Double Tax Treaty between Luxembourg & Malaysia

CONVENTION

Between the Government of the Grand Duchy of Luxembourg and the Government of Malaysia for the avoidance of double taxation and the prevention of fiscal evasion in respect of Taxes on Income and on Capital

 

The Government of the Grand Duchy of Luxembourg and the Government of Malaysia, desiring to conclude a Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital, 

Have agreed as follows:

Article 1

Persons Covered

This Convention shall apply to persons who are residents of one or both of the Contracting States.

Article 2

Taxes Covered

  1. The existing taxes which are the subject of this Convention are

(a) in the Grand Duchy of Luxembourg:

(i) the income tax on natural persons;

(ii) the tax on the income of communities

(iii) the special tax on directors’ fees

(iv) wealth tax; and

(v) the municipal business tax;

(hereinafter referred to as “Luxembourg tax”);

(b) in Malaysia:

(i) the income tax; and

(ii) the petroleum income tax;

(hereinafter referred to as “Malaysian tax”).

  1. This Convention shall apply also to any identical or substantially similar taxes which may be imposed after the date of signature of the Convention in addition to or in place of the existing taxes. replace them. The competent authorities of the Contracting States shall notify each other of any changes which may be made in their respective taxation laws to their respective taxation laws.

Article 3

General Definitions

  1. For the purposes of this Convention, unless the context otherwise requires

(a) the term “Luxembourg” means the territory of the Grand Duchy of Luxembourg;

(b) “Malaysia” means the territories of the Federation of Malaysia, the territorial waters of Malaysia and the seabed and subsoil of the territorial waters, and includes any area beyond the limits of the territorial waters of Malaysia, and territorial waters of Malaysia, and the seabed and subsoil of any such area, which has been or shall hereafter be designated under Malaysian law and in accordance with international law as an area over which Malaysia has sovereign rights with respect to the exploration and exploitation of natural resources, whether living or nonliving;

(c) the term “person” includes natural persons, corporations and any other body of persons;

(d) “corporation” means any body corporate or any entity which is treated as a body corporate for tax purposes

(e) 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

(f) the term “national” means:

(i) any individual who is a citizen or national of a Contracting State;

(ii) any legal person, partnership or association organized under the laws in force in a contracting State;

(g) 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 only between points in the other Contracting State

(h) the term “competent authority” means:

(i) in relation to Luxembourg, the Minister of Finance or his authorized representative; and

(ii) in relation to Malaysia, the Minister of Finance or his authorized representative.

  1. For the purposes of the application of this Convention at any time by a Contracting State, any term or expression not term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State relating to law of that State at that time with respect to the taxes to which this Convention applies, the meaning given to such term or expression under the tax law of that State at that time shall be the meaning given to such term or expression under the tax law of that State at that time. term or expression under the tax law of that State shall prevail over the meaning given to it under other laws of that State.

Article 4

Resident

  1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax in that State by reason of his domicile, residence or any other criterion of a similar nature and shall also apply to that State and to any of its political subdivisions, local authorities political subdivisions, local authorities or public establishments thereof. However, this term does not include persons who are subject to tax in that State in respect only of income from sources in that State or on capital situated therein.
  1. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States

(a) such individual shall be deemed to be a resident only of the State in which he has a permanent home resident only of the State with which his personal and economic relations are closest (center of vital interests);

(b) if the State in which such person has his centre of vital interests cannot be determined, or if he has no permanent home in any of the States, he shall be deemed to be a resident only of the State in which he has an habitual abode;

(c) if such person has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he has the nationality;

(d) if such person 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.

  1. Where, under the provisions of paragraph 1, a person other than an individual of both Contracting States, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

Article 5

Permanent Establishment

  1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
  1. The term “permanent establishment” includes in particular:

(a) a place of management,

(b) a branch office

(c) an office,

(d) a factory,

(e) a workshop, and

(f) a mine, oil or gas well, quarry or other place of extraction of natural resources

  1. A construction or assembly site constitutes a permanent establishment only if its duration exceeds nine months.
  1. Notwithstanding the foregoing provisions of this Article, a “permanent establishment” shall be deemed not to exist if:

(a) use is made of facilities solely for the purpose of storing, displaying or delivering goods or merchandise belonging to the enterprise;

(b) goods belonging to the business are stored for the sole purpose of storage, display or delivery;

(c) goods belonging to the enterprise are stored solely for the purpose of processing by another enterprise;

(d) a fixed place of business is used solely for the purpose of purchasing goods or gathering information for the enterprise;

(e) a fixed place of business is used solely for the purpose of carrying on any other activity of a preparatory or auxiliary character for the enterprise;

(f) a fixed place of business is used solely for the purpose of carrying on the activities referred to in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from such combination is of a preparatory or auxiliary nature.

  1. An enterprise of a Contracting State shall be deemed to have a permanent establishment in the other Contracting State if it carries on supervisory activities in that other State for more than five months in connection with a construction or assembly project undertaken in that other State.
  1. A person (other than a broker, general commission agent or any other agent of independent status to which paragraph 7 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) it has and habitually exercises in the first-mentioned State an authority to conclude contracts on behalf of the enterprise, unless its activities are limited to the purchase of goods or merchandise for the enterprise; or

(b) it maintains in the first-mentioned State a stock of goods belonging to the enterprise, by means of which it regularly accepts and fulfills orders on behalf of the enterprise.

  1. 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.
  1. 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 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 Real Property

  1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
  1. The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property concerned is situated. The term shall in any case include property accessory to immovable property, livestock and equipment of agricultural holdings and rights to which the provisions of private law concerning landed property, usufruct of immovable property and rights to of real estate and rights to variable or fixed payments for the exploitation of mineral deposits, springs and other natural resources; ships, boats and aircraft are not considered as real ships, boats and aircraft are not considered as real estate.
  1. The provisions of paragraph 1 shall apply to income derived from the direct operation, rental or leasing, as well as from any other form of exploitation of real property.
  1. The provisions of paragraphs 1 and 3 shall also apply to income from immovable property of an enterprise and to income from immovable property used for the performance of independent professional activities.

 

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. situated therein. If the enterprise carries on business in such a manner, the profits of the enterprise may be taxed in the other State but only to the extent that they are attributable to that permanent establishment.
  1. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent the profits which it might be expected to make if it were a separate enterprise engaged in the same or similar activities carrying on the same or similar activities under the same or similar conditions and dealing wholly independently with the The taxpayer shall be deemed to have paid the tax on the profits which it would have realized if it had been a 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.
  1. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses incurred for the purposes of that permanent establishment, including executive and general administrative expenses incurred, either in the State of so incurred, whether in the State in which the permanent establishment is situated or elsewhere.
  1. If it is customary in a Contracting State to determine the profits attributable to a permanent establishment on the basis of an on the basis of an apportionment of the total profits of the enterprise to its various parts, provision of paragraph 2 shall not prevent that Contracting State from determining the taxable profits according to the customary apportionment; the method of method of apportionment adopted shall, however, be such that the result is in accordance with the principles contained in this Article.
  1. Where the information available to the competent authority is inadequate to determine the profits attributable to the permanent establishment of an enterprise, nothing in this Article shall prevent the application of any the application of any law of that State relating to the determination of the tax liability of a person by the competent authority in the exercise of its discretion or by making an assessment, provided that the law can be applied in accordance with the principles of this Article, to the extent that the information available to the competent available to the competent authority.
  1. No profit shall be attributed to a permanent establishment by reason of its having merely purchased goods or merchandise for the enterprise.
  1. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined each year by the same method, unless there are good and sufficient reasons for proceeding otherwise.
  1. Where profits include items of income which are dealt with separately in other Articles of this Convention, the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

Maritime and Air Navigation

  1. The profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be treated as income ships or aircraft, and shall be taxable only in that State.
  1. Paragraph 1 shall also apply to that part of the profits from the operation of ships or aircraft an enterprise of a Contracting State from participation in a pool, a joint business or an international operating agency.

 

Article 9

Associated Enterprises

  1. 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 either case the two enterprises are, in their commercial or financial relations, connected by ties of a similar nature. commercial or financial relations, are bound by conditions agreed upon or imposed which differ from those which would be between independent enterprises, the profits which, but for those conditions, would have accrued to one of the enterprises but for those conditions could not in fact be realized by one of the enterprises, may be included in the profits of that enterprise and taxed accordingly.

  1. Where a Contracting State includes in the profits of an enterprise of that State – and taxes accordingly – profits on which an enterprise of the other Contracting State has been taxed in that other State, and the profits so included are profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions between the two enterprises had been those which would have been agreed upon between independent enterprises, the other State shall make an appropriate adjustment to the amount of tax imposed therein on such profits where that other State considers the profits, where that other State considers the adjustment justified. In determining such adjustment, due regard shall be had to the other provisions of this Convention and, if necessary, the competent authorities of the Contracting States shall consult each other

 

Article 10

Dividends

  1. Dividends paid by a company that is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
  2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends resident, and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall be borne by that State.

(a) 5 percent of the gross amount of the dividends, if the beneficial owner is a company (other than a partnership) which directly owns at least 10 percent of the capital of the company paying the dividends

(b) 10 percent of the gross amount of the dividends, in all other cases.

This paragraph shall not affect the taxation of the corporation in respect of the profits out of which the dividends are paid.

  1. Notwithstanding the provisions of paragraph 2, dividends paid by a company which is a resident of a Contracting State shall not be taxable in that State. Contracting State shall not be taxable in that State if the beneficial owner of the dividends is a company which is a resident of the other Contracting State and which has held, during an uninterrupted period of twelve months preceding the date of payment of the dividends, a direct the date of payment of the dividends, a direct holding of at least 25 percent of the company paying the dividends. The provisions of this paragraph shall apply only if the dividend distributed is derived from an effective industrial or commercial business activity in the first-mentioned State, other than the making or managing of investments, unless The provisions of this paragraph shall apply if the dividend is derived from an effective industrial or commercial activity in the first-mentioned State, other than the making or managing of investments, unless it is an activity carried on by a banking or insurance company.
  1. The term “dividends” as used in this Article means income from shares or other rights, except debt-claims, as well as income from other shares and other payments which are subject to the same taxation treatment as income from shares under the laws of the State of which the company making the distribution is a resident.
  1. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the dividends resident of a Contracting State carries on business in the other Contracting State of which the company paying the dividends is a resident, carries on business through a permanent establishment situated therein, or independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected The dividends are effectively connected with it. In such case, the provisions of Article 7 or Article 15, as the case may be, shall apply.
  1. Where a company that is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on dividends paid by the company, except to the extent that such dividends are paid to a resident of the other State. paid to a resident of that other State or to the extent that the holding in respect of which the dividends are paid is effectively connected with dividends is effectively connected with a permanent establishment or a fixed base situated in that other State, or any tax on the undistributed profits of the company by way of taxation on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State.

 

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.
  1. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of that State, the interest may be taxed in that State. of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 percent of the gross amount of the interest.
  1. Notwithstanding the provisions of paragraph 2, interest paid or credited to a resident of Luxembourg by a person authorized to carry on banking business in Malaysia, or on an approved loan, shall be exempt from tax in Malaysia.
  1. Notwithstanding the provisions of paragraph 2, the Government of a Contracting State shall be exempt from tax in the other Contracting State in respect of interest received by the Government of that other State.
  1. For the purposes of paragraph 4, the term “Government” means

(a) in the case of Malaysia, means the Government of Malaysia and includes:

(i) the State Governments;

(ii) Bank Negara Malaysia;

(iii) local governments;

(iv) public institutions; and

(v) Export and Import Bank of Malaysia Berhad (EXIM Bank);

(b) in the case of Luxembourg, means the Government of Luxembourg and includes:

(i) local authorities;

(ii) Société Nationale de Crédit et d’Investissement; and

(iii) the Banque Centrale du Luxembourg.

  1. The term “interest” as used in this article means income from debt obligations of any kind, whether or not secured by mortgage or other collateral. with or without a mortgage or profit-sharing clause, and in particular income from public funds and income from government securities and bonds, including premiums attached to such securities. However, the term “interest” does not include income referred to in Article 10. Penalties for late payment shall not be considered interest for the purposes of this considered as interest within the meaning of this article.
  1. The provisions of paragraphs 1, 2 and 3 shall not apply where the beneficial owner of the interest resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, either business activity through a permanent establishment situated therein, or performing independent personal services from a fixed by means of a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such fixed base. effectively connected therewith. In such a case, the provisions of Article 7 or Article 15, as the case may be, shall apply.
  1. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. However, where the payer of the interest, whether a resident of a Contracting State or not, has in a Contracting State a permanent establishment, or a branch, of a foreign enterprise, the interest shall be deemed to arise in that State. a permanent establishment or a fixed base in a Contracting State in connection with which the indebtedness on which the interest is paid was incurred and which bears the burden of which the indebtedness giving rise to the interest was incurred and which bears the expense of that interest, such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
  2. Where, by reason of a special relationship between the payer and the beneficial owner or between the payer and the beneficial owner and third parties, the debtor and the beneficial owner, the amount of interest, having regard to the debt-claim for which it is paid, exceeds the amount which would the debtor and the beneficial owner would have agreed in the absence of such relationship, the provisions of this article shall apply only to the latter amount. In such 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 Convention.

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.
  1. 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 beneficial owner of the royalties is a resident of that State, the royalties may be taxed in that State but if the beneficial owner of the royalties is a resident of the other Contracting State, tax so charged shall not exceed 8 percent of the gross amount of the royalties.
  1. The term “royalties” as used in this Article means remuneration of any kind paid for the use of or the right to use or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films and films or tapes for radio or television), a patent, a trade mark, a design or a copyright. design, plan, secret formula or process, or for the use of, or the right to use, any such or for the use of or the right to use industrial, commercial or scientific equipment, or for information (know-how) relating to experience acquired in the industrial, commercial or scientific field.
  1. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of the royalties resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, either business activity through a permanent establishment situated therein, or performing independent personal services from a fixed by means of a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with the right or property giving rise to the royalties is effectively connected with it. In such a case, the provisions of Article 7 or Article 15, as the case may be, shall apply.
  1. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred and which which the commitment giving rise to the payment of the royalties was made and which bears the expense of such royalties, such royalties shall be deemed to arise in the State in which the the State in which the permanent establishment or fixed base is situated.
  1. Where, by reason of a special relationship between the payer and the beneficial owner or between the payer and the beneficial owner and third parties, the beneficial owner, the amount of the royalties, having regard to the service for which they are paid, exceeds the amount of the service for which they are paid, exceeds the amount that would have been agreed upon by the debtor and the beneficial owner in the absence of such relationship, the provisions of this article shall apply only to the latter amount. In this case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being due to the other provisions of this Convention.

 

Article 13

Remuneration for Technical Services

  1. 1. Remuneration for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
  1. However, such remuneration for technical services may also be taxed in the Contracting State in which it arises and according to the laws of that State. arise and according to the laws of that State, but if the beneficial owner of the technical service remuneration is a resident of the other State, the technical service remuneration may be taxed in that other State. is a resident of the other Contracting State, the tax so charged shall not exceed 8 percent of the gross amount of the technical services remuneration.
  2. The term “technical services remuneration” as used in this Article means remuneration of any kind paid to any person, other than an employee of the person paying the remuneration, for remuneration, for activities of a technical, managerial or consultative nature.
  1. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of the remuneration for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the remuneration for technical services arises, either remuneration for technical services, either carries on business in the other Contracting State in which the a permanent establishment situated therein, or performs in the other Contracting State, through a fixed base situated therein, independent personal services, and the remuneration for technical services is effectively connected with it. In such a case, the provisions of Article 7 or Article 15, as the case may be, shall apply.
  1. Remuneration for technical services shall be deemed to arise in a Contracting State when The player is a resident of that State. However, where the payer of the remuneration for technical services, whether or not a resident of a Contracting State, is whether or not he is a resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed base in respect of which the obligation giving rise to the payment of the technical service remuneration was incurred and which bears the expense of such remuneration for technical services, such remuneration for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.
  1. Where, by reason of a special relationship between the payer and the beneficial owner or between the payer and the beneficial owner and beneficiary, the amount of the remuneration for technical services paid exceeds, for any reason, the amount of the for any reason exceeds the amount that would have been agreed upon by the obligor and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the latter amount. In such a case, the excess portion of the payments shall remain taxable according to the laws of each Contracting State, due regard being due to the other provisions of this provisions of this Convention.

 

Article 14

Capital Gains

  1. Gains derived by a resident of a Contracting State from the alienation of real property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.
  1. 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 enterprise of a Contracting State has in the other Contracting State, or movable property pertaining to a fixed base which a resident of a Contracting State has in the other Contracting State for the purpose of performing independent personal services including such gains from the alienation of such permanent establishment (alone or with the whole enterprise) or of such the taxable income of a Contracting State from a permanent establishment or fixed base in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such permanent establishment (alone or with the whole enterprise) or fixed base may be taxed in that other State.
  1. Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic, or movable property or aircraft operated in international traffic, or movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that Contracting State.
  1. Gains from the alienation of any property other than that referred to in paragraphs 1, 2 and 3 shall be taxable only in the Contracting State in which the alienation occurs.

 

Article 15

Independent Personal Services

  1. Income derived by a resident of a Contracting State from professional services or from other activities of an independent character shall be taxable only in the Contracting State of which the transferor is a resident. activities of an independent character shall be taxable only in that State unless that resident has an habitual abode in the other Contracting State a fixed base for the purpose of performing his activities. If he has such a fixed base, the income If he has such a fixed base, the income may be taxed in the other State but only so much of it is attributable to that fixed base.
  1. The term “professional services” includes, in particular, independent activities of a scientific, literary, artistic, educational or teaching nature, artistic, educational or pedagogical activities, as well as the independent activities of physicians, lawyers, engineers architects, dentists and accountants.

 

Article 16

Dependent Professions

  1. Subject to the provisions of Articles 17, 19, 20, 21 and 22, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State, unless the employment is exercised in the other Contracting State. If the employment is exercised in that State, remuneration received in respect thereof may be taxed in that other State. If the employment is exercised in that other State, the remuneration received in respect thereof may be taxed in that other State.
  1. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if

(a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the taxable year , and

(b) the remuneration is paid by or on behalf of an employer who is not a resident of the other State, and

(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer is in another State.

  1. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship, aircraft or road vehicle operated in international traffic by an enterprise of a Contracting State may be taxed in that Contracting State.

 

Article 17

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 or supervisory board of a company which is a resident of the other Contracting State

 

Article 18

Artists and Athletes

  1. Notwithstanding the provisions of Articles 15 and 16, income derived by a resident of a Contracting State from his personal activities as an entertainer, such as a theater, motion picture, radio or television artist, exercised in the other Contracting State, radio or television artiste, or musician, or as an athlete, may be taxed in that other State.
  1. Where income from activities which an entertainer or sportsman personally performs in that capacity is attributed not to the entertainer or sportsman himself but to another person, such income may be taxed, notwithstanding the provisions of Articles 7, 15 and 16, such income may be taxed in the Contracting State in which the activities of the entertainer or athlete are carried on.
  1. The provisions of paragraphs 1 and 2 shall not apply to remuneration or profits received from activities performed in a Contracting State where the stay in that State is wholly or mainly financed by public funds of the other Contracting State. by public funds of the other Contracting State, a political subdivision, a local authority or a public institution. In such case, the remuneration or profits shall be taxable only in the Contracting State of which the entertainer or the athlete is a resident.

 

Article 19

Pensions

  1. Subject to the provisions of paragraph 2 of Article 20, pensions and other similar remuneration paid to a resident of a Contracting State in respect of past employment shall be taxable only in that State.
  1. Notwithstanding the provisions of paragraph 1, pensions and other amounts paid under the social security legislation of a Contracting State may be taxed in that State.

Article 20

Public Offices

1.

  1. a) Salaries, wages, and other similar remuneration, other than a pension, paid by a Contracting State or a political subdivision or local authority thereof or a public institution thereof to an individual in respect of his or her employment in the public service of a Contracting State, or in respect of his or her service in the public service of a Contracting State, shall be taxable in that State. to an individual in respect of services rendered to that State or political subdivision or local authority or

(b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that other State and the recipient is a resident of that other State who

(i) is a national of that State, or

(ii) did not become a resident of that State solely for the purpose of rendering the services.

  1. (a) Pensions paid by a Contracting State or a political subdivision or local authority or public institution thereof, either directly or out of funds established by it, to an individual in respect of services rendered in the State. individual in respect of services rendered to that State or political subdivision or local authority or

(b) However, such pensions shall be taxable only in the other Contracting State if the individual is a resident of that State and has the nationality of that State.

  1. The provisions of Articles 16, 17, 18 and 19 shall apply to salaries, wages and other similar remuneration or to pensions paid in respect of or pensions paid in respect of services rendered in connection with a business carried on by a Contracting State or a carried on by a Contracting State or a political subdivision or local authority thereof or a public institution thereof.

 

Article 21

Students and Trainees

An individual who is a resident of a Contracting State immediately before visiting the other Contracting State and who is

(a) as a student of a recognized university, college, school or other similar educational institution of that other State;

(b) as a trainee or apprentice; or

(c) as the recipient of a grant, scholarship, allowance or award received primarily for the purpose of furthering his or her studies, research or training from the Government of either State or from a scientific, educational, religious or philanthropic organization or under a technical assistance program established by a person who is a member of a technical assistance program established by the Government of either State, shall be exempt from tax in that other State on:

(i) any amount received by such person from abroad for maintenance, education, research, or training;

(ii) the amount of any such scholarship, fellowship, grant or award; and

(iii) any remuneration not exceeding $3,000 per annum for services in that other State, provided that the services are performed in connection with his or her study, research or training and are necessary to cover his maintenance expenses. However, this amount may be revised by mutual agreement between the competent authorities of the Contracting States.

 

Article 22

Professors and Researchers

  1. An individual who is a resident of a Contracting State immediately before visiting the other Contracting State and who the other Contracting State and who, at the invitation of a public university, college, institution engaged principally in research, or other similar public institutions, is visiting that other State solely for the purpose of teaching or research, or both, at that public institution, for a period or cumulative periods not exceeding two years, shall be exempt from tax in that other State on any remuneration received for such teaching or research. However, where the period of stay in that other State exceeds two years, that other State exceeds two years, that other State may tax the individual with respect to the period exceeding two years.
  1. This Article shall not apply to income derived from research if such research is undertaken primarily for the benefit of a particular person or persons.

 

Article 23

Other Income

Items of income of a resident of a Contracting State not specifically referred to in the foregoing Articles of this Convention shall not be treated as income preceding Articles of this Convention shall be taxable only in that Contracting State unless such  income arises from sources in the other Contracting State, it may also be taxed in that other State.

 

Article 24

Taxation of Capital

  1. 1. Capital represented by immovable property referred to in Article 6 owned by a resident of a Contracting State and situated in the other Contracting State may be taxed in that other State.
  1. Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has enterprise of a Contracting State has in the other Contracting State, or by movable property pertaining to a fixed base of which a resident of a property that belongs to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services for the purpose of performing independent personal services, may be taxed in that other State.
  1. Capital represented by ships and aircraft operated in international traffic by an enterprise of a Contracting State, and by State, as well as movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that Contracting
  1. All other elements of capital of a resident of a Contracting State shall be taxable only in that State.

 

Article 25

Elimination of Double Taxation

 

  1. 1. Subject to the provisions of the laws of Malaysia regarding the deduction of Malaysian tax from tax payable in a country other than Malaysia, the Luxembourg tax payable under the laws of Luxembourg and in accordance with this in accordance with this Convention, by a resident of Malaysia in respect of income arising in Luxembourg shall be deducted from the Luxembourg, shall be deducted from the Malaysian tax payable in respect of such income. Where such income is a dividend paid by a company which is a resident of Luxembourg to a company which is a resident of Malaysia, and which holds at least 10 percent of the voting shares of the company paying the dividend, the deduction takes into account the Luxembourg tax due by such company. The deduction takes into account the Luxembourg tax due by this company on the income used to pay the dividend. The deduction may not, however, exceed The deduction may not, however, exceed the fraction of the Malaysian tax, calculated before deduction, corresponding to that item of income.

 

  1. Subject to the provisions of Luxembourg law concerning the elimination of double taxation which do not affect the general principle thereof, double taxation shall be avoided as follows:

(a) Where a resident of Luxembourg derives income or owns capital which, in accordance with the provisions of this Convention, may be taxed in Malaysia, Luxembourg shall exempt such income or capital from tax, subject to the provisions of subparagraphs (b) to (d), but may, for the purpose of calculating the amount of tax on but may, in calculating the amount of tax on the remainder of the resident’s income or capital, apply the same rates of tax as if the income or capital had not been exempted.

(b) Where a resident of Luxembourg derives income which, in accordance with the provisions of Articles 10, 11, 12, 13, 18 and 23, may be taxed in Malaysia, Luxembourg shall allow a deduction from the tax it imposes on the income of that resident Luxembourg shall allow a deduction from the tax it levies on the income of that resident in an amount equal to the tax paid in Malaysia. This deduction However, this deduction may not exceed the fraction of the tax, calculated before deduction, corresponding to such items of income received from Malaysia.

(c) Notwithstanding the provisions of subparagraph (b), where a resident of Luxembourg receives interest, royalties, or fees for technical services from Malaysia, Luxembourg shall allow a deduction from the tax it imposes on the income of such resident in an amount equal to the tax which would have been due in the absence of the exemptions or reductions of Malaysian tax in accordance with the special incentives for the promotion of the development of industry, infrastructure, tourism and infrastructure, tourism and agriculture in Malaysia, provided that, in the case of interest, royalties or remuneration for royalties or fees for technical services, such tax shall be deemed to have been paid at the rate of:

(i) 10 percent of the gross amount of interest referred to in section 11;

(ii) 8 percent of the gross amount of royalties referred to in section 12;

(iii) 8 percent of the gross amount of the fees for technical services referred to in section 13.

The provisions of this subparagraph shall apply for a period of 10 years beginning on January 1 of the calendar year following the year in which the The provisions of this subparagraph shall apply for a period of 10 years beginning on January 1 of the calendar year following the year in which the Convention enters into force. This period may be extended by mutual agreement between the competent authorities.

  1. d) Where a Luxembourg resident company receives Malaysian dividends, Luxembourg shall exempt such dividends from tax, provided that the Luxembourg resident Luxembourg, directly holds at least 10 percent of the capital of the company paying the dividends since the beginning of the financial year and if such company is subject to an income tax in Malaysia corresponding to the Luxembourg corporate income tax. The above-mentioned shares or units of the Malaysian company are, under the same conditions, exempted from the Luxembourg wealth tax. The exemption provided for in this subparagraph also applies even if the Malaysian company is exempt from tax or taxed at a reduced rate in Malaysia in accordance with Malaysian legislation providing for incentives for the promotion of the development of industry, infrastructure, tourism and agriculture in Malaysia.

 

Article 26

Limitation of Reduction

Where by virtue of the provisions of this Convention income benefits from a reduction of tax in State and under the laws in force in the other Contracting State, such income of a person is subject to tax to the extent of shall be subject to tax to the extent of the amount of such income that is remitted to or received in that other Contracting State and not to the extent of the the reduction to be granted under this Convention in the first-mentioned Contracting State, the amount of Convention in the first-mentioned Contracting State shall apply only to the amount of such income that is remitted to or received in the other Contracting State.

Article 27

Non-Discrimination

  1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is obligation that is different from or more burdensome than those to which nationals of that other State in the of that other State who are in the same situation, in particular with regard to residence.
  1. The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably assessed in that other State than the taxation of enterprises of that other State carrying on the same business. carrying on the same activity. This provision shall not be construed to require a Contracting State to grant to residents of the other Contracting State personal allowances, reliefs and reductions of tax on the basis of the This provision shall not be construed to require a Contracting State to grant to residents of the other Contracting State the personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities that it grants to its own residents.
  1. Unless the provisions of paragraph 1 of Article 9, paragraph 9 of Article 11, paragraph 6 of Article 12 or paragraph 2 of Article 12 are not met, paragraph 6 of Article 13 are applicable, interest, royalties, fees for technical services and other expenses paid by a services and other expenses paid by an enterprise of a Contracting State to a resident of the other Contracting State shall be Contracting State shall, in determining the taxable profits of that enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State, provided that the provisions of the domestic law of that Contracting State with respect to withholding tax have been complied with. Similarly, debts of an enterprise of a State to a resident of the other Contracting State shall be deductible in determining the taxable capital of that same condition as if they had been contracted with a resident of the first State 
  1. 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 tax or duty therein. State to any taxation or any requirement connected therewith which is other or more burdensome than those to which other similar enterprises of the first-mentioned State are or may be subject to.
  1. In this Article, the term “taxation” means the taxes to which this Convention applies.

 

Article 28

Mutual Agreement Procedure

 

  1. Where a person 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 Convention, he may, notwithstanding the remedies provided for by the domestic law of those States, submit his case to the competent authority of the State of which he is a resident. The case must be submitted within three years after the first notification of the measure that results in taxation not in accordance with the provisions of this Convention
  1. The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution to resolve the case by mutual agreement with the competent authority of the other Contracting State with a view to Contracting State, with a view to the avoidance of taxation not in accordance with this Convention. The agreement shall be applied irrespective of the time limits provided by the domestic law of the Contracting States.
  1. The competent authorities of the Contracting States shall endeavor by mutual agreement to resolve any difficulties or doubts arising as to the interpretation or application of this Convention. They may also consult together for the elimination of double taxation in cases not provided for in this Convention.
  1. The competent authorities of the Contracting States may communicate directly with each other for the purpose of reaching an agreement as described in the preceding paragraph.

 

Article 29

Exchange of Information

  1. The competent authorities of the Contracting States shall exchange such information as is necessary to carry out the provisions of this Convention or the domestic laws of the Contracting States. of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention to the Convention insofar as the taxation thereunder is not contrary to this Convention Information received by a Contracting State shall be treated as secret in the same manner as information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of taxes covered by this Convention covered by this Convention, or in connection with the assessment or collection of, or the enforcement or prosecution in respect of, any such tax, or in connection with the determination of any appeal in respect of any such tax. or in the determination of appeals in relation to such taxes. Such persons or authorities shall use such information only for such purposes. They may disclose such information in public court proceedings or in judicial decisions.
  1. In no case shall the provisions of paragraph 1 be construed to impose on a Contracting State the obligation

(a) to take administrative action at variance with the laws or administrative practice of the other contracting State;

(b) to supply information that is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State

(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy.

 

Article 30

Members of Diplomatic Missions and Consular Posts

The provisions of this Convention shall not affect the fiscal privileges of members of diplomatic missions or consular posts members of diplomatic missions or consular posts under the general rules of international law or the provisions of special agreements.

Article 31

Exclusion of Certain Companies

  1. The provisions of this Convention shall not apply to companies enjoying special tax treatment under the laws or administrative practice of either of the Contracting States. It shall not apply to income derived by a resident of the other Contracting State from such companies, or to shares or other equity securities of such companies owned by such person.
  1. The Governments of the Contracting States shall agree from time to time as to the types of special tax treatment to which the provisions of the provisions of paragraph 1 of this Article shall apply. For these purposes, the Governments of the two Contracting For these purposes, the Governments of the two Contracting States shall communicate with each other by exchange of notes.

Article 32

Entry Into Force

  1. This Convention shall enter into force on the date on which the Contracting States exchange notes through diplomatic channels diplomatic channel, notifying each other that the last of the procedures necessary for this Convention to have the force of law in Malaysia Convention to have the force of law in Malaysia and Luxembourg, as the case may be, has been completed, and accordingly, this Convention shall

(a) in Malaysia:

(i) in respect of Malaysian tax, other than tax on petroleum income, to the tax payable for any taxable year beginning on or after the first day of January in the calendar year following the year in which this Convention enters into force

(ii) in respect of the tax on petroleum income, the tax payable for any taxation year beginning on or after the first day of January in the second calendar year following the year in which this Convention enters into force

(b) in Luxembourg:

(i) in respect of taxes withheld at source, on or after the first day of January in the calendar year immediately following the year in which the Convention enters into force

(ii) in respect of other taxes on income and capital, to the taxes imposed for any taxation year beginning on or after the first day of January in the calendar year following the year in which the Convention enters into force.

 

Article 33

Termination

This Convention shall remain in force indefinitely, but either Contracting State may terminate this Convention through diplomatic channels, giving written notice to the other Contracting State not later than June 30 of any calendar year following a period of five years from the date on which this Convention enters into force. In such case, this Convention shall cease to have effect:

(a) in Malaysia:

(i) in respect of Malaysian tax, other than petroleum income tax, to the tax payable for any taxation year beginning on or after the first day of January in the calendar year following the year in which the notice is given

(ii) in respect of petroleum income tax, the tax payable for any taxation year beginning on or after January 1 of the second calendar year following the year in which the the notice is given;

(b) in Luxembourg: 

(i) with respect to taxes withheld at source, to income allocated on or after January 1 of the calendar year immediately following the year in which the notice is given;

(ii) in respect of other income and capital taxes, to taxes payable for any taxation year beginning on or after January 1 of the calendar year immediately following the year in which the notice is given.

In witness whereof, the undersigned, duly authorized to that effect, have signed this Agreement.

Done in duplicate at Putrajaya, this 21st day of November 2002 in the English, Malay and French languages, the three texts being equally authentic.

Want to know more about LUXEMBOURG with Damalion?

Damalion offers you from bespoke advice by directly operational experts in the fields that challenge your business.
We advice you to give information at its best, so we can qualify your demand and revert to you under the next 8 hours.