What is Double Taxation?
Double taxation arises when two or more countries impose taxes on the same taxpayer in respect of the same taxable income. This results in the same income is being taxed twice, once in the country of source where the income arises and then again, in the country of residence where the income is received.
To provide relief to taxpayers from the burden of double taxation, countries provide various types of reliefs either under their domestic tax laws (eg. foreign tax credits as allowed by ATO) or under the tax treaties they have entered into with other countries.
Tax treaties enable you to access relief from double taxation, either by way of tax credits, tax exemptions or reduced withholding tax rates. These reliefs vary from country to country and are dependent on the specific items of income.
For a comprehensive list of countries with a tax treaty with Australia, click here.
Malaysia-Australia Tax Treaty
Here’s a sample of income covered by the Malaysia-Australia tax treaty:
Dividends (Australia): Australian tax on dividends received by Malaysian-resident shareholders from an Australian company
- 15% withholding tax on gross dividend income
- 0% withholding tax on franked dividend income if paid to an entity that directly holds at least 10% of the voting power in the dividend paying company
Dividends (Malaysia): Relevant marginal tax rate (individuals) or corporate tax rate (company) on dividends received by Australian-resident shareholders from a Malaysian company.
Interest (Australia): Taxed at a reduced rate of 10%
Interest (Malaysia): Taxed at a reduced rate of 15%.
Royalties: Taxed at a reduced rate of 15% in the country in which the royalty income arises.
Useful Read: Tax Traps for Australians in Malaysia
Disclaimer: This blog post has been simplified to cover some key points of double taxation treaties. This should not be construed as advice from Glint Accountants. There are many other factors to be considered and each person’s situation is unique. Therefore, we encourage readers of this blog post to contact Glint Accountants for assistance with their specific circumstances.
Geraldine Lee is a Chartered Accountant in Singapore and a Fellow of CPA Australia. Contact us at Glint Accountants for assistance if you have Malaysian-sourced income or considering the sale of Malaysian properties and are concerned about the tax implications.