Explained: Double Taxation Between Singapore & Malaysia
Singapore and Malaysia are neighboring countries in Southeast Asia with close economic, cultural, and social ties. To avoid double taxation and to promote cross-border trade and investment, Singapore and Malaysia signed a Double Taxation Agreement (DTA) in October of 2004. As a business operating in Singapore, here’s what you need to know about the DTA:
The DTA Between Singapore and Malaysia
A Double Taxation Agreement (DTA) is an international treaty signed between two or more countries to avoid double taxation. Double taxation occurs when the same income or profits are taxed by two or more countries, resulting in a higher tax burden for the taxpayer.
The DTA between Singapore and Malaysia is a bilateral treaty signed between the two countries to avoid double taxation and to prevent fiscal evasion. The DTA covers various types of income and profits including: business profits, dividends, interest, royalties, and capital gains.
The DTA between Singapore and Malaysia:
- Sets out rules and provisions regarding the allocation of tax jurisdictions
- Delineates what tax relief is available between the two countries
- Aids in resolving tax disputes
- Inhibits double taxation.
- Specifies the tax rates and exemptions for each type of income or profit.
- Provides for the exchange of information between the tax authorities of Singapore and tax authorities of Malaysia, allowing them to enforce the DTA and prevent tax evasion.
Benefits of the DTA
The DTA between Singapore and Malaysia provides several benefits to taxpayers and businesses in both countries. Some benefits of the DTA are:
- Reduced tax burden: Taxpayers and businesses based in Singapore and Malaysia can claim tax credits or exemptions for taxes paid in the other country, reducing their overall tax burden.
- Enhanced cross-border trade and investment: Eliminating double taxation and providing a stable and predictable tax environment encourages cross-border trade and investment between Singapore and Malaysia.
- Improved tax compliance: The DTA promotes compliance by reducing both tax barriers and incentives for tax evasion. Providing channels for the exchange of information between tax authorities of both nations also helps reduce evasion.
How to Claim Tax Relief Under the DTA Between Singapore and Malaysia
To claim tax relief under the DTA between Singapore and Malaysia, you first need to meet the eligibility criteria and requirements set out in the DTA. Here's how:
- Determine your tax residence: Your tax residence needs to be in Singapore or Malaysia. This will be based on your domicile, permanent home, or center of vital interests.
- Identify the type of income or profit: Types of income and profit covered by the DTA include business profits, dividends, interest, royalties, and capital gains.
- Calculate your tax liability: Your tax liability in Singapore or Malaysia will be based on the tax rates and exemptions specified in the DTA.
- Prepare the necessary documents: These may include tax returns, tax assessment notices, and other evidence that can be used to support your claim for tax relief.
- Submit your claim for tax relief: You need to submit your claim to the tax authorities of Singapore or Malaysia. This can be done either through the self-assessment system or by filing a tax return.
The DTA between Singapore and Malaysia avoids double taxation and promotes cross-border trade and investment between the two countries. It covers various types of income and profits and helps tax authorities in both countries better work together and exchange information. Businesses with operations in both Singapore and Malaysia directly benefit from this agreement.