Malaysia Double Tax Agreement with Singapore

Malaysia and Singapore have long enjoyed a close economic relationship, with a significant volume of bilateral trade and investment between the two countries. To support this relationship and facilitate cross-border commerce, the two nations have signed a double tax agreement (DTA) that eliminates the double taxation of income for businesses and individuals operating between the two countries.

The Malaysia-Singapore DTA was first signed in 1968 and has since undergone several revisions to reflect changing economic conditions and tax regulations. The most recent update was in 2013, which included new provisions on the taxation of dividends, interest, and royalties.

Under the DTA, businesses and individuals operating in Malaysia or Singapore are only subject to income tax in their country of residence. This means that income earned in Malaysia by a Singaporean resident is not subject to Malaysian income tax, and vice versa. Additionally, the agreement provides for reduced withholding tax rates for dividends, interest, and royalties paid between the two countries.

For example, under the DTA, the withholding tax rate on dividends paid by a Malaysian company to a Singaporean resident is reduced from the standard rate of 20% to either 5% or 10%, depending on the level of ownership of the Singaporean resident in the Malaysian company. Likewise, the withholding tax rate on interest paid by a Malaysian resident to a Singaporean resident is reduced from the standard rate of 15% to either 10% or 0%, depending on the type of interest payment.

The DTA also includes provisions for the avoidance of double taxation in other areas, such as employment income, pensions, and capital gains. Businesses and individuals operating between Malaysia and Singapore should consult the DTA to ensure they are compliant with the relevant tax regulations.

Overall, the Malaysia-Singapore DTA is an important tool for promoting economic cooperation and cross-border investment between the two countries. By eliminating double taxation and providing for reduced withholding tax rates, the DTA helps to facilitate the flow of capital and support economic growth in both Malaysia and Singapore.