Double Tax Agreement Malaysia
With regard to international trade and investment, double taxation is achieved when the same income is taxed in two different countries. This can happen when a taxpayer`s income flows between two countries. Since different countries have their own tax legislation, these income streams can be taxed in both countries and thus penalize the taxpayer. One of the most effective mechanisms to solve this problem is a treaty to avoid double taxation. It is essentially an agreement between two countries that determines which country is entitled to have taxes when income flows between the two countries. The main objective of such an agreement is to ensure that taxpayers are not penalised by double tax payments, while there is no tax evasion. In order to promote trade between the two countries, the DBA often provides for a reduction in net taxation. This article highlights the important provisions of the Malaysia-Singapore DBA, its tax applicability, tax rates, the scope of the agreement and other benefits of this DBA. The approach to avoid double taxation of savings income is similar to the dividend approach described above. Interest is taxed in the country where the beneficiary resides, i.e. country B. The main reason for countries` double taxation is the deterrence of international trade.
This is due to the fact that the country`s government might believe that commercial expertise, which could be involved in business transactions in the country, will be exported abroad. There is another possible reason if the two countries involved do not have peaceful relations. The profits of an enterprise of a Contracting State may be taxed only in that State, unless the enterprise carries on business in the other Contracting State by means of an indication of business management. However, in the other Contracting State, only the part of the profit attributable to the MOU may be taxed. For the purposes of determining the profits of the MOU, all expenses and deductions that could reasonably be attributed to the MOU and deductible if the MOU were an independent undertaking shall be admitted, and the profits of the MOU shall be determined as if it were a separate and distinct undertaking which carries on the same or similar activities under the same or similar conditions and which acts independently with the undertaking: Of which it is an EP. . . . .