April 27, 1982 January
1, 1985
AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF THE
PHILIPPINES AND THE GOVERNMENT OF MALAYSIA FOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
The Government of the Republic of the Philippines and the
Government of Malaysia,
Desiring to conclude an Agreement for the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on
income,
Have agreed as follows:
ARTICLE 1
Personal Scope
This Agreement shall apply to persons who are residents of
one or both of the Contracting States.
ARTICLE 2
Taxes Covered
1. This
Agreement shall apply to taxes on income imposed by a Contracting State,
irrespective of the manner in which they are levied.
2. The taxes
which are the subject of this Agreement are:
(a) in
Malaysia:
(i) the
income tax and excess profit tax;
(ii) the
supplementary income taxes, that is, tin profits tax, development tax and
timber profits tax; and
(iii) the
petroleum income tax;
(hereinafter referred to as "Malaysian tax");
(b) in the
Philippines:
the income taxes, including the corporate development tax
and the branch profit remittance tax, imposed under Title II of the National
Internal Revenue Code of the Philippines, as amended, and all other taxes on
income imposed by the Government of the Republic of the Philippines
(hereinafter referred to as "Philippine tax").
3. The
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
1. In this
Agreement, unless the context otherwise requires:
(a) 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 sea bed and sub-soil and their natural resources
may be exercised;
(b) the term
"Philippines" means the Republic of the Philippines and when used in
a geographical sense means the national territory comprising the Republic of
the Philippines;
(c) the terms
"a Contracting State" and "the other Contracting State"
mean Malaysia or the Philippines, as the context requires;
(d) the term
"person" includes an individual, an estate, a trust, a company and
any other body of persons which is treated as an entity for tax purposes;
(e) the term
"company" means any body corporate or any entity which is treated as
a body corporate for tax purposes;
(f) 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;
(g) the term
"tax" means Malaysian tax or Philippine tax, as the context requires;
(h) the term
"national" means:
(i) any
individual possessing the citizenship 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 the Philippines, the Minister of Finance or his authorized
representative.
2. In the
application of the Agreement by a Contracting State, any term not otherwise
defined shall, unless the context otherwise requires, have the meaning which it
has under the laws of that Contracting State relating to the taxes which are
the subject of the Agreement.
ARTICLE 4
Resident
1. 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 the Philippines, a person who is resident in the Philippines for the
purpose of Philippine tax.
2. Where by
reason of the provisions of paragraph 1 an individual is a resident of both
Contracting States, then his status shall be determined in accordance with the
following rules:
(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 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, he shall be deemed to
be a resident of the State of which he is a national;
(d) if he is a
national of both States or of neither of them, the competent authorities of the
Contracting States shall settle the question by mutual agreement.
3. 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 endeavor 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
1. For the
purposes of this Agreement, the term "permanent establishment" means
a fixed place of business in which the business of the enterprise is wholly or
partly carried on.
2. 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 or 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 project which exists for more
than 6 months.
3. The term
"permanent establishment" shall not be deemed to include:
(a) the use of
facilities solely for the purpose of storage, display or delivery 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, display or delivery;
(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 advertising,
for the supply of information, for scientific research or for similar
activities which have a preparatory or auxiliary character, for the enterprise.
4. 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.
5. 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 delivers goods or
merchandise on behalf of the enterprise;
(c) he
manufactures or processes in the first-mentioned State for the enterprise goods
or merchandise belonging to the enterprise.
6. 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 the enterprise, he shall not be considered
as agent of an independent status if the transactions between the agent and the
enterprise were not made under arm's length conditions.
7. 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
1. 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.
2. 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.
3. The
provisions of paragraph 1 shall apply to income derived from the direct use,
letting, or use in any other form of immovable property.
4. 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
1. 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.
2. 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.
3. In
determining the profits of a permanent establishment, there shall be allowed as
deductions all 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.
4. Notwithstanding
the provisions of paragraph 3, there shall not be allowed any deduction for
payments by that permanent establishment to the head office or any other part
of the enterprise, by way of royalties, fees or other similar payments for the
use of patents or other rights, by way of commission for specific services
performed or for management or (except in the case of a banking enterprise) by
way of interest on moneys lent to the permanent establishment, unless such
payments reimburse expenses actually incurred by the enterprise.
5. Notwithstanding
the provisions of paragraphs 1 and 2, in determining the profits of a permanent
establishment amounts receivable by the permanent establishment from the head
office or any other part of the enterprise by way of royalties, fees or other
similar payments for the use of patents or other rights, by way of commission
for specific services performed or for management or (except in the case of a
banking enterprise) by way interest on moneys lent to the head office or any
other part of the enterprise shall not be included in the receipts of the
permanent establishment, except insofar as they represent reimbursement of
expenses which it has actually incurred.
6. 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.
7. 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
1. The tax
payable in a Contracting State by a resident of the other Contracting State in
respect of profits from the operation of ships or aircraft in international
traffic shall not exceed the lesser of:
(a) 1 1/2 per
cent of the gross revenue derived from sources in that State; and
(b) the lowest
rate of Philippine tax that may be imposed on profits of the same kind derived
under similar circumstances by a resident of a third State.
2. Paragraph
1 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, control or capital of an enterprise of the other Contracting State,
or
(b) the same
persons participate directly or indirectly in the management, control or
capital of an enterprise of a Contracting State and an enterprise of the other
Contracting State,
and in their case conditions are made or imposed between the
two enterprises in their commercial or 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
1. 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.
2. Dividends
paid by a company which is a resident of the Philippines to a resident of
Malaysia who is subject to tax in Malaysia in respect thereof, may be taxed in
the Philippines in accordance with the laws of the Philippines but if the
recipient is the beneficial owner of the dividends the tax so charged shall not
exceed:
(a) 15 per
cent of the gross amount of the dividends if the recipient is a company;
(b) in all
other cases, 25 per cent of the gross amount of the dividends.
3. Dividends
paid by a company which is a resident of Malaysia to a resident of the
Philippines who is the beneficial owner thereof and is subject to Philippine
tax in respect 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: Provided that 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.
4. The
provisions of paragraph 1, 2 and 3 shall not apply if the recipient of the
dividends, being a resident of a Contracting State, has in the other
Contracting State in which the company paying the dividends is a resident, a
permanent establishment with which the holding by virtue of which the dividends
are paid is effectively connected. In such a case, the provisions of Article 7
shall apply.
5. 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 the other
State, or subject the company's undistributed profits to a tax on undistributed
profits, even if the dividends paid the undistributed profits consist wholly or
partly of income or profits arising in that other State.
6. The term
"dividends" as used in this Article means income from shares or other
rights (not being debt-claims) participating in income or profits, as well as
income from other corporate rights assimilated to income from shares according
to the taxation laws of the Contracting State of which the company making the
distribution is a resident.
ARTICLE 11
Interest
1. Interest
arising in a Contracting State and paid to a resident of the other Contracting
State may be taxed in that other State.
2. 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 per cent the gross
amount of the interest.
3. Notwithstanding
the provisions of paragraph 2, interest paid to a resident of the Philippines
on an approved loan or a long-term loan shall be exempt from Malaysian tax.
4. 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.
5. For
purposes of paragraph 4, the term "Government":
(a) 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 Bank
Negara Malaysia;
(iv) such
institutions, the capital of which is wholly owned by the Government of Malaysia
or the governments of the states or the local authorities, as may be agreed
from time to time between the competent authorities of the Contracting State;
(b) in the
case of the Philippines means the Government of the Republic of the Philippines
and shall include:
(i) the
Central Bank of the Philippines;
(ii) such
institutions, the capital of which is wholly owned by the Government of the
Republic of the Philippines, as may be agreed upon from time to time between
the competent authorities of the Contracting States.
6. The term
"interest" as used in this Article means income from Government
securities, bonds or debentures, whether or not secured by mortgage and whether
or not carrying a right to participate in profits, and debt-claims of every
kind as well as all other income assimilated to income from money lent
according to the taxation laws of the Contracting State in which the income
arises.
7. 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.
8. 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 as 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.
9. Where, by
reason of a special relationship between the payer and the recipient 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 recipient in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In that 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
1. Royalties
arising in a Contracting State and paid to a resident of the other Contracting
State may be taxed in that other State, if such resident is the beneficial
owner of the royalties.
2. Such
royalties may also be taxed in the Contracting State in which they arise, and
according to the laws of that State. However, if the recipient is the
beneficial owner of the royalties:
(a) in the
case of Malaysia:
(i) the tax
so charged shall not exceed 15 per cent of the gross amount of the royalties;
and
(ii) approved
industrial royalties derived from Malaysia by a resident of the Philippines
shall be exempt from tax.
(b) in the
case of the Philippines:
the tax so charged shall not exceed:
(i) 15 per
cent of the gross amount of the royalties where the royalties are paid by a
registered enterprise as well as royalties defined in paragraph 4(a)(ii); and
(ii) 25 per
cent of the gross amount of the royalties in all other cases.
3. Royalties
derived by a resident of the Philippines, being royalties that, as film
rentals, are subject to the cinematograph film-hire duty in Malaysia, shall not
be liable to Malaysian tax.
4. (a) 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, any copyright of literary, artistic or 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.
(b) The term
"approved industrial royalties" as used in this Article means
royalties included in the definition in subparagraph 4(a)(i) which are approved
and certified by the competent author of Malaysia as payable for the purpose of
promoting industrial development in Malaysia and which are payable by an
enterprise which is wholly or mainly engaged in activities falling within one
of the following classes:
(i) manufacturing,
assembling or processing;
(ii) construction,
civil engineering or ship-building; or
(iii) electricity,
hydraulic power, gas or water supply.
(c) The term
"registered enterprise" as used in this Article means an enterprise
registered with the Philippine Board of Investments and engaged in preferred
areas of activities.
5. The
provisions of paragraphs 1 and 2 shall not apply of the recipient of the
royalties, being a resident of a Contracting State, has in the other
Contracting State in which the royalties arise a permanent establishment with
which the right or property giving rise to the royalties is effectively
connected. In such a case, the provisions of Article 7 shall apply.
6. 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
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, then such royalties shall be deemed to arise
in the State in which the permanent establishment is situated.
7. Where,
owing to a special relationship between the payer and the recipient 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 recipient 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 13
Gains from the Alienation of Property
1. 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. LLphil
2. 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 pertaining to a fixed base
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) or of such a fixed base 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.
3. Gains
from the alienation of shares of a company, the property of which consists
principally or 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.
4. 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
1. Subject
to the provisions of Articles 15, 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.
2. 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, and
(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.
3. 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.
4. 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
1. 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.
2. 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.
ARTICLE 16
Artistes and Athletes
1. 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.
2. 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. pred
3. 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
1. Subject
to the provisions of Article 18, any pension or other remuneration for past
employment or any annuity arising in a Contracting State and paid to a resident
of the other Contracting State may be taxed in the first-mentioned State.
2. Pensions
or other remuneration for past employment shall be deemed to arise in a
Contracting State if the payer is that State itself, a political subdivision or
local authority thereof, or a resident of the State. Where, however, the person
paying such income, whether he is a resident of a Contracting State or not, has
in a Contracting State a permanent establishment, and such income is borne by
the permanent establishment, then the income shall be deemed to arise in the
State in which the permanent establishment is situated.
3. 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 or a local authority thereof to any individual in respect of
services rendered to that State or political subdivision or local authority
thereof shall be taxable only in that State.
(b) However,
such remuneration shall be taxable only in the other Contracting State if the
services are rendered in that State and the recipient is a resident of that
State who:
(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 or a local authority thereof to any individual in respect of
services rendered to that State or political subdivision or local authority
thereof may be taxed in the other Contracting State. liblex
3. The
provisions of Articles 14, 15 and 17 shall apply to remuneration or pensions in
respect of services rendered in connection with any trade or business carried
on by a Contracting State or a political subdivision or a local authority
thereof.
ARTICLE 19
Students and Trainees
1. An
individual who is a resident of a Contracting State immediately before making a
visit to the other Contracting State and is temporarily present in the other
State solely as a student at a recognized university, college, school or other
similar recognized educational institution in that other State or as a business
or technical apprentice therein, for a period not exceeding 5 years from the
date of his first arrival in that other State in connection with that visit,
shall be exempt from tax in that other State on:
(a) all
remittances from abroad for the purposes of his maintenance, education or
training; and
(b) any
remuneration not exceeding five thousand Malaysian ringgit or the equivalent in
Philippine currency per annum for personal services rendered in that other
State with a view to supplementing the resources available to him for such
purposes.
2. An
individual who is a resident of a Contracting State immediately before making a
visit to the other Contracting State and is temporarily present in the other
State for the purposes of study, research or training solely as a recipient of
a grant, allowance or award from the Government of either State or from a
scientific, educational, religious or charitable organization or under a
technical assistance programme entered into by the Government of either State
for a period not exceeding 2 years from the date of his first arrival in that
other State in connection with that visit shall be exempt from tax in that
other State on:
(a) the amount
of such grant, allowance or award;
(b) all
remittances from abroad for the purposes of his maintenance, education or
training; and
(c) any
remuneration not exceeding five thousand Malaysian ringgit or the equivalent in
Philippine currency per annum in respect of services in that other State
provided the services are performed in connection with his study, research or
training or are incidental thereto.
3. An
individual who is a resident of a Contracting State immediately before making a
visit to the other Contracting State and is temporarily present in the other
State solely as an employee of, or under contract with, the Government or an
enterprise of the first-mentioned State solely for the purpose of acquiring
technical, professional or business experience for a period not exceeding 12
months from the date of his first arrival in that other State in connection
with that visit shall be exempt from tax in that other State on:
(a) all
remittances from abroad for the purposes of his maintenance, education or
training; and
(b) any
remuneration not exceeding six thousand Malaysian ringgit or the equivalent in
Philippine currency per annum for personal services rendered in that other
State provided such services are in connection with his studies or training or
are incidental thereto.
4. For the
purposes of this Article the term "Government" shall have the same
meaning as in paragraph 5 of Article 11.
5. The
amounts referred to in paragraphs 1, 2 and 3 of this Article may be reviewed
and agreed upon by the competent authorities of both Contracting States from
time to time.
ARTICLE 20
Teachers and Researchers
1. 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, which is
recognized by the competent authority in that other State, 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.
2. 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
Items of income of a resident of a Contracting State which
are not expressly mentioned in the foregoing Articles of this Agreement may be
taxed in the State where the income arises.
ARTICLE 22
Elimination of Double Taxation
1. Subject
to the laws of Malaysia regarding the allowance as a credit against Malaysian
tax of tax payable in any country other than Malaysia, Philippine tax payable
in respect of income derived from the Philippines shall be allowed as a credit
against Malaysian tax payable in respect of that income. Where such income is a
dividend paid by a company which is a resident of the Philippines to a company
which is a resident of Malaysia and which owns not less than 15 per cent of the
voting shares of the company paying the dividend, the credit shall take into
account Philippine tax payable by that company in respect of its income out of
which the dividend is paid. 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.
2. For the
purposes of paragraph 1, the term "Philippine tax payable" shall be
deemed to include the amount of Philippine tax which would have been paid if
the Philippine tax had not been exempted or reduced in accordance with this
Agreement and
(a) the
special incentive laws designed to promote economic development in the
Philippines 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 the Philippines 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.
3. Subject
to the laws of the Philippines regarding the allowance as a credit against
Philippine tax of tax payable in any country other than the Philippines,
Malaysian tax payable in respect of income derived from Malaysia shall be
allowed as a credit against the Philippine tax payable in respect of that
income. Where such income is a dividend paid by a company which is a resident
of Malaysia to a company which is a resident of the Philippines and which owns
not less than 15 per cent of the voting shares of the company paying the
dividend, the credit shall take into account Malaysian tax payable by that
company in respect of its income out of which the dividend is paid. The credit
shall not, however, exceed that part of the Philippine tax, as computed before
the credit is given, which is appropriate to such item of income.
4. 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:
(a) 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:
(i) sections
54A and 60A and Schedule 7A of the Income Tax Act, 1967 of Malaysia; or
(ii) sections
21, 22, 26, and 30Q of the Investment Incentives Act, 1968 of Malaysia;
so far as they were in force on the date of signature of
this Agreement; and
(iii) 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;
(b) interest
to which paragraph 3 of Article 11 applies had that interest not been exempted from Malaysian tax in accordance
with that paragraph; and
(c) approved
industrial royalties to which paragraph 2(a)(ii) of Article 12 applies had
those royalties not been exempted from Malaysian tax in accordance with that paragraph.
5. For the
purposes of paragraph 3, where royalties derived by a resident of the
Philippines are, as film rentals, subject to cinematograph film-hire duty in
Malaysia, that duty shall be deemed to be Malaysian tax.
ARTICLE 23
Non-Discrimination
1. 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.
2. The
taxation on a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State shall not be less favorably levied in
that State than the taxation levied on enterprises of that other State carrying
on the same activities.
3. 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.
4. Nothing
in this Article shall be construed as obliging:
(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 the Philippines 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.
5. 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.
6. Nothing
in this Agreement shall be construed as preventing the Philippines from taxing
its citizens who are residents of Malaysia, in accordance with it domestic
legislation. No credit shall be given by Malaysia for such taxes paid.
7. In this
Article, the term "taxation" means taxes which are the subject of
this Agreement.
ARTICLE 24
Mutual Agreement Procedure
1. 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.
2. 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.
3. 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.
4. 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
1. The
competent authorities of the Contracting States shall exchange such information
as is necessary for the carrying out 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 not be disclosed
to any persons or authorities other than those (including a Court or reviewing
authority) concerned with the assessment, collection or enforcement of the
taxes which are the subject of the Agreement or the determination of appeals in
relation thereto.
2. 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 Officers
Nothing in this Agreement shall affect the fiscal privileges
of diplomatic or consular officials under the general rules of international
law or under the provisions of special agreements.
ARTICLE 27
Entry Into Force
1. This
Agreement shall be ratified and the instruments of ratification shall be
exchanged at Kuala Lumpur as soon as possible.
2. This
Agreement shall enter into force upon the exchange of the instruments of
ratification and shall have effect:
(a) in respect
of tax withheld or deducted at source on income paid to non-residents on or
after the 1st day of January in the calendar year following that in which the
exchange of instruments of ratification takes place; and
(b) in all
other cases, in respect of tax for the taxation year or year of assessment
beginning on the 1st day of January of the calendar year immediately following
the year in which the exchange of instruments of ratification takes place, and
subsequent taxation years or years of assessment.
ARTICLE 28
Termination
This Agreement shall remain in effect indefinitely, but
either Contracting State may terminate the Agreement, through diplomatic
channels, by giving to the other Contracting State written notice of
termination on or before June 30 in any calendar year from the fourth year from
the year in which the Agreement entered into force. In such an event the
Agreement shall cease to have effect:
(a) in respect
of tax withheld or deducted at source on income paid to non-residents on or
after the 1st day of January in the calendar year following that in which the
notice is given; and
(b) in all
other cases, in respect of tax for the taxation year or year of assessment
beginning on the 1st day of January of the calendar year following that in
which the notice is given.
IN WITNESS whereof the undersigned, duly authorized thereto,
by their respective Governments, have signed this Agreement.
DONE in duplicate at Manila this 27th day of April 1982 each
in Bahasa, Malaysia and to English language, both texts being equally
authentic.
On
behalf of the Government of On
behalf of the Government
the
Republic of the Philippines: of Malaysia:
___________________________ ___________________________
CESAR
E. A. VIRATA TENGKU RAZALEIGH
HAMZAH
PROTOCOL
1. At the
time of signing the Agreement between the Government of the Republic of the
Philippines and the 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:
2. 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 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.
3. In
connection with Article 10 "Dividends":
A. The
Philippine tax on remittances of profits of a branch to its head office shall
not exceed 15 per cent of the amount remitted.
B. Article
VII of the Agreement between the Government of Malaysia and the Government of
the Republic of Singapore for the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with respect to Taxes on Income signed in
Singapore on 26th December, 1968, shall be taken into consideration.
4. In connection
with Article 11 "Interest": The term "approved loan" means
any loan or other indebtedness approved by the competent authority of Malaysia
as being made or incurred for the purpose of financing development projects or
for the purchase of capital equipment for development projects in Malaysia. The
term "long-term loan" means any loan made or funds deposited as
defined in Section 2 of the Income Tax Act, 1967 of Malaysia.
IN WITNESS whereof the undersigned, duly authorized thereto,
by their respective Governments, have signed this Protocol.
DONE in duplicate at Manila this 27th day of April, 1982
each in Bahasa, Malaysia and the English language, both texts being equally
authentic.
On
behalf of the Government of On
behalf of the Government
the
Republic of the Philippines: of Malaysia:
_________________________ ______________________________
CESAR
E. A. VIRATA TENGKU RAZALEIGH
HAMZAH
