Portfolio growth with reinvested dividends, net of the 2 percent dividend tax.
Final portfolio value
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Dividends reinvested
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Dividend tax paid
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The compounding loop this tool runs
Reinvesting dividends turns a portfolio into a self-feeding machine. Each year your holdings pay a cash dividend, equal to the dividend yield times the portfolio value. Instead of spending that cash, you buy more shares with it, which means next year's dividend is paid on a slightly larger base. The calculator runs that loop year by year. It starts with your initial portfolio, applies the yield to work out the dividend, deducts any dividend tax, adds the net dividend back, then grows the share price by your chosen rate. Two engines are working together: price appreciation on the shares you hold, and an ever-growing dividend stream as your share count climbs. Over a couple of decades, the gap between reinvesting and pocketing the dividends becomes the larger part of your total return.
Where Malaysia's new dividend tax enters the maths
For most Malaysian investors, dividends from shares arrive without a separate dividend tax, and Malaysia has no general capital gains tax on listed shares for individuals, so a share portfolio compounds in a famously tax-friendly way. From the year of assessment 2025, that picture gained one wrinkle. A new tax applies to an individual's chargeable dividend income once it crosses a threshold in a single year. The rate this calculator applies is 2 percent, and it bites only on the portion of annual dividend income above RM100,000, so a year with RM120,000 of dividends is taxed on RM20,000, not the whole amount. Dividends from EPF (KWSP), Amanah Saham Bumiputera, and approved unit trusts sit outside this chargeable figure. The calculator deducts this 2 percent on the excess each year before reinvesting. Because the threshold, the rate, and the exclusions all originate with Budget 2025 and are administered by LHDN (the Inland Revenue Board of Malaysia), treat them as the calculator's modelling assumption and confirm the current rules with LHDN before relying on them.
A RM2.5 million portfolio over five years
Consider a sizeable portfolio of RM2.5 million yielding 5 percent, with 4 percent annual price growth, reinvested for five years. A 5 percent yield on RM2.5 million is RM125,000 of dividends in year one, which exceeds RM100,000, so the 2 percent tax falls on the RM25,000 excess: RM500. As the portfolio grows, the dividend grows too, and the taxable slice with it. Across the five years the tool reinvests about RM742,739 of net dividends, pays RM4,954 of dividend tax in total, and ends near RM3,840,893.
| Year | Start value | Dividend | 2% tax | End value |
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The live chart in the results panel above traces the portfolio breakdown across the full period you have entered. The tax bar stays a thin sliver of the total, which is the honest takeaway: even on a multi-million-ringgit portfolio, a 2 percent levy on the excess barely dents the compounding.
A practical tip and the assumption most people get wrong
The tip: the calculator assumes you can reinvest every ringgit of net dividend, which is the case for fund-level reinvestment or a broker with fractional reinvestment. If you reinvest manually in whole share lots, small remainders sit in cash and your real result will trail the model slightly. The assumption people most often misjudge is the yield. A 5 percent default looks modest, but a yield that high usually means slower price growth, and a yield far above the market average can be a warning sign that the payout is unsustainable. Try lowering the yield and raising price growth to see how a total-return company can beat a high-yield one over time. The tool suits long-horizon investors comparing a reinvest-everything plan against taking dividends as income, and anyone curious whether the 2 percent tax changes their strategy. For most portfolios well under the RM100,000 dividend mark, it does not.
Does the 2 percent dividend tax apply to my unit trust or EPF dividends?
No. The chargeable dividend income that the tax targets excludes dividends from EPF (KWSP), Amanah Saham Bumiputera, and approved unit trusts. If your income comes mainly through those vehicles, the RM100,000 threshold is unlikely to touch you at all. Confirm the current exclusion list with LHDN.
Is reinvesting always better than taking the cash?
Mathematically, reinvesting wins whenever the shares keep compounding at a decent rate, because each dividend buys productive assets. The case for taking cash is behavioural or practical: you need the income, you want to rebalance into something cheaper, or you no longer believe in the holding. The tool shows the pure-reinvestment path so you can judge the size of what you give up by spending the dividends instead.