This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
Lawandtax-news.com favicon LAWANDTAX-NEWS.COM
HOME | CONTACT | RECRUITMENT | ABOUT | LEGAL | PRIVACY & COOKIES Join us on Twitter Lowtax Facebook page Join our discussion on LinkedIn Join us on Google+ Delicious Subscribe to the Tax-News RSS Feed
   LOWTAX   
   TAX-NEWS   
   
 

Contributions

Articles »

Country Home Pages

Australia
Bahamas
Barbados
Bermuda
British Virgin Islands
Canada
Cyprus
Dubai
Gibraltar
Guernsey
Hong Kong
Isle of Man
Ireland
Jersey
Labuan
Liechtenstein
Luxembourg
South Africa
UK
US

Daily Tax Quote

Lowtax Network Sites
Lowtax Network Portal: 'Low-tax' business and investment in the top 50 jurisdictions covered in exceptional detail.
Tax News: Global tax news, continuously updated through the day.
Expat Briefing: A free online publication serving international expatriates and featuring world news, forums, events, in-depth country information and reliable investment and personal taxation guides.
Law & Tax News: Daily news and background data on tax and legal developments for international business.
Offshore-e-com: A topical guide to offshore e-commerce focused on tax and regulation.
Lowtax Library: One of the web's largest and most authoritative business and investment information sources.
US Tax Network: The resource for free online US taxation information, covering: corporate tax, individual tax, international tax, expatriates, sales and e-commerce tax, investment tax.
Offshore Trusts Guide: OTG publishes news, features and newsletters on the use of offshore trust structures.
TreatyPro: Online tax treaty resource.
Global Incorporation Guide [GIG]: A BSI / Lowtax Network international business smart tool.
LABUAN
LINKS IN THIS SECTION
DOUBLE TAX TREATIES
TABLE OF TREATY RATES
OTHER INTERNATIONAL AGREEMENTS
RELATED INFORMATION


International Agreements


Labuan Double Tax Treaties

In pursuit of foreign investment, Malaysia has signed many double tax treaties, of which more than 60 are in force, mostly having low rates of withholding tax on outgoing payments. Details are given below for some of these treaties. Several more treaties are under negotiation.

All Malaysian tax treaties follow the OECD model treaty with some modifications; however the US treaty provides reciprocal exemption to international shipping and air transportation businesses only.

In many cases, Malaysian tax treaties include 'tax sparing' provisions, whereby a dividend that is distributed out of profits which have been exempted from tax under Malaysian tax incentive regimes is deemed to be have been paid out of profits that have been subject to tax. This enables the recipient to claim a tax credit on the exempt dividend in his home country.

There are no anti-treaty shopping provisions in the treaties.

Malaysia has recently concluded double tax treaties with Malta, Mongolia, Sudan, Islamic Republic of Iran, Saudi Arabia, Turkey, Jordan and Vietnam, although not all have been ratified.

Although Labuan, as an integral part of the state of Malaysia, gains the benefit of the country's tax treaties, which were largely signed before Labuan's offshore regime came into existence, some countries have specific or general anti-avoidance legislation which excludes Labuan offshore entities from treaty benefits.

Asian countries on the whole, however, have accepted Labuan in treaty-based tax planning, largely no doubt because they are all themselves hungry for inward investment.

South Korea however has agitated for Labuan to be excluded from a revised version of its Malaysian tax treaty.

The Korean tax authorities believed that many of the firms which they have accused of avoiding tax on capital gains were doing so through offices registered in Labuan.

Relations between the two sides deteriorated still further when in June 2006, the South Korean Ministry of Finance and the Economy (MOFE) revealed that tax would be imposed on gains made by investors based in Labuan from that July, as part of the country's efforts to cut down on tax avoidance by foreign investors.

In 2010, an additional clause to the Labuan Offshore Business Activity Tax Act was added that will enable the island to adopt the internationally-agreed Organization for Economic Cooperation and Development standard for the exchange of information for tax purposes in double taxation agreements (DTAs).

It provides power to the Director General of Inland Revenue to call for information from any person as he may require for the purpose of compliance with any DTAs entered into by the government of Malaysia. It allows the disclosure of any information on a DTA to any authorised agent of the government with whom Malaysia’s government has made such an agreement, and upon a request from a tax authority of any government of any country outside Malaysia.

Furthermore, any person may request for an advance ruling from the Director General of Inland Revenue on the application of any provision of the Tax Act to a particular type of arrangement. Subject to certain qualifications, a ruling issued under this proposed section is binding on the person who requested for such ruling and on the Director General of Inland Revenue.

The following are some of the countries which have double-tax treaties with Malaysia (some further treaties have been signed and await ratification):

  • Albania
  • Australia
  • Austria
  • Bahrain
  • Bangladesh
  • Belgium
  • Canada
  • China
  • Croatia
  • Czech Republic
  • Denmark
  • Egypt
  • Fiji
  • Finland
  • France
  • Germany
  • Hungary
  • India
  • Indonesia
  • Ireland
  • Italy
  • Japan
  • Jordan
  • Korea
  • Kuwait
  • Lebanon
  • Luxembourg
  • Malta
  • Mauritius
  • Mongolia
  • Morocco
  • Namibia
  • Netherlands
  • New Zealand
  • Norway
  • Pakistan
  • Papua New Guinea
  • Philippines
  • Poland
  • Romania
  • Russia
  • Saudi Arabia
  • Seychelles
  • Singapore
  • South Africa
  • Spain
  • Sri Lanka
  • Sweden
  • Switzerland
  • Taiwan
  • Thailand
  • Turkey
  • United Arab Emirates
  • United Kingdom
  • Uzbekistan
  • Vietnam

Back to top

Labuan Table of Treaty Rates

This table lists the percentage rates of withholding tax on certain types of payment made between Malaysia and some of its treaty partners, correct at the time of writing:

Country
Dividends
Royalties
Interest
Paid from Malaysia
Paid from Malaysia


Paid from
Malaysia

Albania
nil
nil or 10
nil or 15
Australia
nil
nil or 10
nil or 15
Austria
nil
10
nil or 15
Bangladesh
nil
nil or 10
nil or 15
Belgium
nil
10
nil, 10 or 15
Canada
nil
nil or 10
nil or 15
China
nil
10
nil or 10
Denmark
nil
nil or 10
nil or 15
Finland
nil
nil or 10
nil or 15
France
nil
nil or 10
nil or 15
Germany
nil
nil or 10
nil or 15
Hungary
nil
10
nil or 15
India
nil
nil or 10
nil or 15
Indonesia
nil
10
nil or 15
Italy
nil
nil or 10
nil or 15
Japan
nil
10
nil, 10 or 15
Korea
nil
nil or 15
nil or 10
Mauritius
nil
10
nil or 15
Netherlands
nil
nil or 10
nil or 15
New Zealand
nil
nil or 10
nil or 15
Norway
nil
nil or 10
nil or 15
Pakistan
nil
nil or 10
nil or 15

Papua New Guinea

nil
nil or 10
nil or 15
Philippines
nil
nil or 10
nil or 15
Poland
nil
nil or 10
nil or 15
Romania
nil
nil or 10
nil or 15
Singapore
nil
10
nil or 15
Sri Lanka
nil
nil or 10
nil or 15
Sweden
nil
nil or 10
nil or 15
Switzerland
nil
nil or 10
nil or 10
Thailand
nil
nil or 10
nil or 15
Russia
nil
10
nil or 15
United Kingdom
nil
nil or 10
nil or 15
Zimbabwe
nil
nil or 10
nil or 10

Back to top

Labuan Other International Agreements

During 2003, attention was given to the international initiative against money laundering, with the introduction of the Anti-Money Laundering (Invocation of Part IV (No.2)) Order 2003. The provision related to the reporting obligations of institutions licensed or registered to carry on, among others, offshore banking, insurance and trust company business.

Section 125A inserted into the Malaysian Penal Code, making it an offence to harbour or attempt to harbour any person in Malaysia or any person residing in a foreign state at war or in hostility against the King.

The Mutual Assistance in Criminal Matters Act 2002 (MACMA), which came into effect on 1 May 2003, was introduced to provide for mutual assistance in criminal and related matters between Malaysia and other countries.

The new section of the Penal Code and MACMA provided LOFSA with additional avenues for cooperation with other supervisory and regulatory authorities, locally and internationally, to increase compliance and improve security for the offshore industry.

In March 2007, the Dubai Financial Services Authority (DFSA) entered into a mutual recognition agreement to facilitate cross border distribution of Islamic investment products with the Securities Commission of Malaysia (SC).

Back to top

 


LINKS IN THIS SECTION
DOUBLE TAX TREATIES
TABLE OF TREATY RATES
OTHER INTERNATIONAL AGREEMENTS
RELATED INFORMATION

THE LOWTAX LIBRARY

One of the web's largest and most authoritative business and investment information sources. Alongside topical, daily news on worldwide tax developments, you can receive weekly newswires or access up-to-date intelligence reports on a range of legal, tax and investment subjects.

FREE TRIAL NEWS SUBSCRIPTION

Our 16 constantly updated intelligence reports cover every important aspect of 'offshore' and international tax-planning in depth, including banking secrecy, the EU's savings tax directive, offshore funds, e-commerce, offshore gaming and transfer pricing. Reports are available for immediate downloading or as subscription services with news pages.

Advertising & Marketing

With over 50,000 qualified readers every month our web-sites offer a number of cost effective, targeted advertising, sponsorship and marketing opportunities:

Display advertising - from 'skyscrapers' to 'buttons'
Content/article submission and sponsorship
Opt-in email marketing
On-line Services Directory listings

Click here to learn more or contact Charles Bell on +44 (0)1424 205 425 or at charles@bsi-media.com and he will put you in touch with your regional rep.

News & Content Solutions

Could your corporate web-site or newsletter benefit from incorporating regularly updated news and content tailored to serve your clients' interests? We can provide a variety of maintenance-free news and content solutions that can be seamlessly integrated and dynamically delivered:

Customised, personalised 'own-brand' news services
Newsletter content and management
News Headlines Tickers

Click here to learn more or contact Charles Bell on +44 (0)1424 205 425 or at charles@bsi-media.com and he will put you in touch with your regional rep.

Important Notice: Wolters Kluwer TAA Limited has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.

All rights reserved. © 2017 Wolters Kluwer TAA Limited


All content on this site has been provided by BSIRN.