Double Tax Treaty Malaysia – Japan

Updated on Wednesday 29th August 2018

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Malaysia signed a treaty for the avoidance of double taxation with Japan and the document became applicable starting with 1st of January 2000. Japanese investors who are interested in opening a company in Malaysia can benefit from the stipulations of the treaty which are also applicable to natural persons from Japan obtaining taxable income in this country. At the same time, the document is applicable to Malaysian citizens performing taxable activities in Japan. Our team of consultants in company registration in Malaysia can offer advice on the tax rates available under this agreement
 

Taxes prescribed by the Malaysia-Japan double tax treaty  
 

The double tax agreement (DTA) signed between the two states is available for a set of taxes. According to the Article 2 of the treaty, Malaysia applies the income tax and the petroleum income tax, while in Japan, the income tax, the corporation tax and the local inhabitant taxes are applicable. 
 
When referring to the Malaysian territory, it is important to know that the treaty takes into consideration, besides the national territory, the country’s territorial waters, as well as its sea-bed and the subsoil of its territorial waters and thus the provisions of the treaty will become applicable if any exploiting activities are developed in these regions. Our team of consultants in company formation in Malaysia can further advise on this matter. 
 

Permanent establishment in Malaysia 
 

Foreign companies operating in Malaysia are generally taxed in their country of residence. However, they are liable to taxation in Malaysia for the income obtained in this country, as long as they develop their commercial activities through a permanent establishment. Under the stipulations of the treaty (specified by the Article 5), a permanent establishment refers to the following: 
  • a place of management, a branch office, an office, a factory or a workshop;
  • a mine, an oil well, a gas well, a quarry or any other type of place that is used for the extraction of natural resources in Malaysia;
  • a building site, a construction project, an installation project or any other supervisory activities related to these operations;
  • the above mentioned will be considered permanent establishments in the situation in which they develop their activities in Malaysia for a period longer than six months
The agreement provides further regulations concerning the taxation of profits, dividends, interests and royalties as well as the manner in which Japanese citizens will be taxed in Malaysia for their income obtained here. Japanese nationals are invited to contact our team of specialists for tailored assistance regarding any matter stipulated under this treaty.