Profits of a business in a contracting state are taxable only in that state, unless the company operates in the other contracting state through a business management activity located there. But only the portion of the profit actually attributable to the MOU can be taxed in the other contracting state. In determining the benefits of the MOU, all expenses and deductions that would reasonably be attributable to the MOU and deductible are admitted if the MOU was an independent business and if the EP`s profits are determined to be a separate and distinct business that carries out the same or similar activities under identical or similar conditions and is totally independent of the business. Of which he is the pe. The mere purchase of goods or goods by an MOU for the company does not have the effect of attributing profits to this MOU. The consideration of PE benefits must be carried out annually using the same method, unless there is a valid reason for the opposite. To the extent that the competent authority has sufficient information, the provisions of the agreement cannot infringe either the right of the contracting state or the discretion of the competent authority. In the case of Malaysia, the income tax and mineral oil tax provisions apply. In the case of Singapore, income tax applies. When a company or person participating in a business in a contracting state participates directly or indirectly in the administration, control or capital of a company of the other State party, the companies concerned are referred to as related enterprises.
The terms and transactions between the related entity are different from those between independent companies, which has an impact on the profitability and income of the businesses. With respect to associated businesses, the DBA provides that contracting states may consider taxable income that would otherwise be due if the parties were independent and would tax the firms accordingly. When a contracting state taxes a resident business on profits and those profits are already taxed by the other contracting state, but the first state considers that those profits would have been generated by the company if it did not meet the condition of the related business, it makes an appropriate adjustment of the amount of tax collected on those profits if the other state considers that the correction is justified. The competent authorities of the contracting states consult, if necessary. Licensing fees incurred in one contracting state and paid to a resident of the other State party may be imposed in that other state. Royalties are deemed to be incurred in a contracting state if the payer is established in that state. However, these royalties may also be imposed in the contracting state where they are created and under the law of that state, but if the beneficiary is the beneficiary of the royalties, the tax thus collected cannot exceed 8% of the gross amount of royalties. Royalties include payments of any kind received in exchange for the use or right to use copyright patents, trademarks, designs, plans, etc.
If, because of the special relationship between the payer and the beneficiary, the royalties paid go beyond the amount that would otherwise have been paid, the provision of the contract applies only to that amount and any excessive amount of the licence is taxable under the legislation of each contracting state. The provisions do not apply where the beneficiary of the levy has an MOU or fixed base in the contracting state where the payer is domiciled and the licence fee paid is effectively linked to that MOU or a fixed base. The general withholding rate for royalties paid to non-residents in Malaysia is 10% and the corresponding Singapore rate is 10%. The contract to avoid double taxation between Singapore and Malaysia applies to both individuals and businesses established in one of the two states and operating in various activities in the other country.