Double Tax Agreement (DTA) between Thailand and Malaysia: What You Need to Know

Double taxation is a common issue faced by many businesses that operate overseas. It occurs when a company is taxed twice on the same income in two different countries. To resolve this issue, many countries have signed DTAs with other nations. In this article, we will focus on the DTA between Thailand and Malaysia, its significance, and how it affects businesses operating in both countries.

What is a Double Tax Agreement?

A Double Tax Agreement (DTA) is a treaty between two countries to avoid double taxation of income earned by businesses in both countries. DTAs specify which country has the primary right to tax specific types of income. They also provide for a reduced or exemption from taxes in one of the countries.

Why is the DTA between Thailand and Malaysia significant?

Thailand and Malaysia signed their first DTA in 1986 and revised it in 2010. The agreement aims to prevent double taxation of income in both countries and give businesses operating in both countries greater certainty and predictability regarding their tax obligations.

The DTA between Thailand and Malaysia is significant because it provides tax relief for businesses operating in both countries. Under the agreement, businesses can claim tax credits for taxes paid in one country against taxes payable in the other country. This means that businesses are not required to pay taxes twice on the same income in both countries.

What does the DTA cover?

The DTA between Thailand and Malaysia covers several types of income, including:

1. Business profits: The DTA provides that business profits are only taxable in the country where the business is located.

2. Dividends: The DTA provides for a reduced withholding tax rate of 10% on dividends paid to a resident of one country by a company of the other country.

3. Interest: The DTA provides for a reduced withholding tax rate of 10% on interest paid to a resident of one country by a resident of the other country.

4. Royalties: The DTA provides for a reduced withholding tax rate of 10% on royalties paid to a resident of one country by a resident of the other country.

What are the benefits of the DTA between Thailand and Malaysia?

The DTA between Thailand and Malaysia provides several benefits for businesses operating in both countries. These benefits include:

1. Reduced tax liability: Businesses can claim tax credits for taxes paid in one country against taxes payable in the other country, reducing their tax liability.

2. Certainty and predictability: The DTA provides businesses with greater certainty and predictability regarding their tax obligations in both countries.

3. Increased investment: The DTA promotes cross-border investment by providing businesses with a more favorable tax environment.

Conclusion

In conclusion, the DTA between Thailand and Malaysia provides significant benefits for businesses operating in both countries. It aims to avoid double taxation on income earned in both countries and provides tax relief for businesses. Therefore, businesses should be aware of its provisions and take advantage of the benefits it provides.