Malaysia Tax Treaties with China

Email: kul4ww@evershinecpa.com
or
Contact us by WeChat or Skype in the day-work-time of Malaysia  (GMT+8)
The Engaging Manager from Headquarter
Vivian Yee, ACCA, C.A. (M)
Skype ID: vivianyeeql;Wechat ID: vivianyeeql

CN-Q-10:
中國母公司在馬來西亞是否可以依DTA申請沒有常設機構(PE)下零稅率?
China Parent Company, can apply for zero tax rate without PE under DTA in Malaysia?

CN-A-10:
Yes.
China has DTA with Malaysia, and if China Legal Resident company is without PE (Permanent Establishment), it will be redeemed as “non-Malaysia Domestic Sourced Income”.
That means Malaysia will levy zero-tax.
However, China Legal Resident company still needs to send zero-tax application to Malaysia Tax Bureau for being approved.

CN-Q-20:
中國母公司在馬來西亞設立了馬來西亞子公司， 中國母公司替子公司服務收入能否申請零稅率?
When China Parent Company as an Investor, set up a Malaysia subsidiary, and provide services from China to Malaysia Subsidiary, can apply for zero tax rate without PE under DTA in Malaysia?

CN-A-20:

According to DTA Article 5 item 7, a Malaysian subsidiary will not be treated as PE of China Parent company as an investor because it is a separate legal entity.
That means if a Malaysia Subsidiary pay a service fee to China Parent Company through a service contract signed between subsidiary and China Parent company
as an investor, China Parent Company can apply zero tax.
As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Malaysia Tax Bureau.

CN-Q-30:  
馬來西亞依DTA沒有PE下零稅率申請的程序為何?
 What is the procedure for Malaysia to apply for zero tax rate under DTA without PE?

CN-A-30:

Under the self-assessment system, when an audit is conducted, it is necessary for foreign residents claiming a tax treaty relief to prove to the Inland Revenue Board Malaysia that they do indeed qualify for the relief.
Among the supporting documents required –

1. Certificate of Residence from the tax authority of the other country overseas to prove the residence status of non-resident foreign resident for each year concerned.
2. Written confirmation on No PE declaration.

CN-Q-40:  
中國母公司有馬來西亞來源所得的各項所得扣繳稅率為何?
When China Resident company has Malaysia domestic sourced income, what are the withholding tax rates for various incomes in Malaysia?

CN-A-40:
China has DTA with Malaysia, and if you are with PE (Permanent Establishment) in Malaysia, your income will be considered as Malaysia domestic sourced income.
As for levying Tax Rate, please be aware:
if Malaysia Tax rate > DTA Rate, adopt DTA Rate; if Malaysia Tax rate < DTA Rate, adopt Malaysia Rate.
If DTA applied, the DTA rates between China and Malaysia are as below:

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.

CN-Q-50
當中國稅務居民有馬來西亞來源所得，依DTA優惠稅率申請的程序為何?
When China Tax Resident has Malaysia domestic sourced income, what is Malaysia’s application procedure based on the DTA preferential tax rate?

CN-A-50:
Under the self-assessment system, when an audit is conducted, it is necessary for foreign residents claiming a tax treaty relief to prove to the Inland Revenue Board Malaysia that they do indeed qualify for the relief.
Among the supporting documents required –

1. Certificate of Residence from the tax authority of the other country overseas to prove the residence status of non-resident foreign resident for each year concerned.
2. Written confirmation on No PE declaration.

Summary of TAX TREATY between Malaysia and CHINA

The Government of Malaysia and The Government of The People’s Republic of China concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 23 November 1985 and take effects from 14 September 1986.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:

*A place of management
*A branch
*An office
*A factory
*A workshop

*The furnishing of consultancy services through employees or other personnel for periods aggregating more than 6 months.

Withholding Tax

*Article 7 of DTA between Malaysia and China explained, Malaysia may not tax payments on business profits rendered by China corporations unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, dividends paid by a company that is a resident of Malaysia to a resident of China shall be exempt from any tax in Malaysia.

*Article 11 states that where China is the beneficial owner of the interest (exempted for interest from government and interest from an approved loan defined in Section 2(1) of the Income Tax Act 1967), shall be taxed in the territory in which it arises at the rate not exceeding 10% of the gross interest.

*Article 12 explained royalties means payment for the use of, right to use, any patent, know-how, trademark, design or model, plan, secret formula or process, copyright of any scientific work, industrial, commercial, or scientific equipment or for information concerning the industrial, commercial, or scientific experience.
15% applicable for the use of, or the right to use any copyright of literary or artistic work including cinematograph films, or tapes for radio or television broadcasting.

*Technical services are covered by the business profits in Article 7.
Malaysian corporations may not tax payments for technical services rendered by a China enterprise unless it is attributable to PE.
Technical services rendered in an independent capacity should be covered in Article 14 (see professional services) instead.

*A professional service or other activities provided by individuals of an independent character was explained in Article 14.
Malaysia corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in Malaysia for 183 days or more.
An independent profession includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation

Article 23 of the DTA states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory.
It shall be credited against the tax levied in the first-mentioned territory on that resident.
However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.

Exchange of Information

Article 26 states that the competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) relevant to the provision of this Agreement.

Contact Us

Kuala Lumpur Evershine BPO Service Limited Corp.
E-mail: kul4ww@evershinecpa.com
or
Contact us by WeChat or Skype in the day-work-time of Malaysia  (GMT+8)
The Engaging Manager from Headquarter
Vivian Yee, ACCA, C.A. (M)
Skype ID: vivianyeeql;Wechat ID: vivianyeeql

or
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please send an email to HQ4kul@evershinecpa.com
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(version: 2024/07)
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