What is the purpose and usage of certificate of residence under withholding tax in Malaysia?

Purpose of certificate of residence

1. to confirm the residence status of the taxpayer for them to claim tax benefit under the double tax agreement (DTA)

2. to avoid double taxation on the same income

Usage of certificate of residence

1. to enjoy lower rate on withholding tax for non-resident

• if there is double tax agreement, by providing the resident certificate, the non-resident can be withheld a lower rate of withholding tax (from 0% - 10%).

Residence status can be determined according to Public ruling 9/2019.

1.  bilateral credit and unilateral credit (refer to public ruling 11/2011)

• if there is a double tax agreement, bilateral credit could be claimed.

It shall only be given to a person resident in Malaysia. The bilateral credit allowed would be the lower of the malaysia tax payable on the foreign income or the withholding tax held of the foreign income.

The claimed has to be made within two years after the end of that year of assessment.

•  if there is no double tax agreement, unilateral credit could be claimed.

However, it is limited to the lower of one-half of the withholding tax held of the foreign income or malaysia tax payable on the foreign income.

 Sources:

Certificate of residence in LHDNM Official website

http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=6&bt_posi=6&bt_unit=1&bt_sequ=1&bt_lgv=2

Public ruling 9/2019 Residence status of companies and bodies of persons

http://phl.hasil.gov.my/pdf/pdfam/PR_09_2019.pdf

Public ruling 11/2011 Bilateral credit and unilateral credit

http://phl.hasil.gov.my/pdf/pdfam/PR11_2011.pdf

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