Double Tax Agreement Malaysia and Japan

15th October 2021

Double Tax Agreement Malaysia and Japan: All You Need to Know

As Malaysia and Japan continue to grow their strong economic relationship, tax agreements are becoming increasingly important in ensuring fair taxation for businesses operating across borders. The Double Taxation Agreement (DTA) between Malaysia and Japan is one such agreement that provides relief from double taxation for businesses operating in both countries.

What is the Double Taxation Agreement?

The Double Taxation Agreement (DTA) is a bilateral agreement between two countries aimed at preventing double taxation of income earned by individuals and businesses in both countries. It is designed to eliminate the possibility of double taxation of income earned by residents of one country who also earn income in another country.

Double taxation can occur when two countries tax the same income earned by an individual or business. This can happen when an individual or business is resident in one country but has income from another country, or when an individual or business is resident in both countries.

The DTA between Malaysia and Japan was signed in 1968 and was revised in 2015 to reflect the current economic environment. The agreement provides guidance on the taxation of various types of income and ensures that residents of both countries are taxed fairly.

What Does the Agreement Cover?

The DTA covers a wide range of types of income, including income from employment, dividends, interest, royalties, and capital gains. It also covers other types of income, such as income from real estate, shipping, and air transport.

The agreement provides guidance on how income is taxed in both countries. For example, the agreement sets out rules for determining the residency of individuals and businesses, as well as rules for determining the source of income.

One of the key features of the agreement is that it provides for relief from double taxation. This means that income earned by residents of one country in the other country will not be subject to double taxation. Instead, the income will be taxed by the country of residence.

Benefits of the Double Taxation Agreement

The DTA between Malaysia and Japan provides numerous benefits for individuals and businesses operating in both countries. These benefits include:

1. Avoidance of double taxation: The DTA ensures that income earned by residents of one country in the other country is not subject to double taxation.

2. Reduced tax rates: The agreement provides for reduced tax rates for certain types of income, such as dividends, interest, and royalties.

3. Increased certainty: The agreement provides greater certainty for businesses operating in both countries by providing clear rules for the taxation of income.

4. Greater investment: The agreement promotes greater investment between the two countries by reducing taxes on income earned by investors.

Conclusion

The Double Taxation Agreement between Malaysia and Japan plays a crucial role in promoting investment and trade between the two countries. By providing clear rules for the taxation of income, it promotes greater certainty for businesses operating in both countries and reduces the risk of double taxation.

As a business operating in both Malaysia and Japan, it is important to understand the provisions of the DTA and how they apply to your business. By doing so, you can ensure that you are taxed fairly and can take advantage of the benefits provided by the agreement.