Last Updated on October 30, 2024 by Chin Yi Xuan
Did you know? Depending on where you invest, a tax may be charged on your dividends!
Dividend withholding tax is something that most investors are unaware of when investing.
In this post, let’s learn about dividend withholding tax as a Malaysian, how it affects your investments, and what can you do about it!
Related Read:
Table of Contents
Highlights of dividend withholding tax
- Dividend withholding tax is a tax that investors incur while receiving dividends from their investments.
- Depending on what you invest in (stocks or Exchange-Traded Funds (ETFs)), the withholding tax rate will apply to you differently.
- Dividend withholding tax impacts each investor differently. In particular, dividend investors should be mindful of the tax when making their investment decisions.
What is dividend withholding tax?
Withholding tax is a method that a country uses to collect taxes from non-residents who have derived income from the country.
As an example, when we invest in stocks in a foreign country (eg. the US), the dividends that we received from our investments are usually charged with a withholding tax. To be precise, that’s what we call ‘dividend withholding tax’.
So, how does dividend withholding tax work? How does it affect us as an everyday investor?
Let’s find out!
How does dividend withholding tax work?
Depending on what you invest in, the way a dividend withholding tax will apply to your investments will differ:
Scenario 1: You invest in stocks
If you invest in stocks, your dividend withholding tax rate is determined by your country of residence.
Most of the time, the rate is determined by whether Malaysia has a tax treaty with the other country.
So, if you invest in US stocks as a Malaysian, you are charged with a 30% dividend withholding tax. If you invest in Singapore stocks, you will enjoy a 0% rate as a Malaysian.
Scenario 2: You invest in funds such as Exchange Traded Funds (ETFs)
The dividend withholding tax rate of an ETF is determined by the country where the fund is domiciled in.
Simply put, ‘domicile’ refers to the country where a fund’s holding company is legally incorporated.
What’s the difference though? Glad you asked.
Essentially, not every ETF listed in a country is necessarily domiciled in that country.
For instance, Singapore has its own S&P500 ETF (which tracks the top 500 listed companies in the US) listed on its exchange, namely the SPDR S&P 500 ETF Trust (SGX code: S27). However, if you dig into the fund’s prospectus, you’d notice that S27 is actually a US-domiciled fund.
Hence investors of S27 ETF, regardless of country of residence, are subjected to a 30% dividend withholding tax.

Meanwhile, S&P500 ETFs such as CSPX and VUAA are Ireland-domiciled ETFs listed on the London Stock Exchange (LSE). Since Ireland has a tax treaty with the US, Ireland-domiciled ETFs are only subjected to a 15% withholding tax.
As a result, instead of investing in US-domiciled funds, Ireland-domiciled ETFs are usually the go-to choice for investors outside of the US to gain exposure to the US market due to favourable tax conditions.

READ MORE: Guide: How to invest in S&P500 as a non-US resident
So, how do we pay our dividend withholding tax?
Essentially, there is no need for an investor to ‘pay’ dividend withholding tax directly, as it is deducted automatically from your dividends BEFORE it is distributed to you.
As an example, Apple decides to pay out $0.10 distribution per share to investors. Let’s say you own 1,000 shares, you’d receive:
- With dividend withholding tax deducted (30% for US-listed stocks): $70 in dividends ($0.10*70%*1000 shares)
Be mindful of the latest 2% dividend tax
That said, Malaysians should be aware of the latest 2% dividend tax (which is different from dividend WHT) under budget 2025, which targets Malaysians who generate more than RM100,000 in annual dividends from local companies.
Find out more about the latest 2% dividend tax for Malaysians HERE.

Dividend withholding tax rates for Malaysians
Below, you can find the dividend withholding tax rates relevant to most Malaysian investors:
p
Country | Dividend Withholding Tax Rate |
Malaysia | 0% (10% for REITs) |
Singapore | 0% |
Hong Kong | 0% |
UK | 0% |
China | 10% |
Canada | 15% |
Australia | 15% on unfranked dividends. 0% on franked dividends. |
Japan | 15% |
Ireland-Domiciled ETFs (London Stock Exchange) | 15% |
US | 30% |
How does it affect you?
Dividend withholding tax affects investors differently.
Growth investing – minimal impact
If you invest in growth-related stocks or ETFs like Tesla and ARKW, the impact of dividend withholding tax is minimal.
The reason is, growth stocks do not usually pay high dividends (or they do not pay dividends at all).
Dividend investing – significant impact
As for dividend investors, it is essential to be aware of dividend withholding tax while investing.
Since dividends make up a significant portion of the overall return of dividend-focused stocks/ETFs, it is crucial to take into account the impact of withholding tax.
For instance, assuming you invest $100,000 in a US dividend portfolio that generates a 6% dividend yield annually.
Below is the total dividend that you’d earn without dividend withholding tax (0%):
In this case, a 30% dividend withholding tax would cause you to end up with over 42% (~$93,000) less in dividend income over the span of 20 years!
In short, it is obvious that dividend withholding tax will impact the returns of dividend investors as a whole.
How to deal with dividend withholding tax as an investor
Usually, most investors would look to the US stock market while investing globally.
However, the 30% dividend withholding tax from the US can be very costly, especially to investors holding stocks where dividends form a significant portion of their returns.
Here are some of the things you can do to reduce the impact of dividend withholding tax on your long-term returns:
- Generally, avoid dividend stocks/ETFs that are listed or domiciled in the US. For ETFs, you can find out the domicile details on the official site or prospectus of the fund.
- Opt for stocks/ETFs that are listed or domiciled in markets with 0% withholding tax, such as Singapore and Hong Kong.
- Alternatively, you can also opt for Ireland-domiciled ETFs that are listed on the London Stock Exchange (LSE) or Canadian-listed stocks/ETFs, which are generally more tax efficient (15%).
Regardless of the market, Interactive Brokers (IBKR) has you covered with access to over 150 markets in 34 countries (US, Canada, Malaysia, Hong Kong, China, Japan, UK, Singapore, Europe, and more!).
Check out my review on Interactive Brokers HERE.
Side note:
With 0% withholding tax, the Singapore REIT market is one of the most established REIT markets in Asia, and it pays a decent dividend as well! Click HERE to learn more about Singapore REIT ETFs!
A word on tax on Foreign-Sourced Income (FSI) for Malaysians
As of the production of this post, Malaysians are not required to pay any further tax on dividends received from overseas investments, aside from the existing Dividend WHT explained in this article.
In Budget 2025, the Malaysian government has extended individual income tax exemption for Foreign-sourced Income (FSI) from 2026 to 2036.

In short, for your overseas dividends, you are not required to pay any tax aside from the Dividend WHT mentioned in this post – at least until 2036.
Will any of these policies change (for the better or worse)?
Based on my understanding of the Malaysian government’s policy-making habits, I think it is hard to tell and I have zero control over this. So, I will focus on continuing to grow my dividend portfolio instead of worrying about the things that may or may not happen.
I will keep this section updated if there’s any news!
No Money Lah Verdict
I hope this guide has been clear and helpful!
I’ve received many tax-related questions on dividends in the past and I think we may have overcomplicated things due to a lack proper of information.
If you have any questions, feel free to let me know in the comments section below!
FAQ on Dividend Withholding Tax
Q1: How do I pay for dividend withholding tax on my dividends?
You DO NOT need to pay for dividend withholding tax directly. Instead, they are deducted before your dividends are paid to you. In short, the dividends that you are receiving have been offset by withholding tax – there is nothing you have to do on your end.
Q2: Is dividend investing still a reliable approach with dividend withholding tax around?
Personally, I think dividend investing is still the most reliable way to build passive income. Meanwhile, dividend withholding tax is just part of the game, not a bug.
I will give additional thoughts into withholding tax while doing my research, but it will not deter me from building my dividend income portfolio!
Q3: What is the difference between ‘franked’ and ‘unfranked dividends’ for Australia-listed stocks/ETFs?
A franked dividend is a system set by the Australian government to eliminate double taxation in dividends.
As such, franked dividend is paid with a tax credit attached, where shareholders submit the dividend income plus the franking credit as income but will only be taxed on the dividend portion.
Meanwhile, unfranked dividends carry no tax credit. Since the company has not paid tax on the dividends paid, you will have to pay income tax on the particular dividend that you received as an Australian.
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Disclaimers
Any of the information above is produced with my own best effort and research.
This post is produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Past return is not indicative of future performance. Please seek advice from a licensed financial planner before making any financial decisions.
This post may contain promo code(s) that afford No Money Lah a small amount of commission (and help support the blog) should you sign up through my referral link
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Chin Yi Xuan
Hi there! I am Yi Xuan. I am a writer, personal finance & REIT enthusiast, and a developing trader with the goal to become a full-time funded trader. Every week, I write about my personal learnings & discovery about life, money, and the market.
about the FSI, is it necessary to declare or tax if transfer money from oversea bank account to malaysia bank account?
So far for dividends, there is no need to declare. But for other sources of foreign income, best to consult a tax expert on this matter.
Regards,
Yi Xuan
If I buy US government bonds (i.e., Treasury bonds) as a Malaysian, will I get charged with a withholding tax when I receive the dividends?
Hi Johnson,
Yes u will.
Regards,
Yi Xuan
foreign dividends receive in cheque and bank in into local malaysia bank. do i need to declare it in the BE form?
Dividend income is not taxable until 2026.
Regards,
Yi Xuan
Hi ,since SG and HK stock market has 0% witholding tax, just to confirm, dividend income from the two stock market is still not taxable until 2026 right?
Hi James,
Yup, correct.
Regards,
Yi Xuan
I’d like to understand about the taxes when investing in US index funds. I understand that there is 30% dividend withholding tax and estate tax applies when deceased.
I’m interested in investing in US-domiciled index stocks for long term. Is there any taxes on the capital gain on shares?
Hi Sam,
There is not capital gain tax while investing in US shares as a non-US citizen.
Regards,
Yi Xuan
Hi tq for writing such an insightful article. Would like to clarify, if i but cspx which is an accumulating etf., many years down the road when i decide to sell to cash out, i wont be taxed at all? Or im still subjected to 15% tax?
Similarly fr growth stocks like tesla i wont be taxed at all when i sell it ?
Hi Siu Ming,
The 15% dividend WHT is deducted BEFORE the dividends are re-accumulated, so it all happens behind the scene automatically. So when u decide to sell, nothing will be happening on your side when it comes to dividend WHT.
Same goes to growth stocks when you buy low sell high, as Malaysia do not have capital gain tax for stocks.
Regards,
Yi Xuan
Hi bro, thanks for the great article! Btw I am curious that you still chose to invest in SCHD despite 30% WHT. May I know the reason behind this?
Hi Kumar,
check out my SCHD article. where I explain why I invest in SCHD:
https://nomoneylah.com/2022/11/22/schd-review/#3_key_reasons_why_I_invest_in_SCHD
Regards,
Yi Xuan
You mentioned the dividend franking system used by Australian companies, and that the final dividend received by a shareholder depends on his marginal tax rate as an Australian taxpayer. This is in contrast to the single tier system used in Malaysia where dividends received are net of tax and no inclusion of that income is necessary when a Malaysian taxpayer files his tax return. My question is with regards to the tax treatment when an Australian taxpayer who receives dividends from Malaysian domiciled companies. I read there is a 15% tax in your article under the Double Taxation Agreement between Malaysia and Australia. Could you elaborate in the situation of an Australian taxpayer receiving dividends from Malaysian companies? Thank you in advance.
Hi Chen,
Apologies that I could not help much as I am not super familiar with this particular scenario.
Chin