In Malaysia, capital gains and dividends from stocks are generally not taxed. However, as a Malaysian investing in the U.S. stock market, will you be subject to taxes? This article will provide you with an overview of the key tax considerations for Malaysians investing in U.S. securities, covering dividends, capital gains, and estate tax.
Dividends
When you receive dividends from U.S. companies, the U.S. Internal Revenue Service (IRS) typically withholds 30% of the dividend payment as tax. As a result, the dividend you receive will be 30% less than the amount announced by the company. This withholding tax applies to all non-resident aliens — referring to individuals who are neither U.S. citizens nor U.S. nationals and who have not passed the green card test.
In Malaysia, dividend income from U.S. investments is classified as foreign-sourced income. According to the Inland Revenue Board of Malaysia, starting from January 2022, all foreign income received in Malaysia by a resident is subject to tax.
The good news is that for individuals, since the dividend has already been taxed by the U.S. government, the dividend income received in Malaysia is exempt from tax until the end of 2026. In short, the dividend is taxed in the U.S. but not in Malaysia during this exemption period.
Source: Inland Revenue Board of Malaysia Capital gains
What about the gains you receive when selling stocks in the U.S.? U.S. residents are subject to a progressive capital gains tax on their investments, including stocks, with rates of up to 20% for long-term capital gains (on assets held for more than a year) and up to 37% for short-term capital gains (on assets held for a year or less).
Malaysians who are non-resident aliens and have been in the U.S. for less than 183 days in a calendar year
