Malaysia and the Netherlands have signed a treaty for the avoidance of double taxation in 1985. Dutch investors who want to open a company in Malaysia should also know that the double tax agreement was amended more than a decade later, in Hague, and its new provisions became applicable starting with 1st of January 2000. Our team of consultants in company formation in Malaysia can offer in-depth information on the tax regulations deriving from this agreement.
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What are the taxes covered by the Malaysia – the Netherlands tax agreement?
As prescribed by the Article 2 of the double tax agreement, both contracting states will apply similar taxes that are available under the national tax legislation of each country. Provided that any of the contracting state modifies its tax regulations, the respective state is legally required to announce the other contracting state on the new taxes (Article 2.2).
In the case of Malaysia, the double tax treaty mentions the following taxes: the income tax and the excess profit tax, the supplementary income taxes (represented by the tin profits tax, the development tax and the timber profits tax) as well as the petroleum income tax. Our team of specialists in company registration in Malaysia may offer more details on the tax rates at which these taxes are imposed to Dutch businesses.
As mentioned by the same Article, the Netherlands will apply to Malaysian tax residents the following taxes: the income tax, the wages tax, the company tax (which also includes any profits obtained from the exploitation of natural resources in the Netherlands) and the dividend tax.
The taxation system available under the Netherlands – Malaysia double tax treaty
In the situation in which a Dutch tax resident is interested in company formation in Malaysia (and vice versa), he or she should know that the taxation of the business will generally be concluded in his or her tax residency country. However, for the profits obtained by the Dutch company in Malaysia, the taxation will be concluded following the applicable legislation in this country. Other relevant aspects are the following:
- if a foreigner obtains profits from immovable property in Malaysia, the person will be taxed in Malaysia;
- the provisions of the double tax agreement stipulate that the meaning of the immovable property will follow the regulations of the country in which the property is located;
- if the Dutch company develops its business activities through a permanent establishment, the company will be allowed to certain deductions;
- in the case of companies that develop business activities in the field of aviation or shipping, the taxation will be concluded only in the country in which the legal entity is a tax resident.
Businessmen are invited to contact our team of consultants in company formation in Malaysia for more information concerning other regulations stipulated by the treaty; our representatives can assist with legal advice on the taxation of dividends, interest and royalties and may also offer advice on the taxation system applicable to certain professions.