What Is Double Tax Agreement Malaysia

What Is Double Tax Agreement Malaysia

Singapore added Malaysia to its list of double taxation conventions in 1968. The agreement was amended in 2004; These changes came into effect in 2007, both for Singapore and Malaysia. This agreement has made a significant contribution to improving trade and investment between Singapore and Malaysia. The DBA is a comprehensive document that deals with revenues from different types of sources such as corporate profits, personal income, shipping, aviation and road transport, etc. In Malaysia, double taxation is generally in effect when a Malaysian subject enters into international or cross-border transactions on the territory of another country. DBA provides a mutual understanding of the treatment of income or benefits received by Malaysian citizens or citizens of the other country concerned, outside Malaysia or within Malaysia. This article highlights the important provisions of the DBA between Malaysia and Singapore, its tax applicability, tax rates, the scope of the agreement and other benefits of the DBA. The DBA imposes double taxation when income is taxed in the two contracting states. In the case of Malaysia, Singapore tax due on Singapore`s income can be considered a credit in relation to Malaysian tax payable for those incomes. The Malaysian tax due on Malaysian income is accepted as a tax credit payable for these incomes in Singapore. The credit thus granted must not exceed the tax calculated before the transfer of credit by the country concerned. For the calculation of solvency, the tax payable does not take into account the specific exemptions, exemptions or subsidies granted by the respective jurisdictions and takes into account the taxable tax payable in the absence of such exemptions and reductions.

In the case of dividends paid by a Singaporean company to a Malaysian company or a resident company holding at least 10% of the voting rights in the paying company, Malaysia takes into account the Singapore tax payable by that company for its income on which the dividend is paid, but the credit must not exceed the portion of the Malaysian tax. , as calculated before credit was granted. Accordingly, in the case of a Singapore beneficiary, a credit equal to the Malaysian tax that the company must pay for its income for which the dividend is paid is taken into account. Malaysia and Singapore have strong, diversified economic and financial ties that include bilateral trade, investment and tourism. This relationship is underpinned by a rich, albeit tumultuous, cultural and political history between the two countries; they were one nation until a few decades ago. In order to deepen economic relations, the two countries have implemented an agreement on double tax evasion (DBA) that helps individuals and businesses avoid double taxation of income. The DBA aims to facilitate trade, investment and technical know-how between the two countries.