Malaysia Tax Treaties with other countries

Malaysia has signed Double Taxation Agreements (DTA) with 73 countries.
Double taxation can occur when transactions are involved international or cross-border with another country.
Hence, DTA between two countries can reduce or eliminate double taxation on the same income.
This can be done by claiming foreign tax credits against Malaysian tax. Where a treaty exists, the credit available is the whole of the foreign tax paid or the Malaysian tax levied, whichever is lower.
In the absence of a tax treaty, the credit available is restricted to half of the foreign tax paid.

Malaysia Tax Treaties with Taiwan
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

We set up below judgment criteria on Treaty application:

Scenario:
If you are not a Malaysia legal resident, and if your resident country has DTA with Malaysia, and if you are without PE (Permanent Establishment), please go to Section Ａ.
If you are not a Malaysia legal resident, and if your resident country has DTA with Malaysia, and if you are with PE (Permanent Establishment) please go to Section Ｂ.
If you are not a Malaysia legal resident, and if your resident country has no DTA with Malaysia, please go to SectionＣ.

Section Ａ:
Scenario:
If you are not a Malaysian legal resident, and if your resident country has DTA with Malaysia, and if you are without PE (Permanent Establishment), it will be redeemed as “non-Malaysia Domestic Sourced Income”.
That means Malaysia will levy zero-tax.
However, your still need to send zero-tax application to Malaysia Tax Bureau for being approved.
Below, we will let you understand through Q&A.

DTA-Q-10:
馬來西亞的哪些外國法律居民公司可以依DTA申請沒有常設機構(PE)下零稅率?
In Malaysia, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
Malaysia has signed DTAs with the following 73 countries:

DTA-Q-20:
為什麼在DTA下該國外資沒有常設機構 (PE)之外資所得，可以享受零稅率?
Why does the Country’s foreign capital without a permanent establishment (PE) in Malaysia, under the DTA enjoy zero tax rate?

DTA-A-20:
It follows Article 5 and Articles 7 in the DTA Treaty. The article defines if the foreign entity has PE in Malaysia.
Article 7 regulates if no PE, non-Malaysia domestic sourced income will not be levied tax in Malaysia.

DTA-Q-30:
哪些情況被視為沒有PE，外資在該國設立子公司會被視為外資的在該國的子公司嗎?
Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in Malaysia be regarded as a foreign-funded subsidiary in Malaysia?

DTA-A-30:
According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in Malaysia will not be treated as PE because it is a separate legal entity.
That means if a Malaysia Subsidiary pays service fee to a non- Malaysia Parent Company through a service contract signed between a subsidiary and non – Malaysia Parent company.
As an investor, non- Malaysia Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by Malaysia Tax Bureau.
Please see the Malaysia Transfer Pricing webpage.

DTA-Q-40:
外資在馬來西亞設立分公司或辦事處，可否適用沒有PE下的零稅率?
If a foreign company establishes a branch or office in Malaysia, can the zero-tax rate without PE be applied?

DTA-A-40:
According to DTA Article 5 item 2, If a foreign company sets up a branch or office in Malaysia, then will be considered as Malaysia’s domestic Income.
But According to DTA Article 5 item 4, if an Office is only doing a preparatory or auxiliary activity, will apply zero-tax rate.

DTA-Q-50:
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?

DTA-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.

Section Ｂ:

Scenario:
If you are not a Malaysia legal resident, and if your resident country has DTA with Malaysia, and if you are with PE (Permanent Establishment), 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.
Below, we will let you understand through Q&A

DTA-Q-60:
被視為馬來西亞來源所得的判定要素?
What are the factors that are deemed to be the country’s domestic source income?

DTA-A-60:

1. Interest, Royalty and Special Classes of Income such as technical fees, payment for services, rent/payment for use of moveable property, are deemed derived from Malaysia if responsibility for payment lies with the Government, or a State Government, or a resident of Malaysia, or interest is charged as an outgoing or expense against any income accruing in or derived from Malaysia.
2. Contract payments are deemed derived from Malaysia if the work or professional services are performed or rendered in Malaysia in connection with or in relation to any undertaking, project or scheme carried on in Malaysia.

DTA-Q-70:
DTA第五條及第七條優先於馬來西亞來源所得的判定要素?
Do Article 5 and Article 7 in the DTA take precedence over the Malaysia determination factors on Malaysia’s domestic sourced income?

DTA-A-70:
When DTA is applied, in the event of a different PE definition between Malaysia domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail the domestic regulations.
When DTA is applied, if a foreign company is defined as without PE (Permanent Establishment) in Malaysia, then will be considered non-Malaysia domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.
In this scenario, please see section A.

DTA-Q-80:
當非馬來西亞稅務居民有馬來西亞來源所得，不考慮DTA 情況下，馬來西亞稅法扣繳稅率多少?
When non-tax residents of Malaysia have Malaysia domestic sourced income, what is the withholding tax rate according to Malaysia tax regulations excluding DTA?

DTA-A-80:
The Income Tax Act, 1967 provides that the Payer is liable to make payment as listed below to a non-resident person (NR payee), he shall deduct withholding tax at the prescribed rate from such payment and pay to Director General of Inland Revenue within one month after such payment has been paid or credited to the NR payee.

The withholding tax rates under domestic law are:
Business Profits – 10%
Dividend – 0%
Interest (General loan) – 15%
Royalties fee – 10%
Technical services – 10%
Professional services – 10%

DTA-Q-90:
If DTA Tax Rate is higher than the Malaysian tax rate, apply which tax rate?

DTA-A-90
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.

DTA-Q-A0:
當非馬來西亞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 non-tax residents of Malaysia have Malaysia’s domestic sourced income, what is Malaysia’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:
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.

Section C :

DTA-Q-B0:
As an investor, if your country has not signed DTA with Malaysia, what kinds of tax rates when you have Malaysia relevant income?

DTA-A-Q0:
The Income Tax Act, 1967 provides that the Payer is liable to make payment as listed below to a non-resident person (NR payee), he shall deduct withholding tax at the prescribed rate from such payment and pay to Director General of Inland Revenue within one month after such payment has been paid or credited to the NR payee.

The withholding tax rates under domestic law are:

Business Profits – 10%
Dividend – 0%
Interest (General loan) – 15%
Royalties fee – 10%
Technical services – 10%
Professional services – 10%

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

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please send an email to HQ4kul@evershinecpa.com
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