Cooperative Dividends: Are They Exempt from Tax?

Two separate matters

When talking about "cooperative tax", there are two separate matters:

Tax on cooperatives — the rates and exemptions applied to the cooperative's own income. (Source: HASiL — Cooperative Tax — R1.)
Tax on dividend recipients — whether dividends received by members from a cooperative are exempt from personal income tax. (Source: HASiL — Tax Exemptions — R2.)

This article discusses both, but do not mix them up: the first is tax on the cooperative; the second is the exemption for members who receive dividends.

What is a cooperative?

A cooperative subject to cooperative tax is a cooperative registered under the Cooperative Societies Act 1993 (Act 502), as well as Farmers' Organisations (under the Farmers' Organisation Act 1973) and Fishermen's Associations (under the Fishermen's Association Act 1971), which are resident in and derive income in Malaysia. (Source: R1.)

Other entities (e.g. school cooperatives or kariah cooperatives) are still registered under the Cooperative Societies Act 1993, so the same treatment applies as long as they meet the definition above.

Cooperative tax rates

Cooperative income is taxed at progressive rates according to the following categories (Source: R1, full schedule Categories A–H):

Category	Chargeable income	Rate
A	RM1 – 30,000	0% (first 30,000)
B	RM30,001 – 60,000	5% (next 30,000)
C	RM60,001 – 100,000	10% (first 60,000; next 40,000)
D	RM100,001 – 150,000	15%
E	RM150,001 – 250,000	18%
F	RM250,001 – 500,000	21%
G	RM500,001 – 750,000	23%
H	RM750,000 and above	24%

Cooperative tax exemptions

Under Schedule 6 of the Income Tax Act 1967 (ACP), cooperative income may be exempt (Source: R1):

Subparagraph 12(1)(a): for the first 5 years from the date of registration of the cooperative.
Subparagraph 12(1)(b): after the 5 years end, if the members' fund on the first day of the basis period is less than RM750,000.

Important note: even if eligible for the exemption, the cooperative must still complete and submit Form C1 (e-C1). (Source: R1.)

The effect on the status of dividends distributed to members if a cooperative is not eligible for the exemption (e.g. after 5 years the members' fund reaches RM750,000 or more) has not been verified from official sources. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.

Dividends from cooperatives: exemption for recipients

The HASiL Tax Exemptions page lists that among dividend payments exempt from income tax are dividends received from cooperative companies (cooperatives). (Source: R2.)

This means: if you are a cooperative member and receive dividends from the cooperative, that dividend income is generally exempt from your personal income tax.

Caution note:

The exact Schedule 6 provision that exempts cooperative dividends for recipients (paragraph number not identified at this review) still needs to be verified against the act text. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.
The treatment of cooperative dividends for company recipients versus individuals has not been fully verified — page R2 lists generally; check Notes BE/B (individuals) and Note C (companies) for details. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.
Whether this exemption applies fully without limit to all recipients (e.g. residents/non-residents) has not been verified. This item still awaits official confirmation from HASiL — check again with HASiL before deciding.
Do not confuse with ordinary company dividends, which are under the single-tier system — a different treatment route.

Cooperative filing obligations

Form C1 is filed via e-Filing (e-C1) from YA 2024, within 7 months after the end of the accounting period — including dormant cooperatives. (Source: R1.)
Cooperatives must also submit e-CP204 estimates and make CP207 payments. (Source: R1.)
Keep records for at least 7 years. (Source: R1.)