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. The contract to avoid double taxation between Singapore and Malaysia applies to both individuals and businesses established in one of the two states and operating in various activities in the other country. The Double Taxation Agreement between Singapore and Malaysia applies to persons residing in one or both countries. The term “person” encompasses both individuals, such as. B, individuals, but also companies such as Malaysian and Singaporean companies. The double taxation agreement applies to all taxes levied on an individual`s income on behalf of the other signatory state.
The agreement includes taxes collected by an individual on total income or, separately, on certain elements of income. The Singapore-Malaysia Double Taxation Convention covers taxes collected in both countries, as there are many commonalities between the two states from a tax point of view. The main taxes covered by the Singapore Double Taxation Conventions are income and corporate tax. In Malaysia, the main taxes are income taxes and excise taxes on mineral oils. On the basis of the double taxation agreement between the two countries, these taxes may be reduced, deducted or exempted in the other state if certain requirements are met.