The Government of the Republic of Singapore and the Government of Malaysia have entered into an agreement to avoid double taxation and to prevent fiscal evasion with respect to taxes on income. The Agreement would apply to persons who are residents of one or both of the Contracting States.
Taxes Covered
The Agreement would apply to taxes on income imposed by a Contracting State. The taxes under the purview of the agreement are:
In Malaysia
- The income tax; and
- The petroleum income tax;
In Singapore
- The income tax
Resident
The term "resident of a Contracting State" means
In the case of Malaysia, a person who is resident in Malaysia for the purposes
of Malaysian tax;
In the case of Singapore, a person who is resident in Singapore for the purposes of Singapore tax;
Business Profits
- The profits of an enterprise of a Contracting State would be taxable only in that State unless the business entity carries on business in the other Contracting State through a permanent establishment situated therein.
- In determining the profits of a permanent establishment, there shall be allowed as deductions expenses including executive and general administrative expenses, which would be deductible if the permanent establishment were an independent enterprise, insofar as they are reasonably allocable to the permanent establishment, whether incurred in the State in which the permanent establishment is situated or elsewhere.
- No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.
- For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.
Dividends
Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. However such dividends may also be taxed in the Contracting State of which the company paying the dividend is a resident and according to the laws of the state. On the contrary if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:
- 5 percent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 25 percent of the capital of the company paying the dividends; and
- 10 percent of the gross amount of the dividends in all other cases.
Interest
- Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
- But such interest may also be taxed in the Contracting State in which it arises and in accordance to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the interest.
- Interest to which a resident of Singapore is beneficially entitled shall be exempt from Malaysian tax if the loan or other indebtedness in respect of which the interest is paid is an approved loan as defined in section 2(1) of the Income Tax Act, 1967 of Malaysia.
- Notwithstanding the provisions of paragraphs 2 and 3, the Government of a Contracting State shall be exempt from tax in the other Contracting State in respect of interest derived by the Government from that other State.
Termination
In Malaysia
- In respect of Malaysian tax, other than petroleum income tax, the is tax chargeable for any year of assessment beginning or after the first day of January in the calendar year following the year in which the notice is given.
In respect of petroleum income tax, the tax is chargeable for any year of assessment beginning on or after the first day of January of the second calendar year following the year in which the notice is given.
