In accordance with international practice, the new agreement also introduced a new article on the taxation of capital gains related to the disposal of property. Below is the list of countries with which Malaysia has a double taxation agreement (DTT): one of the new features of the agreement is that it provides for an appropriate adjustment of transfer prices in the other country, said Amit Maheshwari, partner, Ashok Maheshwary Associates, an accounting firm. The new agreement, signed in May, will enter into force on April 1 in India. In the case of Malaysia, it came into force on 1 January. This is what the new agreement on the prevention of double taxation between India and Malaysia (DBAA) provides for, which came into force on 26 December. Previously, this facility did not exist, which led to double taxation. With regard to the abolition of double taxation, India applies a deduction, while Malaysia would use a credit method. Both states also provide a tax-saving credit. The new agreement not only provides a mechanism for exchanging banking information to the tax authorities, but also includes a limitation of the performance clause, a provision relating to the fight against abuses. Details of the agreement and protocol on income tax (India and Malaysia) signed on 9 May 2012 are available. The contract was concluded in Hindi, Malay and English, all texts authentic. However, in the event of a discrepancy, the English text is necessary.
The treaty generally follows the OECD model . . . The establishment concept was also introduced with a 90-day threshold over a 12-month period. Simply put, when an Indian transfer pricing officer adjusts transfer prices to an Indian subsidiary of a Malaysian company, the Malaysian authorities may make an adjustment in the Malaysian company`s accounts. A tax resident has the right to obtain foreign tax credits against Malaysian taxes. When a contract is in place, the available credit is the total foreign tax paid or the Malaysian tax is collected, depending on the lowest amount. In the absence of a tax agreement, the available credit is limited to half of the foreign tax paid.