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Malaysia - Freight tax

Corporate tax: 26% of taxable income, which is considered to be either 5% of


gross outward freight (= 1.3%) or the ratio of the world income/loss (i.e. "ratio
certificate" method).
Previous corporate tax rates:
Year of assessment 2007 = 27%
Year of assessment 2006 = 28%

Withholding tax: 10% of gross payments made to non-resident shipping


companies.

Rents or payments made for the use of ships or boats are covered under Section
4A(iii) of the Malaysian Income Tax Act 1967 and subject to a withholding tax at
10% of gross. This provision covers slot hire, leasing of ships, whether bare boat
or with crew, time charter and voyage charter.

Exemption Agreements

Casual callers are exempted. Section 54 (6) of the Income Tax Act defines a
casual call as one where there were no other calls at Malaysian ports by that or any
other ships belonging to the owners or charterer in the 24 months preceding or
following that call. In practice, the agents would normally deduct the freight tax
from the outward freight payable.

A refund would be made in the third year when it can be shown that there were no
other calls in the 24 months following the casual call.

Double Taxation Agreements (DTAs) for reduction or avoidance are in force


with the following countries. For all agreements, the basis of exemption is the
residence of the vessel's owner/time charter owner who is the freight recipient.
Vessel's flag has no bearing on exemption agreements.

Country

Reduction Date of effect

Albania

100%

01/01/1996

Australia

100%

01/01/1980

Austria

50%

01/01/1988

Bahrain

100%

01/01/2001

Bangladesh

50%

01/01/1982

Belgium

50%

01/01/1976

Canada

100%

01/01/1981

Chile

100%

01/01/2009

China 1

50%

01/01/1988

China 2

100%

01/01/1999

Croatia

100%

01/01/2005

Czech Republic

100%

01/01/1999

Denmark

100%

01/01/2006

Egypt

100%

01/01/2004

Fiji

100%

01/01/1998

Finland

100%

01/01/1988

France

100%

01/01/1974

Germany

100%

01/01/1972

Hungary

50%

01/01/1993

India

100%

01/01/2004

Indonesia

50%

01/01/1987

Ireland

100%

01/01/2000

Italy

100%

01/01/1977

Japan

100%

01/01/2000

Jordan

100%

01/01/2001

Korea, Republic of

100%

01/01/1983

Kuwait

100%

01/01/1988

Kyrgyzstan

100%

01/01/2007

Lebanon

100%

01/01/2005

Luxembourg

100%

01/01/2005

Malta 3

100%

01/01/2002

Mauritius

100%

01/01/1991

Mongolia

100%

01/01/1997

Morocco

100%

01/01/2007

Myanmar, Union of

50%

01/01/2009

Namibia

100%

01/01/2005

The Netherlands

100%

01/01/1986

New Zealand

100%

01/01/1975

Norway

50%

01/01/1986

Pakistan

100%

01/01/1980

Papua New Guinea

100%

01/01/2000

The Philippines 4

See Note

01/01/1985

Poland

100%

01/01/1978

Qatar 5

100%

01/01/2010

Romania

100%

01/01/1985

Russia

100%

01/01/1989

Saudi Arabia 5

100%

01/01/2008

Seychelles

100%

01/01/2007

Singapore

50%

01/01/2007

South Africa

100%

01/01/2007

Spain

100%

01/01/2008

Sri Lanka

50%

01/01/1999

Sudan

100%

01/01/2002
01/01/2003

Sweden

100%

01/01/2006

Switzerland

100%

01/01/1974

Syria

100%

01/01/2008

Thailand

50%

01/01/1983

Turkey

100%

01/01/1998

United Arab Emirates

100%

01/01/1996

United Kingdom

100%

01/01/1999

Uzbekistan

100%

01/01/2000

Vietnam

100%

01/01/1997

Withholding tax
Corporation tax

Limited Treaties (Air and/or Sea)

Argentina

100%

01/01/1994

United States

100%

01/01/1987

Notes:

1. The treaty does not apply to residents of Hong Kong, SAR; Macau, SAR or
the islands of Kinmen, Matsu, Penghu and Taiwan.

2. Applies only to residents of the islands of Kinmen, Matsu, Penghu and Taiwan
by way of an Income Tax Exemption Order.

3. Profits from the operation of a ship in international traffic derived by a

company which is a resident of Malta having more than 25 per cent of its
capital owned, directly or indirectly, by persons not residents of Malta, may be
taxed in Malaysia unless the company proves that the profits derived from the
operation of such ship are subject to Malta tax without regard to any relief
therefrom as provided for in section 86 of the Merchant Shipping Act (Cap.
234) or in any identical or similar provision.

4. For residents of The Philippines the tax is either levied as 1.5% of the gross
freight or the lowest rate available under Philippine income tax regulations,
whichever is less.

5. If the place of effective management of a shipping enterprise is aboard a ship,


then it shall be deemed to be situated in the Contracting State of which the
operator of the ship is a resident.

Comprehensive treaty negotiations currently in progress

Gazetted
Bosnia-Herzegovina

Kazakhstan

Indonesia (Protocol)

Venezuela

Iran

Zimbabwe

Concluded (Signed)
Turkmenistan

Concluded (Initialled)
Belgium (Protocol)

Senegal

Brunei

Slovak Republic

Germany (New Agreement)

Yemen

Oman

Under negotiation
Brazil

Norway (New Agreement)

Canada (New Agreement)

Portugal

Cyprus

Russia (New Agreement)

Finland (New Agreement)

San Marino

India (New Agreement)

Tunisia

Korea, Republic of (New Agreement)

Ukraine

Laos

Uruguay

Mexico

"Ratio certificate" method


Companies registered in the following countries can, on presentation of the
certificates issued by local tax authorities, have their liability / loss ascertained on
"ratio of the world income / loss" basis.

Australia

Norway

Bahrain

The Philippines

Brunei

Singapore

Denmark

Sri Lanka

Germany

Sweden

India

Thailand

Japan

United Kingdom

Korea; Republic of

USA

Myanmar

Vietnam

The Netherlands