Double Tax Agreement Malaysia Rate – Everything You Need to Know

The Double Tax Agreement (DTA) between Malaysia and other countries is designed to prevent double taxation on income that is earned in both Malaysia and another country. This agreement ensures that taxpayers are not taxed twice on the same income by the Malaysian government and the foreign government where the income was earned. The DTA specifies the rates of tax that will be applied to different types of income and types of taxpayers.

The DTA between Malaysia and other countries covers various types of income such as business profits, dividends, interest, royalties, and pensions. The rate of tax that will be applied to each type of income depends on the DTA agreed between Malaysia and the other country. Generally, the DTA specifies that tax will be imposed in one of the countries and that the other country will provide a tax credit for the tax paid.

The rate of tax that will be applied to income earned by a resident of Malaysia will differ from the rate of tax applied to income earned by a non-resident. The Malaysian government imposes different rates of tax on residents and non-residents. According to the Malaysian Income Tax Act 1967, a resident is an individual who has been in Malaysia for at least 182 days in a tax year, while a non-resident is an individual who has been in Malaysia for less than 182 days in a tax year.

For residents, the DTA rate of tax on business profits is generally 15%, while non-residents are subject to a higher rate of tax at 24%. The rate of tax on dividends for residents is typically 10%, while the rate for non-residents is 15%. Interest and royalties are also subject to different rates of tax for residents and non-residents.

It is important to note that the DTA rate of tax is not automatically applied to income earned in Malaysia. Taxpayers must apply to the Malaysian tax authority for relief under the DTA. Additionally, taxpayers must ensure that they comply with the requirements of the DTA to be eligible for relief. Failure to comply with the DTA could result in double taxation.

In conclusion, the Double Tax Agreement between Malaysia and other countries is an essential legal instrument that protects taxpayers from double taxation. The DTA specifies the rates of tax that will be applied to different types of income and types of taxpayers. It is important for taxpayers to understand the DTA and ensure that they comply with its requirements to avoid double taxation. As a professional, I hope this article has helped you understand the basics of the Double Tax Agreement Malaysia Rate.