Cambodia Malaysia Double Tax Agreement (DTA)
How Malaysian investors can benefit
With this DTA, Malaysian business owners will need to pay less Cambodian withholding taxes when repatriating their profits to Malaysia, in addition to enjoying other taxation benefits. Have a read of the commentary below and see how you can benefit. For the sake of easy reading, this article has simplified some of the technical terms in the DTA.
1. Lower Withholding Tax Rates
Previously
Payments of dividends, interest, royalties and technical fees by a Cambodian company to a Malaysian company are subject to Cambodian withholding taxes at the rate of 14% of the gross payment, based on Cambodian tax law.
With CAMMAL DTA in force:
Implications
This DTA treatment will give a significant saving of Cambodian withholding taxes of 29% [(14-10)/14 = 29%] for Malaysian investors when they repatriate profits back from Cambodia to Malaysia. Malaysian investors can do their own calculations as to which route is best to repatriate profits e.g. dividends, interest, royalties and/or technical fees.
For some investors, the routes are limited. Although the tax exposure in Cambodia is reduced, the said profits repatriated to Malaysia may be taxable in Malaysia. The exposure to taxation in Malaysia is generally as follows:
- Dividends – not taxable in Malaysia.
- Interest income – not taxable in Malaysia if the interest was paid in respect of a loan used in Cambodia.
- Royalties – may not be taxable in Malaysia if certain conditions are met.
- Technical fees – taxable in Malaysia if the technical fees are considered to be sourced from Malaysia.
If any of the above income is subject to Malaysian income tax, the Cambodian withholding tax paid will be allowed to set off against the Malaysian income tax as a double taxation relief against the Malaysian tax payable. The amount of setoff will be limited to the Malaysian income tax suffered on the said income. Due to the intricacies of the computation of double tax relief in Malaysia, Malaysian investors may not get the full relief for the Cambodian withholding tax deducted in certain circumstances.
