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Double Tax Treaties in Malaysia

Double Tax Treaties in MalaysiaIntending to do business in Malaysia? You need to be aware of the local tax laws and compliance requirements. This includes double tax treaties in Malaysia.


What Does A Double Tax Agreement Mean?

A Double Tax Agreement between two countries eliminates the need for their citizens to be taxed on the same income twice.

When two countries have a DTA, their citizens will only be taxed once during cross-border trade or business activities involving these two nations.


What If I Have a Dual Residency? How Am I Being Taxed?

If you are a resident of two countries, your tax liability will be determined based on conditions including:

  • The country of your home residence. Which country takes priority if you have a permanent home in both countries? Take your economic and personal relations into account.
  • Your habitual home, or your nationality.

In the event that you have nationality in both countries, the relevant authorities will help you resolve this matter. This will be settled via a mutual agreement.

In Malaysia, a permanent establishment for tax purposes is based on the following conditions:

  • You have a factory, branch, or office based in Malaysia.
  • You have a management place in Malaysia.
  • You have a workshop in Malaysia.
  • You have a building site that has been installed, assembled, or constructed in Malaysia for more than 6-months.
  • You own a place where forestry, agricultural, and plantation activities are carried out. This includes any activities related to this field.
  • You have a location that extracts natural resources like a gas well, mine, oil, and quarry.


Is My Income Covered by Double Tax Treaties in Malaysia?

The following income categories are covered by the double tax treaty:

  • Income tax
  • Annuities and pensions
  • Government services
  • Profit derived from business
  • Income derived from immovable property
  • Income derived from personal services
  • Any gains derived from the alienation of property
  • Directors’ fees
  • Petroleum income tax
  • Royalties, dividends, and interests
  • Air transport and shipping
  • Technical fees
  • Athletes and artistes


What if There Is A Double Taxation Dispute?

In the event of a dispute, the Malaysian Competent Authority (CA) will resolve the matter. The resolution will be reached via the agreements laid out in the Mutual Agreement Procedure Guidelines.

Malaysia has double tax treaties in place with several countries. The full list can be found on the Inland Revenue Board of Malaysia (LHDN)’s website.

Double Tax Treaties in Malaysia