Director Salary, Fee or Dividends: How to Pay Yourself from a Sdn Bhd

Once your Sdn Bhd makes a profit, you have to decide how to get the money out. As a director and shareholder, you can be paid in each role. You can pay yourself a salary, a director fee, dividends, or a mix. Each is taxed differently, and each has its own rules on EPF, SOCSO and PCB.

This guide covers how each route works, what the 2% dividend tax means for you, and what the Companies Act requires before you pay a dividend. It ends with an example at RM150,000 profit, worked out with the same tax tables as our company tax guide.

Three ways to pay yourself

Paying yourself a salary

A salary is an expense for the company, so it reduces the profit the company pays tax on. You pay personal income tax on it at the resident rates, which start at 0% and rise to 30%. Your company deducts PCB (monthly tax deduction) from your pay each month and pays it to LHDN by the 15th of the next month, like it does for any employee.

EPF is compulsory for salaried directors. KWSP lists "directors receiving salary/wages" among the people who must contribute, and says all salaried directors must register as members. Below age 60, you pay 11% and the company pays 13% on wages up to RM5,000 a month, or 12% above. Non-Malaysian directors on a salary pay 2% each, from October 2025 wages. The company's share is deductible, and your share counts toward the RM4,000 EPF relief.

SOCSO and EIS follow employment. PERKESO covers people "employed for wages under a contract of service". If you work in the business on a monthly salary, you're likely an employee, even of a company you own, and SOCSO and EIS apply like for other staff (EIS stops at 60). A director who doesn't work in the business is generally outside both. PERKESO decides on the facts, so check with them if you're unsure.

Can you employ yourself? Yes. In Acexide Technology v Chang Heng Keong (2026), the Federal Court said "there is no prohibition in law for an individual to simultaneously be both a company Director and an employee of the same company". A contract of service doesn't have to be written: KWSP says it "can be written or verbal, expressed or implied".

To see the monthly numbers for a salary, use our salary calculator. At RM5,000 a month, PCB comes to RM110 for a single person with no other reliefs.

Paying yourself a director fee

A director fee pays you for the board role: attending board meetings, signing off the accounts, and the legal duties that come with being a director. It isn't pay for running the business day to day. For the company, it's deductible like a salary. For you, LHDN taxes it at the same personal rates as a salary: the Income Tax Act counts an office such as a directorship as employment, and lists fees in employment income (section 13(1)(a)).

PCB applies. LHDN's PCB rules treat a director fee that isn't paid monthly as additional remuneration. The company deducts PCB in the month it pays the fee, using the same formula as a bonus.

If you work in the business, your pay for that work is a salary. Most owner-directors of a small Sdn Bhd do more than sit on the board: they sell, deliver the work and manage staff. That work is done as an employee, and the pay for it is wages. EPF's definition of wages covers "all remuneration in money" due under a contract of service, whatever it's called, and KWSP lists "any company director who receives wages or remuneration for services rendered to the company" among those who must contribute. So for most founders, the main way to pay yourself for your work is a salary with EPF, plus SOCSO and EIS. Our guide to EPF, SOCSO and EIS for employers covers the rates and deadlines.

A fee on top is fine, for the board role. A modest yearly fee for your board duties, approved by the board, is normal. Calling your monthly pay a fee to skip EPF is not. KWSP and PERKESO look at what the payment is for, not its label, and courts treat regular pay plus EPF and SOCSO as strong evidence of employment. If KWSP treats your fee as wages, the company owes the missed contributions plus late payment charges, and directors are personally liable for unpaid EPF (EPF Act 1991, section 46).

When fees alone make sense. A director who isn't involved day to day, such as a co-founder who has stepped back or an investor on the board, is usually paid fees only, with no EPF.

Who approves it. In a private company, the board can approve directors' fees and benefits, subject to the constitution. In a public company, shareholders must approve them at a general meeting. The approval goes in the minutes, and the board must tell shareholders within 14 days (Companies Act 2016, section 230). Shareholders holding at least 10% can ask for a shareholder vote if they think a fee isn't fair to the company.

Paying yourself dividends

Single-tier dividends. The company pays tax on its profit first, and that tax is final. Dividends come out of what's left, and they're not deductible for the company.

The 2% dividend tax. From YA2025, individual shareholders pay 2% on Malaysian dividend income above RM100,000 a year. It applies to:

• dividends from both listed and unlisted Malaysian companies, in cash or otherwise
• resident and non-resident individuals, and shares held through a nominee

The first RM100,000 is exempt, so RM150,000 of dividends means 2% of RM50,000: RM1,000. When you have other income too, the rules (P.U.(A) 148/2025) share out your reliefs between dividend and other income, so the taxable dividend can be a little lower.

What's exempt. Dividends from abroad, from the profits of companies with pioneer status or reinvestment allowance, from tax-exempt shipping profits, from co-operatives and closed-end funds, and from Labuan entities. Distributions from KWSP, LTAT, ASNB and unit trusts aren't caught either. Dividends paid to a company shareholder aren't subject to the 2% tax.

How you pay it. The company doesn't withhold anything. You declare the dividend in your own tax return (Form BE, B or M) and pay the tax there.

Profits and solvency come first. A company can only pay a dividend out of profits, and only if it's solvent (section 131). The directors must authorise each distribution and be satisfied that, right after it, the company can pay its debts as they fall due within the next 12 months (section 132). Paying an improper dividend knowingly is an offence for the directors, and shareholders who knew can be made to pay it back (section 133). In practice, look at your latest accounts, cash flow and upcoming bills, and record the solvency check in a directors' resolution.

Company tax rates in 2026

Dividends come out of after-tax profit, so the company's rate matters. Here are the YA2026 rates for an SME company:

A company that is more than 20% owned by foreign companies or non-Malaysians doesn't get SME rates. It pays 24% on all its profit, which makes a salary more attractive compared with dividends. The full conditions are in our company tax guide.

An example: RM150,000 profit

Say your company makes RM150,000 profit in YA2026 before paying you, and spends RM2,188 on its company secretary and tax filing. You're Malaysian, below 60, single, with no other income. You work in the business, so any salary comes with EPF, SOCSO and EIS. Everything the company has left after tax is paid out as dividends. The mix is a RM5,000 monthly salary. Most salary is RM10,800 a month, about as much as the profit can pay once the company's EPF, SOCSO and EIS are added.

What this shows:

• All dividends pays the most tax. The company pays 15% on almost all the profit, you get no personal relief, and nothing goes to EPF. It also only fits if you don't work in the business. If you do, the company is expected to pay you a salary for that work, with EPF.
• All salary moves the tax onto you. Once your chargeable income passes RM70,000, your personal rate (19%, then 25%) is above the company's 15%, so the last part of a big salary costs more tax than paying it as a dividend.
• The mix sits in between. In this example, the lowest total tax comes at about RM7,000 a month: RM11,674 in tax and RM134,245 in cash plus EPF.

Under the rates proposed in Budget 2027 for YA2027, the same split gives about RM135,259 at RM7,200 a month, and all dividends RM126,576.

This is an estimate with simple assumptions: KWSP and PERKESO contribution tables, only the individual, EPF and SOCSO reliefs, no other income, no director fee, and an SME company that is audit-exempt. Your own numbers will differ with other reliefs, a spouse or children, an audit fee, or profit kept in the company. The salary also has to match the work you do, which is the next point.

Keep it reasonable

LHDN allows a deduction for expenses wholly and exclusively incurred in producing the company's income (section 33(1) of the Income Tax Act 1967). A salary that matches the work you do, and a fee that matches the board role, are normal. Paying a large salary to a family member who doesn't work in the business, or timing payments only to move income between tax years, can be challenged, including under the anti-avoidance rule in section 140.

If the company gives you a car, a house or other benefits, those are taxable for you as benefits in kind, on top of your salary or fee (LHDN Public Ruling 11/2019).

Keep the paperwork tidy: a board resolution for fees and dividends, a short employment letter, payslips and EA forms for salary, and PCB, EPF, SOCSO and EIS paid on time.

Tax is only one factor

The lowest tax isn't always the right answer. Before you settle on a split, think about:

• EPF is locked away. Most of it stays in your account until 55. Cash from dividends you can use now.
• Loans. Banks usually want payslips, EA forms and EPF statements for a home loan. A steady salary helps more than one large dividend.
• SOCSO cover. As an employee of your company, SOCSO covers you for work accidents and invalidity, and LINDUNG 24 Jam adds cover outside work.
• Cash flow. A salary is a monthly commitment. Dividends can wait until the year's profit and cash are clear.
• Keeping profit in the company. If you're growing, leaving profit in the company at 15% can make more sense than paying it out.

If you're still choosing a structure, our Enterprise vs Sdn Bhd comparison shows at what profit a Sdn Bhd starts to pay off.

FAQ

Is a director fee subject to EPF, SOCSO and PCB? PCB: yes. LHDN treats a director fee not paid monthly as additional remuneration, so the company deducts PCB when it pays the fee. EPF, SOCSO and EIS: generally no, if the fee pays only for the board role. If you also work in the business, pay for that work is wages, so EPF, SOCSO and EIS apply whatever the payment is called.

Is it better to take salary or dividends from a Sdn Bhd? For most owner-directors a mix works out lowest in tax: a salary up to the point where your personal rate passes the company's rate, then dividends from what's left. At RM150,000 profit in YA2026, our example keeps about RM134,245 with a mix (including EPF), against RM125,127 with dividends only. If you work in the business, part of that salary is usually needed anyway.

Are dividends taxable in Malaysia? Dividends are single-tier, so the company's tax on its profit is final. From YA2025, an individual shareholder pays 2% on Malaysian dividend income above RM100,000 a year, on the part above RM100,000 only. Foreign dividends, Labuan, co-operative and some other dividends are exempt.

Can I be an employee of my own company? Yes. The Federal Court confirmed in 2026 that there is no bar to one person being both a director and an employee of the same company. A contract of service can be written, oral or implied. If you work in the business day to day on a monthly salary, you're likely an employee, so EPF, SOCSO and EIS apply like for other staff. A director who only attends board meetings is generally not.

Can my company pay a dividend any time? Only out of profits, and only if the directors are satisfied the company will be solvent right after the payment: able to pay its debts as they fall due for the next 12 months (Companies Act 2016, sections 131 and 132). The directors authorise it and should record the solvency check.

Board resolutions for directors' fees and dividends are part of what a company secretary does. Our company secretary plans start at RM99/month (RM1,188 a year, billed yearly, plus SST). Questions about paying yourself? WhatsApp us.

Sources

• LHDN: Form BE explanatory notes (dividend tax scope: listed and unlisted shares, residents and non-residents, nominees; P.U.(A) 148/2025). Checked 12 October 2026.
• Ministry of Finance: Budget 2025 Tax Measures (2% dividend tax, RM100,000 threshold, exemptions). Checked 12 October 2026.
• LHDN: responses on issues arising from the 2025 Budget (dividend tax applies to individual shareholders only). Checked 12 October 2026.
• Income Tax (Determination of Chargeable Income of an Individual in respect of Dividend) Rules 2025 [P.U.(A) 148/2025], gazetted 7 May 2025.
• LHDN: Specification for MTD calculations using the computerised calculation method, 2026 (director's fee as additional remuneration). Checked 12 October 2026.
• KWSP: employer mandatory contribution (salaried directors must register and contribute; wages and non-wages; contract of service can be verbal or implied). Checked 12 October 2026.
• KWSP: who can contribute (company directors paid for services rendered to the company). Checked 12 October 2026.
• Employees Provident Fund Act 1991, section 2 ("employee", "wages") and section 46 (directors' liability).
• Acexide Technology Sdn Bhd v Chang Heng Keong [2026] 5 MLRA 455 (Federal Court: a director can also be an employee of the same company). Checked 12 October 2026.
• PERKESO: contributions and coverage (employees under a contract of service; EIS coverage). Checked 12 October 2026.
• Companies Act 2016, sections 131 to 133 (distributions out of profits, solvency test, recovery) and section 230 (approval of directors' fees), via Laws of Malaysia Online. Checked 12 October 2026.
• Income Tax Act 1967, sections 2 ("employment"), 13(1)(a), 33(1) and 140; LHDN Public Ruling 11/2019 (benefits in kind).
• Ministry of Finance: Budget 2027 Tax Measures (proposed YA2027 SME and personal rates; no change to dividend tax). Checked 12 October 2026.
• PwC Worldwide Tax Summaries: Malaysia taxes on corporate income (SME conditions). Checked 12 October 2026.

This guide is general information and an estimate of how the rules apply, not tax advice. Budget 2027 measures are proposals until the Finance Act is gazetted. Last updated: 12 October 2026.

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