TMI BlogDouble taxation and the prevention of fiscal evasion between Government of India and the Government of MalaysiaX X X X Extracts X X X X X X X X Extracts X X X X ..... l Government hereby directs that all the provisions of the said Agreement shall be given effect to in the Union of India. ANNEXURE Agreement between the Government of India and the Government of Malaysia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income The Government of India and the Government of Malaysia, Desiring to conclude an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, Have agreed as follows: CHAPTER I Scope of the Agreement Article 1 PERSONAL SCOPE This agreement shall apply to persons who are residents of one or both of the Contracting States. Article 2 TAXES COVERED 1. The taxes which are the subject of this Agreement are: (a) in Malaysia: (i) the income tax; (ii) the supplementary income tax, that is, tin profits tax, development tax and timber profits tax; and (iii) the petroleum income tax; (hereinafter referred to as " Malaysian tax "); (b) in India: (i) the income-tax and any surcharge on income-tax impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires; (i) the term " competent authority " means, in the case of Malaysia, the Minister of Finance or his authorised representative; and in the case of India, the Central Government in the Ministry of Finance (Department of Revenue and Insurance). 2. In the application of this Agreement by one of the Contracting States any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes which are the subject of this Agreement. Article 4 FISCAL DOMICILE 1. In this Agreement, unless the context otherwise requires:- (a) the term " resident of Malaysia " means- (i) an individual who is ordinarily resident in Malaysia; or (ii) a person other than individual who is resident in Malaysia; for the basis year for a year of assessment for the purpose of Malaysian tax; (b) the term " resident of India " means a person who is treated as a resident of India in the previous year for the relevant assessment year for the purpose of Indian tax; (c) the terms " resident of one of the Contracting States " and " resident of the other Contracting State " mean a resident of Malay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or collecting information for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character for the enterprise. 4. An enterprise of one of the Contracting States shall be deemed to have a permanent establishment in the other Contracting State if: (a) it carries on supervisory activities in that other Contracting State for more than six months in connection with a construction, installation or assembly project which is being undertaken in that other Contracting State; (b) it carries on a business which consists of providing the services of public entertainers (such as stage, motion picture, radio or television artistes and musicians) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, oil wells, quarries and other places of extraction of natural resources or of timber or forest produce. Ships, boats and aircraft shall not be regarded as immovable property. 3. The provisions of paragraph 1 of this Article shall apply to income derived from the direct use, letting, or use in any other form of immovable property. 4. The provisions of paragraph 1 and 3 of this Article shall also apply to the income from immovable property of an enterprise. Article 7 BUSINESS PROFITS 1. The income or profits of an enterprise of one of the Contracting States shall be taxable only in that Contracting State, unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, tax may be imposed in that other Contracting State on the income or profits of the enterprise but only on so much of that income or profits as is attributable to that permanent establishment. 2. Where an enterprise of one of the Contracting States carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock or goods which are brought to that other Contracting State solely for transhipment or for transfer from an aircraft to a ship or from a ship to another ship. 3. Where income from the operation of ships in international traffic is derived by an enterprise of one of the Contracting States from a State other than the Contracting States, such income shall be taxable only in the Contracting State of which the enterprise is a resident. 4. The provisions of paragraphs 1, 2 and 3 of this Article shall likewise apply to income arising from participation in shipping pools of any kind by such enterprise engaged in shipping operations. Article 9 AIR TRANSPORT 1. Income of an enterprise of one of the Contracting States derived from the other Contracting State, from the operation of aircraft in international traffic shall not be taxed in the other Contracting State. 2. For the purposes of paragraph 1 of this Article, income derived from the other Contracting State shall mean income from the carriage of passengers, mail, livestock or goods from the other Contracting State. 3. Where income from the operation of aircraft in international traffic is derived by an enterprise of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Malaysia and at the time of payment of that dividend, the company declared itself to be a resident of Singapore for the purposes of Article VII of the agreement between the Government of Malaysia and the Government of the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income signed in Singapore on 26th December, 1968, the dividend shall be deemed to have been paid by a company not resident in Malaysia. 4. Nothing in this Article shall affect the provisions of the law in Malaysia under which the tax in respect of a dividend paid by a company resident in Malaysia from which Malaysian tax has been, or has been deemed to be, deducted may be adjusted by reference to the rates of tax appropriate to the year of assessment immediately following that in which the dividend was paid. 5. Where a company which is a resident of one of the Contracting States derives income or profits from sources within the other Contracting State, there shall not be imposed in that other Contracting State any form of taxation on dividends paid by the company to persons not resident in that other Contracting State or any tax in the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such royalties are payable is approved by the Government of Malaysia after this Agreement is signed. 3. Royalties shall be deemed to be derived from a Contracting State if the payer is the Government, a State Government, a political sub-division, a local authority or a resident of that Contracting State. Where, however, the payer has in the other Contracting State a permanent establishment with which the right or property giving rise to the royalties is effectively connected, then, such royalties shall be deemed to be derived from the Contracting State in which the permanent establishment is situated. In such a case, the provisions of Article 7 shall apply. 4. Where, owing to a special relationship between the payer and the recipient, or between both of them and some other person, the amount of the royalties having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this Article shall apply only to the last mentioned amount. In that case, the excess part of the payments shall be taxed according to the laws of each Contracting St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us period of more than 183 days throughout which he is present within Malaysia; and (c) the remuneration is paid by or on behalf of an employer who is not a resident of Malaysia; and (d) the amount of remuneration is not deductible in computing the income or profits of an enterprise chargeable to Malaysia tax. 4. Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft engaged in international traffic and operated by an enterprise of one of the Contracting States may be taxed in that Contracting State. 5. In relation to remuneration of a director of a company derived from the company, the provisions of this Article shall apply as if the remuneration were remuneration of an employee in respect of an employment. Article 15 DIRECTORS' FEES Notwithstanding the provisions of Article 14, directors' fees and similar payments derived by a resident of one of the Contracting States in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other Contracting State. Article 16 ARTISTES AND ATHLETES 1. Notwithst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt at a recognised university, college, school or other similar recognised educational institution in that other Contracting State or as a business or technical apprentice therein, for a period not exceeding five years from the date of his first arrival in that other Contracting State in connection with that visit, shall be exempt from tax in that other Contracting State on- (a) all remittances from abroad for the purposes of his maintenance, education or training; and (b) any remuneration (not exceeding 3,000 Malaysian Dollars or 7,500 Indian Rupees during any basis year or previous year, as the case may be, for any year of assessment) for personal services rendered in that other Contracting State with a view to supplementing the resources available to him for such purposes. 2. An individual who is a resident of one of the Contracting States and who visits the other Contracting State for the purposes of study, research or training solely as a recipient of a grant, allowance or award from the Government of either of the Contracting States or from a scientific, educational, religious or charitable organisation or under a technical assistance programme entered into by the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary purpose of teaching or engaging in research or both, at a university or other recognised educational institution shall be exempt from tax in that other Contracting State on his income from personal services for teaching or research or both at the university or the recognised educational institution, for a period not exceeding two years from the date of his arrival in that other Contracting State. 2. This Article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons. Article 21 INCOME OF GOVERNMENT AND INSTITUTIONS 1. The Government of one of the Contracting States shall be exempt from tax in the other Contracting State in respect of any income derived by such Government from that other Contracting State. 2. For the purposes of paragraph 1 of this Article, the term " Government "- (a) in the case of Malaysia means the Government of Malaysia and shall include- (i) the Government of the States; (ii) the Bank Negara Malaysia; (iii) any such institution or body as may be agreed from time to time between the two Contracting States; (b) in the case of India means the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount not exceeding that proportion of Malaysian tax which such income bears to the entire income chargeable to Malaysian tax. (b) For the purposes of the credit referred to in sub-paragraph (a) above, there shall be deemed to have been paid by the resident of Malaysia the amount which would have been paid if the Indian tax had not been reduced or relieved in accordance with the special incentive measures designed to promote economic development in India- (i) in relation to royalties, as set forth in the relevant annual Finance Act of India; and (ii) in relation to other income as set forth in the following sections of the Income-tax Act, 1961, of India or which may be introduced in future in the Indian tax laws in modification of or in addition to the existing measures, provided that an agreement is made between the two Governments in respect of the scope of the benefit accorded by the said measures:- (aa) Section 10(15)(iv)(b) and (c)-relating to exemption from tax of (a) an approved foreign financial institution in respect of interest on moneys lent by it to an industrial undertaking in India under a loan agreement; and (b) a non-resident in respect of interest on money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same conditions. 3. Enterprises of one of the Contracting States, the capital of which is wholly or partly owned or controlled, directly or indirectly by one or more residents of the other Contracting State, shall not be subjected in the first mentioned Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of that first-mentioned Contracting State are or may be subjected in the same circumstances and under the same conditions. 4. In this Article, the term " citizens or nationals " in relation to a Contracting State means: (a) all individuals possessing the citizenship or nationality of that Contracting State; (b) all legal persons, partnerships, associations and other entities deriving their status as such from the law in force in that Contracting State. Article 24 MUTUAL AGREEMENT PROCEDURE 1. Where a resident of one of the Contracting States considers that the actions of one or both of the Contracting States result or will result in taxation not in accordance with this Agreement, he may, notwithstanding the remedies provided by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial, commercial or professional secret or trade process or information the disclosure of which would be contrary to public policy. DIPLOMATIC AND CONSULAR OFFICIALS Nothing in this Convention shall affect the fiscal privileges of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements. CHAPTER VI Final Provisions Article 27 ENTRY INTO FORCE 1. This Agreement shall come into force on the date when the last of all such things shall have been done in Malaysia and India as are necessary to give the Agreement the force of law in Malaysia and India respectively. 2. The Contracting States shall notify each other of the completion of the requirements mentioned in paragraph 1 of this Article. The exchange of diplomatic notes certifying that this requirement has been completed shall take place at Kuala Lumpur. 3. Upon the exchange of such diplomatic notes this Agreement shall have effect. (a) in Malaysia- as respects Malaysian tax for the year of assessment beginning on 1st January, 1973, and subsequent years of assessment; (b) in India,- as respects Indian tax for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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