The recent announcement of a 2% tax on dividend income exceeding RM100,000 annually, introduced as part of Malaysia’s Budget 2025, has sparked concern among SME owners and investors alike. Coming into effect on January 1, 2025, this policy is a departure from Malaysia’s previous tax-free dividend environment, under which shareholders received dividends exempt from personal tax obligations. While ostensibly a minor change, this tax is poised to have a pronounced impact on small and medium-sized enterprises (SMEs) and their owners.