The Dewan Rakyat has passed the Finance Bill 2025, introducing a 2% tax on LLP profit distributions and advancing digital tax administration reforms.
KUALA LUMPUR: The Dewan Rakyat today passed the Finance Bill 2025, detailing amendments to five tax acts.
The bill introduces a tax on profit distributions from limited liability partnerships (LLPs) to individual partners, effective from the Year of Assessment 2026.
Deputy Finance Minister Lim Hui Ying said this aims to equalise tax treatment between individual partners and shareholders, aligning with the 2% dividend tax implemented from YA 2025.
“The imposition of tax on profit distributions received by LLP partners is part of efforts to continuously improve the individual income tax structure so that it becomes more progressive,” she said during the debate’s winding-up.
She clarified that the 2% rate is a minimum and, combined with a RM100,000 threshold, is not expected to place an additional burden on partners.
The government noted suggestions for a comprehensive impact assessment and to reassess the rate to avoid affecting high-value services industry growth.
Lim also addressed concerns about “double taxation” raised by several MPs.
She clarified that an LLP, as a business entity, only pays corporate income tax, while the 2% tax is paid by individual partners.
On the self-assessment stamp duty system, Lim said the approach aligns with international practice and facilitates business processes.
“This self-assessment system involves the use of electronic means in tax calculation and document submission,” she explained.
She added the system, introduced for corporates in 2001 and individuals in 2003, has increased tax compliance and positively impacted national revenue.
The Finance Bill 2025 was debated by eight MPs before its passage.
The Dewan Rakyat also passed the Measures for the Collection, Administration and Enforcement of Tax Bill 2025.
Lim said this bill consists of administrative amendments to regulate tax collection and enforcement more effectively.
It aims to strengthen the digitalisation agenda of tax administration, targeting wider use of digital platforms for filing and processing.
The Measures Bill was debated by six MPs before being passed.
