Double Tax Agreement between Malaysia and Vietnam: Everything You Need to Know

The Double Tax Agreement (DTA) between Malaysia and Vietnam is an essential agreement that governs the tax laws applicable to individuals or entities operating in both countries. This agreement is designed to eliminate double taxation of the same income in both countries, promote cross-border investment, and avoid tax evasion.

Here`s everything you need to know about the DTA between Malaysia and Vietnam:

What is the Double Tax Agreement?

The DTA is an agreement between two countries that aims to eliminate the double taxation of individuals or businesses that are tax residents of both countries. This agreement ensures that taxpayers are not taxed twice on the same income earned in two different countries.

What are the Benefits of the DTA between Malaysia and Vietnam?

The DTA between Malaysia and Vietnam provides several benefits for taxpayers, including:

1. Avoidance of Double Taxation

The DTA ensures that taxpayers are not taxed twice on the same income earned in Malaysia and Vietnam. This agreement ensures that taxpayers are taxed only in one of the two countries.

2. Reduction of Withholding Taxes

The DTA reduces withholding tax rates on dividends, interest, and royalties. For example, Malaysian taxpayers who receive dividends from a Vietnamese company are subject to a lower withholding tax rate of 5% instead of the normal 10%.

3. Prevention of Tax Evasion

The DTA between Malaysia and Vietnam includes provisions to prevent tax evasion. Taxpayers who try to evade taxes can be penalized under the agreement.

What are the Key Provisions of the DTA between Malaysia and Vietnam?

The DTA between Malaysia and Vietnam covers various tax-related issues, including:

1. Residence

The DTA provides a definition of the term `resident` in each country. The definition of `resident` is important in determining which country has the primary right to tax the income of individuals or entities.

2. Permanent Establishment

The DTA defines `permanent establishment` to avoid any ambiguity in the application of tax law. A permanent establishment refers to a fixed place of business where the business is conducted, such as an office, factory, or workshop.

3. Dividends, Interest, and Royalties

The DTA between Malaysia and Vietnam provides for a reduced withholding tax rate on dividends, interest, and royalties.

4. Capital Gains

The DTA provides that gains from the disposal of immovable property are taxable in the country where the property is located.

5. Exchange of Information

The DTA includes provisions for the exchange of information between the tax authorities of Malaysia and Vietnam to prevent tax evasion.

Conclusion:

The DTA between Malaysia and Vietnam provides several benefits for taxpayers, including the avoidance of double taxation, reduction of withholding taxes, and prevention of tax evasion. The DTA also includes provisions for the exchange of information between the tax authorities of Malaysia and Vietnam. By understanding the provisions of the DTA, taxpayers can take advantage of the benefits provided by the agreement.