# Repatriating Profits and Dividends from Malaysia

> Malaysia levies no withholding tax on dividends under the single-tier system, and imposes no cap on repatriation — but the 2% individual dividend tax and the FEP currency rule catch people out.

- Category: business
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/business/repatriate-profits-malaysia

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Foreign founders arrive expecting a dividend withholding tax, because almost every
comparable jurisdiction has one. Malaysia does not, and the confusion costs real money —
in structures built to avoid a tax that was abolished, and in pricing that assumes a
leakage that never happens.

## There is no dividend withholding tax

Malaysia moved to a **single-tier system**: tax paid by the company on its chargeable
income is final, and the profits are then distributable without further tax.

The operative provision is **paragraph 12B of Schedule 6 to the Income Tax Act 1967**,
which exempts any dividend paid, credited or distributed to any person **other than an
individual** where the company paying it is not entitled to deduct tax under the Act.

So a Malaysian subsidiary paying a dividend to its Singapore, Hong Kong or Delaware parent
deducts nothing and remits nothing to LHDN. There is no form, no clearance and no treaty
claim required — the exemption operates in the shareholder's hands, domestically and
unconditionally.

## The exception: individual shareholders from YA2025

The words "other than an individual" were inserted by **s.17 of the Finance Act 2024**,
and they carve individuals out of the general exemption. In their place:

- **Schedule 6 paragraph 12B(2)** exempts a dividend to an individual **amounting to
  RM100,000 or less**; and
- **Schedule 1 Part XXII**, inserted by s.16 of the same Act, charges income tax at **2%
  on every ringgit above RM100,000** of an individual's dividend income that is deemed
  under s.14 to be derived from Malaysia.

Both have effect **from the year of assessment 2025**, under s.3(1) of Act 862.

**Read the scope carefully, because it is commonly mis-stated as a tax on resident
individuals.** Part XXII charges "the income of an individual", with no residence
qualifier, and the charging provision s.6(1)(x) — which imposes the rate in Part XXII of
Schedule 1 — reaches "an individual, who is a shareholder
of a company, either through direct shareholding **or a nominee**". The gate is that the
dividend is Malaysian-sourced, not that the shareholder lives here. A non-resident
individual holding shares in a Sdn Bhd is within the terms of the charge.

The practical planning point follows directly: **a foreign corporate shareholder is
outside this charge entirely.** Where the ultimate owners are individuals, holding through
a company rather than personally is the difference between paragraph 12B(1) and Part XXII.

## What is not tax-free

The zero rate attaches to dividends, not to every payment to a parent. Sums routed out as
**interest** on a shareholder loan attract withholding under s.109 at 15%, **royalty** at
10%, and fees for the special classes of income under s.109B at 10%. Recharacterising a
distribution as a management fee to move it out of Malaysia converts an untaxed dividend
into a taxed payment — and one whose deductibility is at risk under the s.39(1)
disallowance limbs if the withholding is not paid over.

## The FEP condition people miss

Bank Negara imposes no ceiling on repatriation and requires no approval. **Part E of
Notice 4** of the Foreign Exchange Policy Notices allows a non-resident to repatriate
funds from Malaysia, including income earned and proceeds from divestment of a Ringgit
Asset, on two conditions: the repatriation **is made in foreign currency**, and the
conversion of ringgit into foreign currency is undertaken in accordance with Part B of
Notice 1.

That first condition is the operative one. The Notices contemplate money leaving Malaysia
in foreign currency; a request to transfer ringgit offshore is not what Part E approves.

One useful provision sits in Notice 7. Appendix B allows a resident exporter to receive
less than the full value of its export proceeds where it enters an offsetting arrangement
with a non-resident covering, among other things, **its own dividend payment**. Netting a
dividend against receivables from the same overseas counterparty is expressly
contemplated.

## Common mistakes

**Budgeting for a 5% or 10% dividend withholding tax.** There is none, at any rate, for
any shareholder.

**Assuming the 2% only hits Malaysians.** Part XXII is drafted around the individual and
the Malaysian source of the dividend, not the individual's residence.

**Treating the RM100,000 as an exemption on the whole amount.** It is a threshold: the 2%
applies to the excess above RM100,000, not to the first ringgit once you cross it.

**Chasing a treaty rate.** Domestic law already gives zero to corporate shareholders.
There is nothing for a treaty to reduce.

## What's next

Confirm whether your ultimate shareholders hold personally or through a company, because
from YA2025 that determines whether Part XXII applies at all. Then check the company has
distributable profits and that the directors can properly authorise the distribution under
the solvency requirements in the Companies Act 2016 — the tax position is the easy half.
Finally, agree the settlement currency with your bank before declaring.

## Sources

- Income Tax Act 1967 (Act 53), reprint as at 21 May 2024 — https://www.hasil.gov.my/wp-content/uploads/20240521-akta-cukai-pendapatan-1967-akta-53.pdf (LHDN)
- Finance Act 2024 (Act 862) — https://lom.agc.gov.my/ilims/upload/portal/akta/outputaktap/2592589_BI/Act%20862%20-FINANCE%20ACT%202024.pdf (Attorney General's Chambers)
- Foreign Exchange Policy Notices (Consolidated), in operation 1 October 2025 — https://www.bnm.gov.my/documents/20124/60360/Consolidated+Foreign+Exchange+Policy+Notices_2+Oct+2025_Update.pdf (Bank Negara Malaysia)

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