AGREEMENT BETWEEN
THE GOVERNMENT OF THE REPUBLIC OF INDONESIA
AND
THE GOVERNMENT OF MALAYSIA
FOR
THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON
INCOME
Article 1
PERSONAL SCOPE
This Agreement shall apply to persons who are residents of one or both of the Contacting States.
Article 2
TAXES COVERED
-
This Agreement shall apply to taxes on income imposed by a Contracting State, irrespective of the
manner in which they are levied. -
The taxes, which are the subject of this Agreement are:
(a) in lndonesia, the income tax (paiak penghasilan);
(hereinafter referred to as “Indonesian tax”).(b) In Malaysia: (i) the income tax and excess profit tax; (ii) the supplementary income tax, that is, development and (iii) the petroleum income tax; (hereinafter referred to as “Malaysian tax”). -
This Agreement shall also apply to any identical or substantially similar taxes on income which are
imposed after the date of signature of this Agreement in addition to, or in place of, the existing
taxes. The competent authorities of the Contracting States shall notify each other of important
changes which have been made in their respective taxation laws.
Article 3
GENERAL DEFINITIONS
-
For the purposes of this Agreement, unless the context otherwise requires:
(a) the term “Indonesia” comprises the territory of the Republic of Indonesia as defined in its
laws, and parts of the Continental Shelf and adjacent seas, over which the Republic of
Indonesia has sovereignty, sovereign rights or other rights in accordance with international
law;(b) the term “Malaysia” means the Federation of Malaysia and includes any area adjacent to the
territorial waters of Malaysia which, in accordance with international law, has been or may
hereafter be designated under the laws of Malaysia concerning the Continental Shelf as an area
within which the rights of Malaysia with respect to the exploration and exploitation of
natural resources, whether living or non- living, of the seabed and subsoil and the
superjacent waters, may be exercised;(c) the terms “a Contracting State” and “the other Contracting State” mean Malaysia or Indonesia
as the context requires;(d) the term “tax” means Malaysian tax or Indonesian tax, as the context requires;
(e) the term “person” includes an individual, a company and any other body of persons which is
treated as an entity for tax purposes;(f) the term “company” means any body corporate or any entity which is treated as a body corporate
for tax purposes;(g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State”
mean respectively an enterprise carried on by a resident of a Contracting State and an
enterprise carried on by a resident of the other Contracting State;(h) the term “national” means:
(i) any individual possessing the citizenship or nationality of a Contracting State;
(ii) any legal person, partnership, association and any other entity deriving its status as such
from the laws in force in a Contracting State;(i) the term “international traffic” means any transport by a ship or aircraft operated by an
enterprise of a Contracting State, except when the ship or aircraft is operated solely between
places in the other Contracting State;(j) the term “competent authority” means:
(i) in the case of Malaysia, the Minister of Finance or his authorized representative;
(ii) in the case of Indonesia, the Minister of Finance or his authorized representative.
-
In the application of the Agreement by a Contracting State, any term not defined therein shall, unless
the context otherwise requires, have the meaning which it has under the laws of that Contracting State
concerning the taxes to which the Agreement applies.
Article 4
RESIDENT
-
For the purposes of this Agreement, the term “resident of a Contracting State” means:
(a) in the case of Malaysia, a person who is resident in Malaysia for the purposes of Malaysian
tax; and(b) in the case of Indonesia, a person who is resident in Indonesia for the purposes of Indonesian
tax. -
Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting
States, then his status shall be determined as follows;(a) he shall be deemed to be a resident of the State in which he has a permanent home available to
him. If he has a permanent home available to him in both States, he shall be deemed to be a
resident of the State with which his personal and economic relations are closer (centre of
vital interests);(b) if the State in which he has his centre of vital interests cannot be determined, or if he has
not a permanent home available to him in either State, he shall be deemed to be a resident of
the State in which he has an habitual abode;(c) if he has an habitual abode in both States or in neither of them, the competent authorities of
the Contracting States shall settle the question by mutual agreement. -
Where, by reason of paragraph 1, a person other than an individual is a resident of both Contracting
States, the competent authorities of the Contracting States shall by mutual agreement endeavour to
settle the question having regard to its day-to-day management, the place where it is incorporated or
otherwise constituted and any other relevant factors.
Article 5
PERMANENT ESTABLISHMENT
-
For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business
through which the business of the enterprise is wholly or partly carried on. -
The term “permanent establishment” shall include especially:
(a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, an oil of gas well, a quarry or other place of extraction of natural resources
including timber or other forest produce;(g) a farm or plantation; (h) a building site or construction, installation or assembly protect which exists for more than 6
months;(i) the furnishing of services, including consultancy services, by an enterprise through an
employee or other person (other than an agent of independent status within the meaning of
paragraph 6) where the activities of that nature continue (for the same or a connected
project) within the other Contracting State for a period or periods aggregating more than
three months within any twelve-month period. -
The term “permanent establishment” shall be deemed not to include:
(a) the use of facilities solely for the purpose of storage or display of goods or merchandise
belonging to the enterprise;(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the
purpose of storage or display;(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the
purpose of processing by another enterprise;(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or
merchandise, or for collecting information, for the enterprise;(e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the
enterprise, any other activity of a preparatory or auxiliary character. -
An enterprise of a Contracting State shall be deemed to have a permanent establishment in the other
Contracting State if:(a) it carries on supervisory activities in that other State for more than 6 months in connection
with a construction, installation or assembly project which is being undertaken in that other
State; or(b) substantial equipment is in that other State being used or installed by, for or under contract
with, the enterprise. -
A person (other than a broker, general commission agent or any other agent of an independent status to
whom paragraph 6 applies) acting in a Contracting State on behalf of an enterprise of the other
Contracting State shall be deemed to be a permanent establishment in the first-mentioned State, if:(a) he has, and habitually exercises in the first-mentioned State, an authority to conclude
contracts in the name of the enterprise, unless his activities are limited to the purchase of
goods or merchandise for the enterprise;(b) he maintains in the first-mentioned State a stock of goods or merchandise belonging to the
enterprise from which he regularly fills orders on behalf of the enterprise; or(c) he manufactures or processes in the first-mentioned State for the enterprise goods or
merchandise belonging to the enterprise. -
An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that other State through a broker,
general commission agent or any other agent of an independent status, where such persons are acting in
the ordinary course of their business. However, when the activities of such an agent are devoted
wholly or almost wholly on behalf of that enterprise, he shall not be considered an agent of an
independent status within the meaning of this paragraph. -
The fact that a company which is a resident of a Contracting State controls or is controlled by a
company which is a resident of the other Contracting State, or which carries on business in that other
State (whether through a permanent establishment or otherwise), shall not of itself constitute either
company a permanent establishment of the other.
Article 6
INCOME FROM IMMOVABLE PROPERTY
-
Income derived by a resident of a Contracting State from immovable property situated in the other
Contracting State may be taxed in that other State. -
For the purposes of this Agreement, the term “immovable property” shall be defined in accordance with
the laws of the Contracting State in which the property in question is situated. The term shall in any
case include property accessory to immovable property, livestock and equipment used in agriculture and
forestry, rights to which the provisions of general law respecting landed property apply, usufruct of
immovable property and rights to variable or fixed payments as consideration for the working of, or
the right to work, mineral deposits, oil or gas wells, quarries and other places of extracting of
natural resources including timber or other forest produce. Ships, boats and aircraft shall not be
regarded as immovable property. -
The provisions of paragraph 1 shall also apply to income derived from the direct use, letting, or use
in any other form of immovable property. -
The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of professional
services.
Article 7
BUSINESS PROFITS
-
The profits of an enterprise of a Contracting State shall be taxable only in that State unless the
enterprise carries on business in the other Contracting State through a permanent establishment
situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise
may be taxed in the other State but only on so much thereof as is attributable to that permanent
establishment. -
Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on
business in the other Contracting State through a permanent establishment situated therein, there
shall in each Contracting State be attributed to that permanent establishment the profits which it
might be expected to make if it were a distinct and separate enterprise engaged in the same or similar
activities under the same or similar conditions and dealing wholly independently with the enterprise
of which it is a permanent establishment. -
In determining the profits of a permanent establishment, there shall be allowed as deductions expenses
including executive and general administrative expenses, which would be deductible if the permanent
establishment were an independent enterprise, insofar as they are reasonably allocable to the
permanent establishment, whether incurred in the State in which the permanent establishment is
situated or elsewhere. -
If the information available to the competent authority is inadequate to determine the profits to be
attributed to the permanent establishment of an enterprise, nothing in this Article shall affect the
application of any law of that State relating to the determination of the tax liability of a person by
the exercise of a discretion or the making of an estimate by the competent authority, provided that
the law shall be applied, so far as the information available to the competent authority permits, in
accordance with the principle of this Article. -
No profits shall be attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise. -
For the purpose of the preceding paragraphs, the profits to be attributed to the permanent
establishment shall be determined by the same method year by year unless there is good and sufficient
reason to the contrary. -
Where profits include items of income which are dealt with separately in other Articles of this
Agreement, then the provisions of those Articles shall not be affected by the provisions of this
Article.
Article 8
SHIPPING AND AIR TRANSPORT
-
Profits derived from the operation of ships or aircraft in international traffic shall be taxable only
in the Contracting State in which the place of effective management of the enterprise is situated. -
Notwithstanding the provisions of paragraph 1, profits derived by an enterprise of a Contracting State
from the operation of ships in international traffic may be taxed in the other Contracting State, but
the tax imposed in that other State shall be reduced by an amount equal to 50% thereof. -
Notwithstanding the provisions of paragraphs 1 and 2 and Article 7, profits derived by an enterprise
of a Contracting State from a voyage of ships or aircraft where the principal purpose of the voyage is
to transport passengers or goods between places in the other Contracting State shall be taxed in that
other State. -
Paragraphs 1 and 2 shall also apply to the share of the profits from the operation of ships or
aircraft derived by a resident of a Contracting State through participation in a pool, a joint
business or an international operating agency.
Article 9
ASSOCIATED ENTERPRISES
Where:
(a) |
an enterprise of a Contracting State participates directly or indirectly in the management, |
(b) |
the same persons participate directly or indirectly in the management, control or capital of an |
financial relations which differ from those which would be made between independent enterprises, then
any profits which would, but for those conditions, have accrued to one of the enterprises, but, by
reason of those conditions, have not so accrued, may be included in the profits of that enterprise and
taxed accordingly.
Article 10
DIVIDENDS
-
Dividends paid by a company which is a resident of a Contracting State to a resident of the other
Contracting State may be taxed in that other State. -
Dividends paid by a company which is a resident of Indonesia to a resident of Malaysia may be taxed in
Indonesia in accordance with the laws of Indonesia but if the recipient is the beneficial owner of the
dividends the tax so charged shall not exceed 15% of the gross amount of the dividends. -
Dividends paid by a company which is a resident of Malaysia to a resident of Indonesia who is the
beneficial owner thereof shall be exempt from any tax in Malaysia which is chargeable on dividends in
addition to the tax chargeable in respect of the income of the company. Nothing in this paragraph
shall affect the provisions of the Malaysian law under which the tax in respect of a dividend paid by
a company which is a resident of Malaysia from which Malaysian tax has been, or has been deemed to be,
deducted may be adjusted by reference to the rate of tax appropriate to the Malaysian year of
assessment immediately following that in which the dividend was paid. -
The term “dividends” as used in this Article means income from shares or other rights, not being
debt-claims, participating in profits, as well as income from other corporate rights which is
subjected to the same taxation treatment as income from shares by the laws of the State of which the
company making the distribution is a resident. -
The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the dividends,
being a resident of a Contracting State, carries on business in the other Contracting State, of which
the company paying the dividends is a resident, through a permanent establishment situated therein,
and the holding in respect of which the dividends are paid is effectively connected with such
permanent establishment. In such a case, the provisions of Article 7 shall apply. -
Where a company which is a resident of a Contracting State derives income or profits from the other
Contracting State, that other State may not impose any tax on the dividends paid by the company to
persons who are not residents of that other State, or subject the company’s undistributed profits to a
tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly
or partly of income or profits arising in that other State.
Article 11
INTEREST
-
Interest arising in a Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State. -
However, such interest may be taxed in the Contracting State in which it arises, and according to the
laws of that State, but if the recipient is the beneficial owner of the interest, the tax so charged
shall not exceed 15% of the gross amount of the interest. -
Notwithstanding the provisions of paragraph 2, interest to which a resident of Indonesia is
beneficially entitled shall be exempt from Malaysian tax if the loan or other indebtedness in respect
of which the interest is paid is an approved loan as defined in section 2(1) of the Income Tax Act
1967 of Malaysia. -
Notwithstanding the provisions of paragraphs 2 and 3, the Government of a Contracting State shall be
exempt from tax in the other Contracting State in respect of interest derived by the Government from
that other State. -
For purposes of paragraph 4, the term “Government”:
(a) in the case of Indonesia means the Government of the Republic of Indonesia and shall include: (i) the local authorities; (ii) the statutory bodies; (iii) Bank Indonesia (the Central Bank of Indonesia); and (iv) such institutions, the capital of which is wholly owned by the Government of the Republic of
Indonesia or the local authorities or the statutory bodies thereof, as may be agreed upon from
time to time between the competent authorities of the Contracting States.(b) in the case of Malaysia means the Government of Malaysia and shall include:
(i) the Governments of the States; (ii) the local authorities; (iii) the statutory bodies; (iv) Bank Negara Malaysia; and (v) such institutions, the capital of which is wholly owned by the Government of Malaysia or the
Governments of the States or the local authorities or the statutory bodies thereof, as may be
agreed upon from time to time between the competent authorities of the Contracting States; -
The term “interest” as used in this Article means income from debt-claims of every kind, whether or
not secured by mortgage, and whether or not carrying a right to participate in the debtor’s profits,
and in particular, income from government securities and income from bonds and debentures. -
The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest, being
a resident of a Contracting State, carries on business in the other Contracting State in which the
interest arises, through a permanent establishment situated therein and the debt-claim in respect of
which the interest is paid is effectively connected with such permanent establishment. In such a case,
the provisions of Article 7 shall apply. -
Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a
political subdivision, a local authority or statutory body thereof, or a resident of that State.
Where, however, the person paying the interest, whether he is a resident of a Contracting State or
not, has in a Contracting State a permanent establishment in connection with which the indebtedness on
which the interest is paid was incurred, and such interest is borne by such permanent establishment,
then such interest shall be deemed to arise in the State in which the permanent establishment is
situated. -
Where, by reason of a special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the interest paid, having regard to the debt- claim for
which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial
owner in the absence of such relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such a case, the excess part of the payments shall remain taxable according
to the laws of each Contracting State, due regard being had to the other provisions of this
Agreement.
Article 12
ROYALTIES
-
Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State. -
However, such royalties may also be taxed in the Contracting State in which they arise, and according
to the laws of that State, but if the recipient is the beneficial owner of the royalties, the tax so
charged shall not exceed 15% of the gross amount of the royalties. -
The term “royalties” as used in this Article means payments of any kind received as consideration
for:(i) the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula
or process, or any copyright of scientific work, or for the use of, or the right to use,
industrial, commercial or scientific equipment, or for information concerning industrial,
commercial or scientific experience;(ii) the use of, or the right to use, cinematograph films, or tapes for radio or television
broadcasting, any copyright of literary or artistic work. -
The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a
resident of a Contracting State, carries on business in the other Contracting State in which the
royalties arise through a permanent establishment situated therein and the right or property in
respect of which the royalties are paid is effectively connected with such permanent establishment. In
such a case, the provisions of Article 7 shall apply. -
Royalties shall be deemed to arise in a Contracting State when the payer is that Contracting State
itself, a political subdivision, a local authority or a statutory body thereof, or a resident of that
State. Where, however, the person paying such royalties, whether he is a resident of a Contracting
State or not, has in a Contracting State a permanent establishment in connection with which the
obligation to pay the royalties was incurred, and such royalties are borne by such permanent
establishment or fixed base, then such royalties shall be deemed to arise in the State in which the
permanent establishment is situated. -
Where, by reason of a special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the royalties paid, having regard to the use, right or
information for which they are paid, exceeds the amount which would have been agreed upon by the payer
and the beneficial owner in the absence of such relationship, the provisions of this Article shall
apply only to the last-mentioned amount. In such a case, the excess part of the payments shall remain
taxable according to the laws of each Contracting State, due regard being had to the other provisions
of this Agreement. -
Subject to paragraph 5 of Article 22, royalties derived by a resident of Indonesia which are subjected
to film hire duty under the Cinematograph Film-Hire Duty Act in Malaysia shall not be liable to
Malaysian tax to which this Agreement applies.
Article 13
GAINS FROM THE ALIENATION OF PROPERTY
-
Gains from the alienation of immovable property, as defined in paragraph 2 of Article 6, may be taxed
in the Contracting State in which such property is situated. -
Gains from the alienation of movable property forming part of the business property of a permanent
establishment, which an enterprise of a Contracting State has in the other Contracting State or of
movable property available to a resident of a Contracting State in the other Contracting State for the
purpose of performing professional services, including such gains from the alienation of such a
permanent establishment (alone or together with the whole enterprise) may be taxed in the other State.
However, gains from the alienation of ships or aircraft operated by an enterprise of a Contracting
State in international traffic and movable property pertaining to the operation of such ships or
aircraft shall be taxable only in the State of which the enterprise is a resident. -
Gains from the alienation of shares of a company, the property of which consists principally of
immovable property situated in a Contracting State, may be taxed in that State. Gains from the
alienation of an interest in a partnership or a trust, the property of which consists principally of
immovable property situated in a Contracting State, may be taxed in that State. -
Gains from the alienation of any property or assets, other than those mentioned in paragraphs 1, 2 and
3 of this Article, shall be taxable only in the Contracting State of which the alienator is a
resident.
Article 14
PERSONAL SERVICES
-
Subject to the provisions of Articles 15, 16, 17, 18, 19 and 20, salaries, wages and similar
remuneration or income derived by a resident of a Contracting State in respect of professional
services or other activities of a similar character, shall be taxable only in that State unless the
services or activities are exercised or performed in the other Contracting State. If the employment,
services or activities are so exercised or performed, such remuneration or income as is derived
therefrom may be taxed in the other State. -
Notwithstanding the provisions of paragraph 1, remuneration or income derived by a resident of a
Contracting State in respect of an employment, services or activities exercised or performed in any
calendar year in the other Contracting State shall be taxable only in the first-mentioned State, if:(a) the recipient is present in that other State for a period or periods not exceeding in the
aggregate 183 days in the calendar year concerned;(b) the services or activities are exercised or performed for or on behalf of a person who is a
resident of the first-mentioned State; and(c) the remuneration or income is not borne by a permanent establishment which the person paying
the remuneration has in the other State. -
The term “professional services” includes independent scientific, literary, artistic, educational or
teaching activities as well as the independent activities of physicians, lawyers, engineers,
architects, dentists and accountants. -
Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment
exercised on board a ship or aircraft operated in international traffic by an enterprise of a
Contracting State, shall be taxable only in that State.
Article 15
DIRECTORS’ FEES
-
Directors’ fees and similar payments derived by a resident of a Contracting State in his capacity as a
member of the board of directors of a company which is a resident of the other Contracting State, may
be taxed in that other State. -
The remuneration which a person to whom paragraph 1 applies derives from the company in respect of the
discharge of day-to-day functions of a managerial or technical nature may be taxed in accordance with
the provisions of Article 14 (Personal services).
Article 16
ARTISTES AND ATHLETES
-
Notwithstanding the provisions of Article 14, income derived by a resident of a Contracting State as
an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as
an athlete, from his personal activities as such exercised in the other Contracting State, may be
taxed in that other State. -
Where income in respect of personal activities exercised by an entertainer or an athlete in his
capacity as such accrues not to the entertainer or athlete himself but to another person, that income
may, notwithstanding the provisions of Articles 7 and 14, be taxed in the Contracting State in which
the activities of the entertainer or athlete are exercised. -
The provisions of paragraphs 1 and 2 shall not apply to remuneration or profits derived from
activities exercised in a Contracting State if the visit to that State is directly or indirectly
supported wholly or substantially from the public funds of the other Contracting State, a political
subdivision, a local authority or statutory body thereof.
Article 17
PENSIONS AND ANNUITIES
-
Subject to the provisions of paragraph 2 of Article 18, any pensions or other similar remuneration for
past employment or any annuity arising in a Contracting State and paid to a resident of the other
Contracting State shall be taxable only in that other State. -
The term “annuity” includes a stated sum payable periodically at stated times, during life or during a
specified or ascertainable period of time, under an obligation to make the payments in return for
adequate and full consideration in money or money’s worth.
Article 18
GOVERNMENT SERVICE
1. | (a) |
Remuneration, other than a pension, paid by a Contracting State or a political subdivision, a |
|
(b) |
However, such remuneration shall be taxable only in the other Contracting State if the services |
||
(i) |
is a national of that State; or |
||
(ii) |
did not become a resident of that State solely for the purpose of performing the services. |
||
2. |
Any pension paid by, or out of funds created by, a Contracting State or a political subdivision, a |
||
3. |
The provisions of Articles 14, 15 and 17 shall apply to remuneration or pensions in respect of |
Article 19
STUDENTS AND TRAINEES
An individual who is a resident of a Contracting State immediately before making a visit to the other
Contacting State and is temporarily present in the other State solely:
(a) |
as a student, at a recognized university, college, school or other similar recognized educational |
|
(b) |
as a business or technical apprentice; or |
|
(c) |
as recipient of a grant, allowance or award for the primary purpose of study, research or training |
|
shall be exempt from tax in that other State on:
|
||
(a) |
all remittances from abroad for the purposes of his maintenance, education, study, research or |
|
(b) |
the amount of such grant, allowance or award; and |
|
(c) |
any remuneration not exceeding United States Dollars two thousand two hundred per annum in respect |
Article 20
TEACHERS AND RESEARCHERS
-
An individual who is a resident of a Contracting State immediately before making a visit to the other
Contracting State, and who, at the invitation of any university, college, school or other similar
educational institution, visits that other State for a period not exceeding two years solely for the
purpose of teaching or research or both at such educational institution shall be exempt from tax in
that other State on any remuneration for such teaching or research. -
This Article shall not apply to income from research if such research is undertaken primarily for the
private benefit of a specific person or persons.
Article 21
INCOME NOT EXPRESSLY MENTIONED
Articles of this Agreement shall be taxable only in that Contracting State except that if such income is
derived from sources in the other Contracting State, it may also be taxed in that other State.
Article 22
ELIMINATION OF DOUBLE TAXATION
-
Subject to the laws of Malaysia regarding the allowance as a credit against Malaysian tax of tax
payable in any country other than Malaysia, Indonesian tax payable under the laws of Indonesia and in
accordance with this Agreement by a resident of Malaysia in respect of income derived from Indonesia
shall be allowed as a credit against Malaysian tax payable in respect of that income. The credit shall
not, however, exceed that part of the Malaysian tax, as computed before the credit is given, which is
appropriate to such item of income. -
For the purposes of paragraph 1, the term “Indonesian tax payable” shall be deemed to include the
amount of Indonesian tax which would have been paid if the Indonesian tax had not been exempted or
reduced in accordance with this Agreement and:(a) the special incentive laws designed to promote economic development in Indonesia so far as they
are in force on the date of signature of this Agreement; or(b) any other provisions which may subsequently be introduced in Indonesia in modification of, or in
addition to, the existing special incentive laws so far as they are agreed by the competent
authorities of the Contracting States to be of a substantially similar character. -
Subject to the laws of Indonesia regarding the allowance as a credit against Indonesian tax of tax
payable in any country other than Indonesia, Malaysian tax payable under the laws of Malaysia and in
accordance with this Agreement by a resident of Indonesia in respect of income derived from Malaysia
shall be allowed as a credit against the Indonesian tax payable in respect of that income. The credit
shall not, however, exceed that part of the Indonesian tax, as computed before the credit is given,
which is appropriate to such item of income. -
For the purposes of paragraph 3, the term “Malaysian tax payable” shall be deemed to include Malaysian
tax which would, under the laws of Malaysia and in accordance with this Agreement, have been payable
on any income derived from sources in Malaysia had the income not been taxed at a reduced rate or
exempted from Malaysian tax in accordance with:(a) the special incentive laws for the promotion of economic development of Malaysia so far as they
were in force on, and have not been modified since, the date of signature of this Agreement or
have been modified only in minor respects so as not to affect their general character; and(b) any other provisions which may subsequently be introduced in Malaysia in modification of, or in
addition to, the investment incentives laws so far as they are agreed by the competent
authorities of the Contracting States to be of a substantially similar character. -
For the purposes of paragraph 3, royalties derived by a resident of Indonesia from film rentals, which
are subjected to duty under the Cinematograph Film-Hire Act in Malaysia, that duty shall be deemed to
be Malaysian tax.
Article 23
NON-DISCRIMINATION
-
The nationals of a Contracting State shall not be subjected in the other Contracting State to any
taxation or any requirement connected therewith which is other or more burdensome than the taxation
and connected requirements to which nationals of that other State in the same circumstances are or may
be subjected. -
The taxation on a permanent establishment which an enterprise of a Contracting State has in the other
Contracting State shall not be less favourably levied in that other State than the taxation levied on
enterprises of that other State carrying on the same activities. -
Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled,
directly or indirectly, by one or more residents of the other Contracting State, shall not be
subjected in the first-mentioned State to any taxation or any requirement connected therewith which is
other or more burdensome than the taxation and connected requirements to which other similar
enterprises of that first-mentioned State are or may be subjected. -
Nothing in this Article shall be construed as obliging:
(a) a Contracting State to grant to individuals who are resident of the other Contracting State
any personal allowances, reliefs and reductions for tax purposes on account of civil status or
family responsibilities which it grants to its own residents;(b) Malaysia to grant to nationals of Indonesia not resident in Malaysia those personal
allowances, reliefs and reductions for tax purposes which are by law available on the date of
signature of this Agreement only to nationals of Malaysia who are not resident in Malaysia. -
Nothing in this Article shall be construed so as to prevent either Contracting State from limiting to
its nationals the enjoyment of tax incentives designed to promote economic development in that
State. -
In this Article, the term “taxation” means taxes to which the Agreement applies.
Article 24
MUTUAL AGREEMENT PROCEDURE
-
Where a resident of a Contracting State considers that the actions of one or both of the Contracting
States result or will result for him in taxation not in accordance with this Agreement, he may,
notwithstanding the remedies provided by the taxation laws of those States, present his case to the
competent authority of the State of which he is a resident or, if his case comes under paragraph 1 of
Article 23, to that of the State of which he is a national. The case must be presented within three
years from the first notification of the action resulting in taxation not in accordance with the
provisions of the Agreement. -
The competent authority shall endeavour, if the objection appears to it to be justified and if it is
not itself able to arrive at an appropriate solution, to resolve the case by mutual agreement with the
competent authority of the other Contracting State, with a view to the avoidance of taxation which is
not in accordance with the Agreement. -
The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation or application of the Agreement. They may also
consult together for the elimination of double taxation in cases not provided for in the Agreement. -
The competent authorities of the Contracting States may communicate with each other directly for the
purpose of reaching an agreement in the sense of the preceding paragraphs.
Article 25
EXCHANGE OF INFORMATION
-
The competent authorities of the Contracting States shall exchange such information as is necessary
for carrying out the provisions of this Agreement or for the prevention or detection of evasion or
avoidance of taxes covered by this Agreement. Any information so exchanged shall be treated as secret
and shall be disclosed only to any persons or authorities (including a Court or reviewing authority)
concerned with the assessment, collection, enforcement or prosecution in respect of, or the
determination of appeals in relation to, the taxes which are the subject of the Agreement. -
In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the
obligation:(a) to carry out administrative measures at variance with the laws or the administrative practice
of that or of the other State;(b) to supply particulars which are not obtainable under the laws or in the normal course of the
administration of that or of the other State;(c) to supply information which would disclose any trade, business, industrial, commercial or
professional secret, trade process, or information the disclosure of which would be contrary
to public policy.
Article 26
DIPLOMATIC AND CONSULAR OFFICER’S
general rules of international law or under the provisions of special agreements.
Article 27
ENTRY INTO FORCE
-
This Agreement shall be ratified by the Governments of the Contracting States and the instruments of
ratification shall be exchanged at … as soon as possible. -
This Agreement shall enter into force upon the exchange of the instruments of ratification and shall
have effect for the year of assessment or taxation year beginning on the first day of January 1987 and
subsequent years of assessment or taxation years.
Article 28
TERMINATION
State may terminate the Agreement through diplomatic channels, by giving to the other Contracting State
written notice of termination at least six months before the end of the calendar year after the year 1991.
In such event, the Agreement shall cease to have effect for the year of assessment or taxation year
beginning on or after the first day of January of the calendar year next following that in which the
notice is given.
this Agreement.
and English language, the three texts being equally authentic. In the event of there being a dispute in
the interpretation and the application of this Agreement, the English text shall prevail.
For the Government of the Republic Indonesia sgd J.B. Sumarlin Minister of Finance |
For the Government of Malaysia sgd Anwar Ibrahim Minister of Finance |
Government of Malaysia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income, both Governments have agreed that the following provisions shall form an
integral part of the Agreement.
-
In connection with Article 3 “General definitions”, it is understood that the territorial
definitions provided in paragraph 1(a) and paragraph 1(b) shall not include any part of territory or
maritime areas over which the two Contracting States have claims to be settled.
-
In respect of paragraph 2(h) of Article 5 “Permanent establishment”, it is understood that a time
limit of 3 months shall apply to an assembly or installation project performed by a person other
than the main contractor.
-
(a) In connection with paragraph 1 of Article 7 “Business profits”, nothing in this Article
shall prevent either Contracting State from imposing tax on profits derived from:(i) sales in that State of goods or merchandise of the same or similar kind as those sold
through a permanent establishment in that Contracting State; or(ii) other business activities carried on in that State of the same or similar kind as those
effected through a permanent establishment in that Contracting State, provided that
those sales or other business activities are evidently not conducted through that
permanent establishment merely for the purpose of reducing the tax of the permanent
establishment.(b) In connection with Article 7 “Business profits”, nothing in this Agreement shall affect the
operation of any law of a Contracting State relating to the taxation of income or profits from
any insurance business provided that if the relevant law in force in either Contracting State at
the date of signature of this Agreement is amended (otherwise than in minor respects so as not
to affect its general character) the States shall consult with each other with a view to
agreeing to any amendment of this paragraph that may be appropriate.(c) In connection with Article 7 “Business profits”, nothing in this Article shall prevent either
Contracting State from imposing, apart from the corporate income tax, a branch profits tax on
the after tax profits of the permanent establishment, provided that the tax so imposed shall not
exceed 12.5% of such amount.
-
In connection with Article 10 “Dividends”, nothing in this Article shall affect the provisions contained
in any production sharing contracts relating to the exploitation and production of oil and natural gas
which have been negotiated with the Government of Indonesia or the relevant state oil company of
Indonesia, provided that a company which is resident in Malaysia deriving income from a production
sharing contract shall not be less favourably treated with respect to tax than that levied on a company
of a third state deriving income from a similar production sharing contract.
-
In connection with Articles 11, 12, 16 and 18 the term “statutory body” means any body corporate
irrespective of the name by which it is known, which is incorporated pursuant to the provisions of
written law and is a public authority or an instrumentality or an agency of:(a) the Government of Malaysia or any of the States of the Federation but does not include a
local authority and a body corporate that is incorporated under the Companies Act 1965;(b) the Government of the Republic of Indonesia but does not include a local authority and a
body corporate that is incorporated under Law Number 9 of year 1969. Government Regulation
Number 12 of year 1969.
signed this Protocol.
Done in duplicate at Kuala Lumpur this 12th day of September 1991, in Bahasa Malaysia, Bahasa Indonesia
and English language, the three texts being equally authentic. In the event of there being a dispute in
the interpretation and the application of this Agreement, the English text shall prevail.
THE GOVERNMENT OF THE REPUBLIC OF INDONESIA AND
THE GOVERNMENT OF MALAYSIA
FOR THE AVOIDANCE OF DOUBLE TAXATION AND
THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME AND ITS PROTOCOL
SIGNED AT KUALA LUMPUR ON 12 SEPTEMBER 1991
THE GOVERNMENT OF THE REPUBLIC OF INDONESIA AND THE GOVERNMENT OF MALAYSIA.
DESIRING to conclude a Protocol to amend the Agreement between the Government of the Republic of Indonesia
and the Government of Malaysia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion
with Recpect to Taxes on Income and its Protocol signed at Kuala Lumpur on 12 September 1991 (hereinafter
referred to as “the Agreement” and “the Protocol” respectively),
HAVE AGREED as follows:
Paragraph 2 of Article 10 of the Agreement is amended by substituting for the words “15 per cent” the
words “10 per cent”.
Paragraph 2 of Article 11 of the Agreement is amended by substituting for the words “15 per cent” the
words “10 per cent”.
Paragraph 2 of Article 12 of the Agreement is amended by substituting for the words “15 per cent” the
words “10 per cent”.
Paragraph 5 of the Protocol is substituted by the following new paragraph :
“In connection with Article 10 “Dividens” nothing in this Article shall affect the provisions contained in
any production sharing contracts relating to oil and gas sector concluded by the Government of Indonesia,
its instrumentality, its relevant state oil and gas company or any other entity thereof with a person who
is a resident of Malaysia”.
For the purposes of this Protocol, it is understood that:
1) |
the benefits of the Agreement shall not be available in respect of the carrying on of any offshore business activity under the Labuan Offshore Business Activity Tax Act 1990; and |
2) |
the term “offshore business activity” means an offshore business activity as defined under section 2 (1) of the Labuan Offshore Business Activity Tax Act 1990 in force at the date of signature of this Protocol and includes any substantially similar activity dealt with in any amendment to that Act thereafter. |
This Protocol shall be an integral part of the Agreement between the Government of the Republic of
Indonesia and the Government of Malaysia for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income and its Protocol signed at Kuala Lumpur on the 12th day of
September, 1991.
This Protocol shall be subject to ratification and instruments of ratification shall be exchanged as soon
as possible. It shall enter into force on the date exchange of the instruments of ratification. The
provisions of this Protocol shall for the first time have effect for amounts paid or credited on or after
the first day of the second month next following the date on which the Protocol enters into force.
IN WITNESS whereof the undersigned, being duly authorized thereto by their respective Governments, have
signed this Protocol.
DONE in duplicate at Bukittinggi, Indonesia, this twelfth day of January in the year of two thousand and
six, each in Bahasa Indonesia, Bahasa Malaysia and in English, the three texts being equally authentic. In
the event of there being a divergence in the interpretation and the application of this Protocol, the
English text shall prevail.
For the Government of
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For the Government of
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