Introduction
“Why is my profit after tax from oversea clients seemed lesser than the projected amount? “
If you are facing the same challenge as above, you may have fallen into the double taxation, which is a common scenario in a cross-border transaction for service industry. In this article, we will look into how double taxation may apply to you, and what are the tax credit reliefs you may need.
Background
As Malaysian residents (including individuals, corporations or enterprises) receive an income from a foreign country, they are subjected to tax from both Malaysia and the foreign transacting country. In other words, the same income is taxed twice by two or more jurisdiction.
Double Taxation Agreement (DTA)
In order to mitigate and to provide relief from the effect of double taxation, many countries have entered into Double Taxation Agreement (DTA). As of 21st June 2019, Malaysia has entered into DTA with countries and territories as listed in link below.
View list of countries eligible for double taxation agreement here: https://bit.ly/3hvnGeD
What are the types of credit that may be claimed under DTA?
Bilateral credit
A bilateral credit is a relief that can be claimed by a resident of Malaysia for the year of assessment on the lower of tax payable in the foreign country and Malaysian tax payable on the foreign income. This credit is only applicable if a DTA is in place between Malaysia and the taxing foreign country.
Unilateral credit
Where there is no DTA in place, one who is resident in Malaysia and is charged to tax in Malaysia and is also taxed on the same income in a foreign country, a unilateral credit can be claimed. The credit can be claimed on the lower of ½ tax payable in the foreign country and Malaysian tax payable on the foreign income.
Looking for more tax guidance on Malaysia Double Taxation Relief? Our tax professionals are here to help!
Kindly contact Interesources Tax Advisory enquiry team at +604 281 4628 or email your enquiries to interesourcesmarketing@gmail.com for tax consultation.
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