The Government of Malaysia and the Government of Japan have concluded an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
Taxes Covered
1. The taxes which are the subject of this Agreement are:
a) In Malaysia:
(i) The income tax;
(ii) The supplementary income tax, that is, tin profits tax, development tax and timber profits tax and
(iii) The petroleum income tax
b) In Japan:
(i) The income tax; and
(ii) The corporation tax
2. This Agreement shall also apply to any other taxes of a character substantially similar to those referred to in the preceding paragraph imposed in either Contracting State after the date of signature of this Agreement.
Dividends
1. Dividends paid by a company which is a resident of one of the Contracting States shall be treated as derived from that Contracting State.
2. Dividends paid by a company which is a resident of Malaysia to a resident of Japan who is subject to Japanese tax in respect thereof shall be exempt from any tax in Malaysia which is chargeable on dividends in addition to the tax chargeable in respect of the income of the company:
Provided that nothing in this paragraph shall affect the provisions of the Malaysian laws under which the tax in respect of a dividend paid by a company resident in Malaysia from which Malaysian tax has been, or has been deemed to be, deducted may be adjusted by reference to the rate of tax appropriate to the Malaysian year of assessment immediately following that in which the dividend was paid.
3. Dividends paid by a company which is a resident of Japan to a resident of Malaysia who is subject to Malaysian tax in respect thereof shall not be chargeable to tax in Japan at a rate exceeding fifteen per cent:
Provided that where the resident of Malaysia is a company which owns at least twenty-five per cent of the entire voting shares of the company paying such dividends during the period of six months immediately preceding the date of payment of the dividends, such dividends shall not be chargeable to tax in Japan at a rate exceeding ten per cent.
Remuneration
1. Remuneration, including pensions, paid by the Government of Malaysia to any individual who is a citizen of Malaysia in respect of services rendered in the discharge of governmental functions shall be exempt from Japanese tax, unless such individual is a national of Japan or has been admitted to Japan for permanent residence therein.
2. Remuneration paid by the Government of Japan or pensions paid by or out of funds to which contributions are made by the Government of Japan to any individual who is a national of Japan in respect of services rendered in the discharge of governmental functions shall be exempt from Malaysian tax, unless such individual is a citizen of Malaysia or has been admitted to Malaysia for permanent residence therein.
