Double Tax Agreement between New Zealand and Malaysia: All You Need to Know
As businesses expand across borders, it becomes increasingly important to understand the tax implications of operating in different countries. To avoid double taxation, many countries sign Double Tax Agreements (DTAs) to determine which country has the right to tax certain types of income. In this article, we will focus on the DTA between New Zealand and Malaysia.
The Double Tax Agreement between New Zealand and Malaysia was signed on 26 June 2018 and came into force on 1 January 2020. The agreement aims to promote trade and investment between the two countries while also eliminating double taxation.
What is Double Taxation?
Double taxation occurs when a taxpayer is subject to tax on the same income in two different countries. For instance, if a New Zealand resident earns income in Malaysia, they may have to pay tax in Malaysia on that income. However, they may also have to pay tax on the same income in New Zealand.
To avoid double taxation, DTAs are signed between countries to determine which country has the right to tax certain types of income. The DTA between New Zealand and Malaysia ensures that taxpayers are not taxed twice on the same income.
Key Features of the New Zealand-Malaysia DTA
1. Residence-Based Taxation
Under the DTA, residents of New Zealand and Malaysia are only taxed in their respective countries. This means that if a New Zealand resident earns income from Malaysia, they will only pay tax in New Zealand, and vice versa.
2. Business Profits
The DTA provides guidelines for taxing business profits. For instance, if a Malaysian business has a permanent establishment in New Zealand, it will only be taxed on the profits earned from that establishment. Similarly, if a New Zealand business has a permanent establishment in Malaysia, it will only be taxed on the profits earned from that establishment.
3. Dividends, Interest and Royalties
The DTA also provides guidelines for taxing dividends, interest and royalties. For instance, dividends paid by a Malaysian company to a New Zealand resident will only be taxed in Malaysia at a maximum rate of 15%. Similarly, interest paid by a Malaysian company to a New Zealand resident will only be taxed in Malaysia at a maximum rate of 10%.
4. Capital Gains
The DTA provides guidelines for taxing capital gains. Generally, gains from the sale of immovable property are taxed in the country where the property is located. However, gains from the sale of movable property (e.g. shares) are taxed in the country where the seller is a resident.
5. Other Income
The DTA also provides guidelines for taxing other types of income such as pensions, annuities and government service pensions.
Conclusion
The DTA between New Zealand and Malaysia provides a framework for determining the tax obligations of residents and businesses operating across borders. It eliminates double taxation and ensures that taxpayers are not taxed twice on the same income. As a business owner or individual conducting business in New Zealand or Malaysia, it is important to understand the provisions of this DTA to avoid tax pitfalls and to ensure compliance with tax laws in both countries.
