Malaysia Tax Treaties with Taiwan

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

Tw-Q-10:
台灣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?
Taiwan Parent Company, can apply for zero tax rate without PE under DTA in Malaysia?

Tw-A-10:
Yes.
Taiwan has DTA with Malaysia, and if Taiwan 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, the Taiwan Legal Resident company still needs to send zero-tax application to Malaysia Tax Bureau for being approved.

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

Tw-A-20:
According to DTA Article 5 item 7, a Malaysian subsidiary will not be treated as PE of Taiwan Parent company as an investor because it is a separate legal entity.
That means if a Malaysia Subsidiary pay service fee to Taiwan Parent Company through service contract signed between subsidiary and Taiwan Parent company
as an investor, Taiwan Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgement by Malaysia Tax Bureau.

Tw-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?

Tw-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.

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

Tw-A-40:

Taiwan 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 is applied, the DTA rates between Taiwan 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.

Tw-Q-50
當台灣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 Taiwan Tax Resident has Malaysia domestic sourced income, what is Malaysia’s application procedure based on the DTA preferential tax rate?

Tw-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 Taiwan

The Taipei Economic and Cultural Office in Malaysia and The Malaysian Friendship and Trade Centre in Taipei 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 July 1996 and takes effects from 1 January 2000.

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

Withholding Tax

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

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

*In Article 11 states that interest arising in Malaysia may be taxed in Malaysia according to the laws applicable in Malaysia, the tax so charged shall not exceed 10% of the gross amount of the interest.

*Article 12 explained royalties means payment for the use of, or the right to use, any patent trademark, design or model, plan, secret formula or process, or any copyright of scientific work, or for the use of, or the right to use industrial, commercial, or scientific equipment, or for information concerning the industrial, commercial, or scientific experience.

*Technical services are covered in Article 13. Technical fees arising in Malaysia may also be taxed in Malaysia, the tax so charged shall not exceed 7.5% of the gross amount of the technical fees.

*Article 15 of DTA between Malaysia and Taiwan explained, Income derived by a resident of Taiwan in respect of professional services or other independent activities of a similar character shall be taxable only in Taiwan. However, if stay in Malaysia for a period exceeding aggregate 183 days, such income may be taxed in Malaysia. 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
For  how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System,
please send an email to HQ4kul@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+Vietnam+UK will be accountable for your case.
Email address:dalechen@evershinecpa.com
linkedin address:Dale Chen

Additional Information

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(version: 2024/07)
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