Ordinarily, it is not difficult to know whether a person is conducting a business in Malaysia. However, there may be cases where businesses are more transient whereby the operations may be conducted without a full set of business premises and the sales are secured via agents or via the business’ website.
For these borderline cases, one may need to refer to the relevant Double Tax Agreement (“DTA”) that the country of the person has entered into with Malaysia (“DTA countries”). Only where the person has a “permanent establishment” in Malaysia, will this person be held to be taxable in Malaysia on his profits(excluding specific income such as interest, royalty and technical fees). If he is from a country which does not have a DTA with Malaysia(“non-DTA countries”), there is not much guidance in the ITA.
Resultantly, the question as to whether a person is “doing business in Malaysia or doing business with Malaysia” is a question of facts and circumstances. This nebulous concept oftentimes introduces ambiguity and complication into the Malaysian tax law.
Hence, persons from the USA, Bahamas, Serbia, Cyprus, Ecuador, etc. which either do not have any DTA with Malaysia or have a limited double tax treaty with Malaysia, will find their tax position to be uncertain. So, do these new changes in Section 12 provide more clarity or introduce more confusion as to the source of income for Malaysian tax purposes?
Click here to continue >>>