and Hoe Leong high-speed rail were not mentioned, which is expected to bring some selling pressure to construction stocks."
IFAST research analyst Xu Kaisheng believes that this budget is not very friendly to the market, mainly because the highly anticipated large infrastructure projects were not mentioned, coupled with the bearish news brought by the minimum wage adjustments and additional dividend taxes.
"Projects like the much-anticipated MRT 3, Johor Bahru new transit, and Hoe Leong high-speed rail were not mentioned, which is expected to bring some selling pressure to construction stocks."
On the other hand, Prime Minister cum Finance Minister Datuk Seri Anwar announced in the 2025 Budget today that the government has decided to raise the minimum wage from 1,500 ringgit to 1,700 ringgit starting from February 1st next year, in addition, non-local employees will also be required to contribute to the EPF.
This is expected to impact companies in labor-intensive industries such as gloves, plantations, construction, etc., with overtime pay based on the new minimum wage, which will increase costs.
Xu Kaisheng said that investors are particularly shocked by the introduction of new dividend taxes in this budget.
This is expected to impact companies in labor-intensive industries such as gloves, plantations, construction, etc., with overtime pay based on the new minimum wage, which will increase costs.
Xu Kaisheng said that investors are particularly shocked by the introduction of new dividend taxes in this budget.
To broaden the tax base, the government will impose a 2% dividend tax on individual dividend income above 0.1 million ringgit starting next year.
"This may prompt investors to consider when investing in banks, REITs, and other high dividend stocks, not to the extent of short selling, but may lack catalysts."
He believes that this may cause some fluctuations in the Malaysian stock exchange and Malaysian stocks.
Possible special dividend.
Regarding dividend taxes, Wu Junsheng also has some opinions, as from the threshold perspective, this is mainly aimed at taxing the rich or fund managers.
He believes that this may prompt some net cash companies to distribute special dividends before next year's implementation.
"In general, the management or decision-makers of companies hold more shares, and it cannot be ruled out that they may profit in advance."
He added that because the government is considering exempting dividend taxes from self-employed provident funds, the National Investment Institutions (PNB), and other large institutions, the expected impact on blue-chip stocks will not be significant.
Focus on two major investment themes
Investors can focus on two main themes suggested by Xu Kaisheng, which are stocks related to the development of Johor and Sarawak.
"In this budget, there is further clarification on the Johor-Singapore Special Economic Zone (JSSEZ), while Sarawak is considered due to political factors and local infrastructure projects."
In addition, Goh Jun Seng believes that investors can not only focus on developments related to Johor, but also pay attention to areas involving green energy and the National Energy Transition Roadmap (NETR), such as utilities.
"At the same time, considering the government's active promotion of Malaysia Tourism Year 2026, areas like aviation, hotels or trusts, consumer, tobacco, and alcohol also have positive prospects."
"This may prompt investors to consider when investing in banks, REITs, and other high dividend stocks, not to the extent of short selling, but may lack catalysts."
He believes that this may cause some fluctuations in the Malaysian stock exchange and Malaysian stocks.
Possible special dividend.
Regarding dividend taxes, Wu Junsheng also has some opinions, as from the threshold perspective, this is mainly aimed at taxing the rich or fund managers.
He believes that this may prompt some net cash companies to distribute special dividends before next year's implementation.
"In general, the management or decision-makers of companies hold more shares, and it cannot be ruled out that they may profit in advance."
He added that because the government is considering exempting dividend taxes from self-employed provident funds, the National Investment Institutions (PNB), and other large institutions, the expected impact on blue-chip stocks will not be significant.
Focus on two major investment themes
Investors can focus on two main themes suggested by Xu Kaisheng, which are stocks related to the development of Johor and Sarawak.
"In this budget, there is further clarification on the Johor-Singapore Special Economic Zone (JSSEZ), while Sarawak is considered due to political factors and local infrastructure projects."
In addition, Goh Jun Seng believes that investors can not only focus on developments related to Johor, but also pay attention to areas involving green energy and the National Energy Transition Roadmap (NETR), such as utilities.
"At the same time, considering the government's active promotion of Malaysia Tourism Year 2026, areas like aviation, hotels or trusts, consumer, tobacco, and alcohol also have positive prospects."
Furthermore, there will be a live online review of the 2025 budget on Saturday (19th), stay tuned.
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