EPF Dividends Remain Tax-Free, Says LHDN Amid 2% Dividend Tax Confusion

Malaysia introduced a 2% dividend tax under Budget 2025, and this has raised many questions among taxpayers. Many people are unsure whether dividends from EPF, ASNB, and similar funds are affected.

To address this confusion, Lembaga Hasil Dalam Negeri (LHDN) has clarified how the tax applies and what types of dividends are actually taxable.

The good news is that not all dividends are included under this new tax rule.

EPF & ASNB Dividends Are NOT Taxed

LHDN has confirmed that dividends from several government-linked funds are not subject to the 2% dividend tax.

This includes dividends from:

Employees Provident Fund (EPF / KWSP)
Amanah Saham Nasional Berhad (ASNB)
Armed Forces Fund Board (LTAT)
Unit trust funds

These dividends are:

Not taxable
Not counted toward the RM100,000 dividend threshold
Not required to be declared in income tax filings

LHDN also explained that these distributions are not treated as taxable dividend income under Malaysia’s tax rules.

What Is the 2% Dividend Tax?

The 2% dividend tax was introduced under Budget 2025 as part of Malaysia’s effort to strengthen its tax system. So, how does it work?

A 2% tax is applied to dividend income exceeding RM100,000 per year
The amount is calculated after deductions and reliefs
It applies to individual shareholders

This tax mainly targets higher-income individuals who receive large dividend payouts.

Who Needs to Pay This Tax?

Not everyone needs to worry about this tax. It applies to individuals who:

Receive dividend income above RM100,000 annually
Hold shares directly or through nominee accounts

It applies to Malaysian residents, non-residents, and individuals investing through nominee accounts.

LHDN has confirmed that the rule applies broadly to dividend income received by individuals, regardless of how the shares are held.

What Dividends Are Exempted?

Several types of dividends remain exempt from this tax. These include:

EPF (KWSP) dividends
ASNB dividends
Foreign-sourced dividends
Dividends from pioneer status companies
Dividends from shipping companies
Cooperative dividends
Closed-end fund distributions

Most everyday Malaysians who rely on savings schemes like EPF and ASNB will not be affected.

LLP Income (Important Update)

Starting from Year of Assessment (YA) 2026, there is an important update. Profit distributions from Limited Liability Partnerships (LLPs) will also be subject to the 2% tax if total distributions exceed RM100,000 per year

Taxpayers who receive both dividend income and LLP distributions above the threshold must declare both.

Filing Deadline

For income tax filing, the deadlines remain the same:

Form BE (without business income)
- 30 April
- 15 May (e-Filing)
Form B (with business income)
- 30 June
- 15 July (e-Filing)

Taxpayers need to check whether their dividend income exceeds the threshold and file accordingly.

FAQs

Do I need to pay tax on EPF dividends?

No. EPF dividends are tax exempt and do not need to be declared.

Is ASNB dividend taxable in Malaysia?

No. ASNB dividends are also not taxable.

What is the 2% dividend tax?

It is a tax introduced in Budget 2025 on dividend income exceeding RM100,000 per year.

Who needs to pay dividend tax in Malaysia?

Only individuals with high dividend income above RM100,000 annually.

Do I need to declare the EPF dividend in the tax form?

No. EPF dividends do not need to be declared and are not included in taxable income.

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