Singapore has signed a double taxation agreement with Malaysia based on the two countries strong economic ties. Considering the trade relations between the two countries and the fact that most of the Singapore workforce is constituted by Malaysian citizens, the double tax treaty has a significant impact on the economies of the two states. Singapore has signed its first double taxation agreement with Malaysia in 1968. The agreement was renewed in 2005 and enforced in 2007 in both countries.
The Singapore-Malaysia double tax treaty applies to persons residing in one or both countries. The term “person” covers both natural persons, such as individual, but also corporate persons, such as Malaysian and Singapore companies. The double taxation agreement applies on all the taxes imposed on the income of a person on behalf of the other signatory state. The agreement covers the taxes imposed on the total income on a person, or separately on certain elements of the income.
In the case of Malaysia the double taxation agreement covers the following:
In the case of Singapore, it covers the income tax. With respect to elements of the total income, the Singapore-Malaysia double taxation agreement covers the following taxes:
The double taxation agreement Singapore signed with Malaysia contains several specific provisions with respect to the taxation of dividends, interests and royalties. The tax rates applied in case of Malaysian and Singapore companies paying dividends are:
Interests are taxed with 10% under the Singapore-Malaysia double tax treaty, while royalties are taxed with 8%. Technical fees are taxed with 5% under the treaty, but a 17% tax rate is applied in case of Singapore companies operating in Malaysia.
For complete information about the provisions of the double tax treaty with Malaysia you may refer to our agents who can also assist Malaysian businessmen who want to open a company in Singapore.