The DBA imposes double taxation when income is taxed in the two contracting states. In the case of Malaysia, Singapore tax due on Singapore`s income can be considered a credit in relation to Malaysian tax payable for those incomes. The Malaysian tax due on Malaysian income is accepted as a tax credit payable for these incomes in Singapore. The credit thus granted must not exceed the tax calculated before the transfer of credit by the country concerned. For the calculation of solvency, the tax payable does not take into account the specific exemptions, exemptions or subsidies granted by the respective jurisdictions and takes into account the taxable tax payable in the absence of such exemptions and reductions. In the case of dividends paid by a Singaporean company to a Malaysian company or a resident company holding at least 10% of the voting rights in the paying company, Malaysia takes into account the Singapore tax payable by that company for its income on which the dividend is paid, but the credit must not exceed the portion of the Malaysian tax. , as calculated before credit was granted. Accordingly, in the case of a Singapore beneficiary, a credit equal to the Malaysian tax that the company must pay for its income for which the dividend is paid is taken into account. Non-resident businesses are taxed on revenues generated in Malaysia or from Malaysia if they have stable establishments in Malaysia.
Recent changes to Section 12 of the ITA have changed the ITA`s definition of „place of activity“ to reflect the definition of stable establishment, which is common in all double taxation agreements (ADBs) 27.As a result, companies should consider factors such as where an agreement is reached and the jurisdiction in which staff conduct commercial activities to structure their business relationships. In the case of Malaysia, the income tax and mineral oil tax provisions apply. In the case of Singapore, income tax applies. Where a non-resident who may be exempt from tax under the Double Taxation Agreement (DBA) between Malaysia and her country of residence, the temporary presence in Malaysia due to COVID-19 restrictions does not create a stable facility („EP“) in Malaysia provided the following criteria are met: in the case of a person established in both countries , his tax domicile is determined by the location of his permanent home. but if his permanent residence is in either country or in none of them, the centre of vital interest is taken into account. If permanent residence factors and vital factors do not determine habitual residence, habitual residence is considered and, if the person does not have a customary residence in both countries, nationality is taken into account and, if the person is a national of or is not a national of both countries, the States Parties determine the place of residence by mutual agreement. If the person who is not an individual is established in the two contracting states, the residence is determined by the state in which his or her actual place of administration is located. If in doubt, the competent authorities of the contracting states agree on the place of residence, taking into account all relevant factors. Income from one country of a contracting state from real estate in the other contracting state may be taxed in that other state.
Income from a company`s real estate and income from real estate used to provide independent personal services are also covered by this provision.