The treaties for the avoidance of double taxation are bilateral agreements signed by two contracting states in order to sustain the development of the business relationships established between the two countries, by offering various tax deductions to tax residents of a contracting state. Our specialists in company formation in Malaysia can offer assistance to foreign investors interested in the main benefits they can obtain if they want to start a business here as tax residents of one of the numerous states with which Malaysia signed double tax treaties (DTTs).
| Quick Facts | |
|---|---|
| Double taxation treaties are also known as | Double taxation avoidance agreements (DTAs) |
|
Purpose of a DTT |
To reduce or eliminate double taxation on the same income, if a treaty is signed in this sense. |
|
Tax determination |
If an individual/company is a resident of two contracting states, one of them being Malaysia. |
| DTT models |
Based on: – Organization for Economic Co-operation and Development (OECD), – Model Tax Convention (MTC), – United Nations (UN) Model Double Tax Convention. |
| Document solicited to claim DTT rights |
Certificate of Tax Residence from the country of origin/residence |
| Taxes covered |
– income tax, – petroleum income tax |
| Income covered |
– business profit, – income from immovable property, – dividends, – interest, – royalties, – technical fees, – director’s fees, – pensions, – gains from the alienation of property, etc. |
| Withholding tax (WHT) imposed on |
– dividends, – royalties, – interest Exemptions also apply. |
| Credits available (YES/NO) |
YES |
| Special cases | Where there is no DTT signed, the credit available is restricted to half of the paid foreign tax. |
| WHT on dividends |
No WHT on dividends paid by Malaysian companies |
| WHT on royalties |
7%, 8%, 10%, depending on the treaty |
| WHT on interest |
Ranging between 5% and 15% |
| Resolving double taxation disputes in Malaysia |
With the mutual agreement procedure, a specific process where the Malaysian Competent Authority and a contracting state solve double taxation matters/issues. |
| Working with our Malaysian agents | We assist entrepreneurs and individuals in claiming DTT rights, by managing all the paperwork involved. |
Table of Contents
Contracting states for Malaysian DTAs
The local authorities provide an attractive business environment to those who are interested in opening a company in Malaysia. One of the ways in which foreign entrepreneurs can obtain various benefits refers to the stipulations of the DTAs signed by Malaysia with other countries.
At the moment, Malaysia entered into agreements for the avoidance of double taxation with the following states: Albania, Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Bosnia& Herzegovina, Brunei, Canada, China, Chile, Croatia, Czech Republic, Denmark, Egypt, Fiji, Finland, France, Germany, Hong Kong, Hungary, India, Indonesia, Iran, Ireland, Italy, Japan, Jordan, Kazakhstan, Korea, Kyrgyz Republic, Kuwait, Laos, Lebanon, Luxembourg, Malta, Mauritius, Morocco, Mongolia, Myanmar, Namibia, the Netherlands, New Zealand, Norway, Pakistan, Papua New Guinea, Philippines, Poland, Qatar, Romania, Russian Federation, San Marino, Saudi Arabia, Senegal, Seychelles Republic, Singapore, Slovakia, South Africa, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syria, Thailand, Turkey, Turkmenistan, United Arab Emirates, United Kingdom, United States of America, Uzbekistan, Venezuela, Vietnam, and Zimbabwe.
Withholding tax through DTTs signed by Malaysia
The double taxation agreements in Malaysia imply the following withholding tax (WHT) payments:
- 15% on interest,
- 10% on royalties,
- 0% on dividends.
In certain situations, double taxation in Malaysia can mean WHT on interest of 10%, as is the case with the treaties signed with Albania, Belgium, Cambodia, or China. There are, however, exceptions to this tax, as can be the case of Croatia if all conditions are met. We invite you to find out more about double taxation agreements in Malaysia from our local agents. Our specialists can also help you with company incorporation and tax registration in Malaysia, among others.
Please explore this infographic with information about the DTTs signed by Malaysia with countries worldwide:
US tax treaty with Malaysia
It is good to know that there is no US tax treaty with Malaysia. In this case, worldwide income taxation applies. In other words, an individual pays his/her taxes in the country of residence, in this case, the US or Malaysia. Here is other important information:
- If an American is receiving distributions from a pension plan in Malaysia, the income is going to be tax-free or subject to specific exceptions.
- US taxpayers who have bank accounts in Malaysia, foreign investments, or pension plans in this country might be requested to report the values of these assets, alongside information about the income generated from them.
We suggest you discuss this with our accountants in Malaysia if you want to know more about the US tax treaty with Malaysia.
Malaysia-Singapore double tax agreement
The Malaysia-Singapore double tax agreement is known as the multilateral convention to implement tax treaty-related measures to prevent double taxation. This agreement applies to persons resident in Malaysia or Singapore and refers to income tax and petroleum income tax in the case of Malaysia. In this case, the withholding tax is between 5% and 10% on dividends, under certain circumstances and conditions. The withholding tax on interest does not exceed 10% as agreed by the Malaysia-Singapore double tax agreement. As for royalties, an 8% WHT is imposed. You can find out more about the double taxation agreements in Malaysia from our specialists.
Want to know more about company formation in Malaysia? Are you thinking of setting up a business in Malaysia? You can contact our team of agents and find out more about opening a company in Malaysia and related procedures. We can also tell you more about the double taxation agreements in Malaysia.