The Double Taxation Agreement between Malaysia and Thailand: A Win-Win Solution

This agreement is entered into between the Government of Malaysia and the Government of Thailand with the aim of avoiding double taxation and preventing tax evasion in the two countries.

Article 1 – Personal Scope of the Agreement

This agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2 – Taxes Covered

The existing taxes to which this agreement shall apply are:

Malaysian Taxes	Thai Taxes
Income Tax	Income Tax
Withholding Tax	Withholding Tax

Article 3 – Definitions

For the purposes of this agreement, unless the context otherwise requires:

“Contracting State” means Malaysia or Thailand, as the context requires;
“Business” includes the performance of professional services and of other activities of an independent character;
“Company” means any body corporate or any entity which is treated as a company for tax purposes;
“Competent Authority” means the authority responsible for the administration of the taxes covered by this agreement;

Article 4 – Residence

For the purposes of this agreement, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, or any other criterion of a similar nature.

Article 5 – Permanent Establishment

For the purposes of this agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

Article 6 – Income from Immovable Property

Income derived by a resident of a Contracting State from immovable property situated in the other Contracting State may be taxed in that other State.

Article 7 – Business Profits

The business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein.

Article 8 – Shipping and Air Transport

Profits derived by a resident of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

Article 9 – Associated Enterprises

Where an enterprise of a Contracting State participates directly or indirectly in the management, control, or capital of an enterprise of the other Contracting State, the two enterprises shall be regarded as associated enterprises and any profits that would, but for conditions made or imposed between the two enterprises, have accrued to one of the enterprises, but by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

Article 10 – Dividends

Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State shall be taxable only in that other State.

Article 11 – Interest

Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

Article 12 – Royalties

Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

Article 13 – Capital Gains

Gains derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State may be taxed in that other State.

Article 14 – Independent Personal Services

Income derived by an individual who is a resident of a Contracting State in respect of professional services or other independent activities shall be taxable only in that State.

Article 15 – Dependent Personal Services

Salaries, wages, and other similar remuneration derived by an individual who is a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State.

Frequently Asked Legal Questions

Question	Answer
1. What is the purpose of the The Double Taxation Agreement between Malaysia and Thailand: A Win-Win Solution?	The purpose of the double taxation agreement is to prevent income from being taxed twice in both Malaysia and Thailand. This is to promote cross-border trade and investment by providing tax relief and reducing administrative burdens for individuals and businesses operating in both countries.
2. How does the double taxation agreement impact individuals and businesses operating in both Malaysia and Thailand?	For individuals and businesses, the agreement helps avoid double taxation on income, dividends, interest, and royalties. It provides clarity on tax residency status and outlines procedures for claiming relief and benefits under the agreement.
3. Can the double taxation agreement override domestic tax laws in Malaysia and Thailand?	The double taxation agreement takes precedence over domestic tax laws in both countries. It provides specific provisions for resolving conflicts and determining the taxing rights of each country on different types of income.
4. What are the key provisions of the double taxation agreement related to business profits?	The agreement defines the criteria for determining a permanent establishment, outlines the method for allocating business profits between the two countries, and addresses issues related to transfer pricing and related party transactions.
5. How does the double taxation agreement address the taxation of dividends, interest, and royalties?	The agreement provides for reduced withholding tax rates on dividends, interest, and royalties, and sets out the conditions for claiming such benefits. It also includes provisions to prevent abuse of these benefits through anti-avoidance measures.
6. What are the procedures for claiming tax relief and benefits under the double taxation agreement?	Individuals and businesses can typically claim relief and benefits by submitting a residency certificate or other relevant documentation to the tax authorities in the country where the income arises. The agreement also outlines mutual agreement procedures for resolving disputes between the tax authorities of Malaysia and Thailand.
7. How does the double taxation agreement impact cross-border employment and taxation of employment income?	The agreement provides rules for determining the taxation of employment income and ensures that individuals working in both countries are not subject to double taxation. It also addresses issues related to social security contributions and provides clarity on tax residency status for individuals working across borders.
8. What are the compliance requirements for individuals and businesses under the double taxation agreement?	Compliance requirements include maintaining proper documentation, filing tax returns, and providing relevant information to the tax authorities in both Malaysia and Thailand. Failure to comply with these requirements may result in penalties or other enforcement actions.
9. Are there any recent developments or updates to the The Double Taxation Agreement between Malaysia and Thailand: A Win-Win Solution?	Recent developments may include changes to tax rates, updates to the agreement to align with international standards, or amendments to specific provisions based on evolving tax policies and practices in Malaysia and Thailand. It is important for individuals and businesses to stay informed about such developments to ensure compliance.
10. How can individuals and businesses navigate the complexities of the double taxation agreement and ensure full compliance?	Seeking professional advice from tax advisors, accountants, or legal experts with expertise in international tax matters can help individuals and businesses navigate the complexities of the double taxation agreement. Staying informed about changes in tax laws and actively managing tax risks are also vital for ensuring full compliance and maximizing the benefits of the agreement.