Malaysia and Indonesia have signed a treaty for the avoidance of double taxation in September 1991. The treaty is applicable to natural persons and legal entities who are tax residents of the two contracting states and it was enforced in order to avoid the taxation of the same income obtained by residents of a country who have taxable income in the other contracting state. The treaty applies to certain categories of taxes and our team of specialists in company formation in Malaysia can provide more details on the taxes covered by this agreement.
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Taxes under the Malaysia – Indonesia double tax agreement (DTA)
Article 2 of the Malaysia – Indonesia DTA stipulates the taxes that are covered by the treaty. The treaty is applicable to income taxes and it is important to know that in Indonesia the only tax taken into consideration is the income tax, while in Malaysia the treaty applies to a wider category of taxes – the income tax and the excess profit tax, the supplementary income tax and the petroleum income tax.
The difference between the taxes applied in each country is given by the national tax legislation applied in each jurisdiction, which, if modified, the respective state has to announce the other contracting state on the changes. Our team of consultants in company registration in Malaysia can provide more details on this matter.
Permanent establishments, under the regulations of the DTA
Foreign businessmen who want to open a company in Malaysia must know that they will be taxed in this country for the profits obtained here. This is also applicable in the case of companies operating through a permanent establishment, which, under the regulations of the Malaysia – Indonesia DTA (Article 5), can refer to:
- a place of management, a branch office, an office, a factory or a workshop;
- any type of establishment that is used for the extraction of natural resources, such as a mine;
- a building site in which the operations are carried out for a period longer than six months;
- the furnishing of services – for example consultancy services provided by a company through an employee.
Businessmen are invited to contact our team of consultants for in-depth assistance on the tax benefits deriving from the Malaysia – Indonesia DTA, as well as legal advice on the taxation of a company operating in this country. Our agents can also offer assistance on tax compliance available for foreign natural persons or legal entities in Malaysia.