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Singapore Malaysia Double Taxation Treaty

Singapore Malaysia Double Taxation Treaty

Avoidance of double taxation between Singapore and Malaysia

Singapore has added Malaysia to its double taxation agreements list in 1968. The agreement was modified in 2005 and enforced in 2007 in Singapore and Malaysia. Even if no major changes have been brought, the agreement has significantly contributed to the improvement of trade and investment relations between Singapore and Malaysia. Considering many Malaysians work in Singapore companies, the agreement also contains provisions for the elimination of double taxation of employment income. The Singapore-Malaysia double tax treaty covers both individuals residing in both countries, but also companies with branches in Singapore and Malaysia.

The provisions of the Singapore-Malaysia double tax treaty

The double taxation agreement between Singapore and Malaysia covers both individuals and companies based on tax residency. The double taxation agreement covers all the taxes applied to the worldwide income of individuals or companies in Singapore and Malaysia. With respect to tax residency, the agreement covers the following aspects:

  • – in the case of individuals, tax residency will be determined based on whether the individual’s permanent home is in Singapore or Malaysia, considering many employees commute from one to another,
  • – in the case of corporate bodies, the agreement applies to permanent establishments of Malaysian or Singapore companies.

For more information about how tax residency is established according to the double tax treaty with Malaysia you may contact our lawyers in Singapore.

Elimination of double taxation according to the Singapore-Malaysia tax treaty

The Singapore-Malaysia taxation treaty establishes that the elimination of double taxation will occur through tax reliefs in both countries. In Malaysia, the Singapore tax will be allowed as a credit tax against the similar local tax. In Singapore, the Malaysian tax will also be granted a credit tax against the similar local tax.

However, where tax credits are not provisioned, the Singapore-Malaysia double taxation treaty stipulates the following reduced tax rates:

  • – a 5% tax rate for dividends paid to a Malaysian or Singapore citizen or company holding at least 10% of the capital in the company paying the dividends,
  • – a 10% tax rates for the payment of interests,
  • – an 8% tax rate for the payment of royalties.

For detailed information about taxation under the agreement with Malaysia you may rely on our Singapore lawyers.