Tax in Stock Investment

Some people might still confuse on Tax paying on Stock Investment. Here we will share the Taxing in Stock investment.

There is 2 kinds of income in Stock investment. (We don't discuss about lost, because there is no Tax in losing money)

1. Capital Gain
This income generate when you buy a share in a lower price and sell it in a higher price. You can only get this income when you sell off your shares.
This kind of income is TAX FREE!!! We does not need to pay any tax on capital gain. (If you are having an investment company that manage a fund, that is a different case)

2. Cashflow Gain
This income generate when the company decide to pay our a dividend. Normally the divedend will be Tax Deduct upfront. And the Tax deduction is on a maximum rate - 25%(except for REIT and some other kind of share).
In this case, it is better if you report your Dividend in your Income Tax Submition. Because you already paid all the Tax in a maximum rate.

(Malaysia is having a regulation that all the Tax will be deduct upfront before giving dividend starting on year 2012. This means all dividend also will be TAX FREE as well. Because the government already Tax it when the company make profit.)

Eg.
Maybank is giving 11sens devidend in year 2010. And you are having 1000 units.
The cheque that you will get is 11sens x 1000 - 25% = RM 82.50
And you had paid Tax for RM 27.50
Let say your Taxible income highest rate is 14%;
So when you report this Dividen in your Income Tax, you also report the Tax Paid (RM 27.50).
In a way, LHDN need to return you 11% of the tax collected in your divedend = RM 12.10

After all is your duty to report the Tax correctly. Happy investing and paying Tax.