• 1. Freight tax

Freight tax

Corporate tax: 24% of taxable income, which is considered to be either 5% of gross outward freight (= 1.25%) or the ratio of the world income/loss (i.e. "ratio certificate" method).


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 for reduction or avoidance are in force with the following countries. 

Country Reduction Date of Entry into force Date of effect (Year of assessment)
Albania 100% 13/01/2007 01/01/2008
Algeria 100% 31/08/2006 01/01/2007
Australia 100% 01/01/1984 01/01/1984
Austria (Revised) 100% 30/03/2002 01/01/1983
Azerbaijan1 100% 25/11/2008 01/01/2009
Bahrain1 100% 26/04/2013 01/01/2014
Bangladesh 50% 22/08/1984 01/01/1984
Belarus 100% 17/06/2003 01/01/2004
Belgium (Revised) 100% 31/12/1996 01/01/1996
Brazil 100% 21/11/1991 01/01/1992
Brunei 100% 14/10/2016 01/01/2017
Bulgaria 100% 22/06/1995 01/01/1995
Canada (Revised) 100% 18/12/2006 01/01/2007
Chile 100% 25/07/2003 01/01/2004
China2,3 100% 28/09/1994 01/01/1995
China5 100% 27/09/2016 01/01/2017
Colombia 1 100% 15/07/2014 01/01/2015
Croatia 100% 15/09/2006 01/01/2007
Czech Republic 100% 03/03/1995 03/03/1995
Denmark 100% 17/01/1979 01/01/1980
Ecuador 1 100% 16/10/2013 01/01/2014
Egypt 100% 06/02/1994 01/01/1994
Estonia 100% 25/05/2010 01/01/2011
Fiji 100% 17/02/1995 01/01/1995
Finland 100% 23/12/1981 01/01/1982
France (Revised) 100% 01/03/1992 01/01/1992
Germany (Revised) 100% 31/10/2002 01/01/2003
Greece 100% 10/07/1998 01/01/1999
Hungary 100% 01/04/1990 01/01/1991
Iceland 100% 23/10/2008 01/01/2009
India 50% 31/08/1986 01/01/1987
India (Renegotiated) 50% 12/09/2016 01/01/2017
Indonesia 100% 03/05/1989 01/01/1990
Iran 100% 08/12/2009 01/01/2010
Ireland 1 100% 27/12/1991 01/01/1992
Israel 3 100% 13/12/1997 01/01/1998
Italy 100% 14/07/1992 01/01/1993
Japan (Revised) 100% 22/11/1999 01/01/2000
Jordan 100% 28/03/2005 01/01/2006
Kazakhstan 100% 09/04/1999 01/01/2000
Kyrgyzstan

22/11/2013 01/01/2014
Kuwait 100% 13/06/2000 01/01/2000
Laos 100% 09/02/2006 01/01/2007
Latvia 100% 26/12/2009 01/01/2010
Lithuania 100% 14/07/2007 01/01/2008
Luxembourg 100% 26/12/1986 01/01/1986
Malaysia 100% 02/01/1983 01/01/1983
Malta 100% 21/03/1998 01/01/1999
Mexico 100% 11/02/1995 01/01/1996
Mongolia 100% 06/06/1993 01/01/1996
Morocco3 100% 01/07/2000 01/01/2001
Myanmar, Union of 50% 04/08/2003 01/01/2004
Nepal 100% 29/05/2003 01/01/2004
The Netherlands (Revised) 100% 02/04/1999 01/01/1999
New Zealand (Revised) 100% 10/10/1997 01/01/1997
Norway 100% 01/03/1984 01/01/1984
Oman 100% 13/02/2006 01/01/2007
Pakistan 50% 20/10/1987 01/01/1987
Panama 100% 01/04/2012 01/01/2013
Papua New Guinea 100% 21/03/1998 01/01/1999
Peru 100% 03/03/2014 01/01/2015
The Philippines 4 See Note 09/11/1986 01/01/1987
Poland 100% 21/02/1992 01/01/1992
Portugal 100% 21/12/1997 01/01/1998
Qatar 100% 15/04/2009 01/01/2010
Romania 3 100% 06/10/1994 01/01/1995
Russia 100% 24/08/1995 01/01/1996
Saudi Arabia 1,3 100% 01/12/2008 01/01/2009
Serbia 100% 17/11/2016 01/01/2017
Singapore 100% 11/02/1981 01/01/1979
Slovakia 100% 08/07/2003 08/07/2003
Slovenia 100% 02/03/2006 01/01/2007
South Africa 1 100% 07/01/1976 01/01/1997
Spain 100% 21/11/1994 01/01/1995
Sri Lanka 50% 20/06/1986 01/01/1980
Sweden 100% 09/09/1982 01/01/1982
Switzerland 100% 22/04/1981 01/01/1979
Thailand (Revised) 50% 29/06/2007 01/01/2008
 Tajikistan 100%   28/09/2016 01/01/2017   
Tunisia 100% 25/11/1989 01/01/1990
Turkey 100% 27/03/1984 01/01/1985
Ukraine 1 100% 19/03/2002 01/01/2003
United Arab Emirates 1 100% 02/03/2005 01/01/2005
United Kingdom (Revised) 1 100% 29/12/1996 01/01/1997
United States 100% 20/10/1979 01/01/1979
Uruguay 1 100% 22/01/2013 01/01/2014
Uzbekistan 100% 25/12/1998 01/01/1998
Venezuela 1 100% 15/01/2007 01/01/2008
Vietnam 100% 09/09/1994 01/01/1995
Comprehensive treaty negotiations currently in progress:
Signed but not ratified
Gabon   Signed 25/10/2010  
Malaysia (Renegotiated)   Signed 13/01/2011  
Nigeria   Signed 06/11/2006  
Sudan Signed 10/10/2004
Yemen Signed 07/07/2010
In the process of negotiation or finalised but not signed
Ethiopia
Paraguay

Notes

  1. The treaty does not apply to residents of Hong Kong, SAR; Macau, SAR or Taiwan, Province of China.
  2. Applies only to residents of Taiwan, Province of China by way of an Income Tax Exemption Order.  
  3. The treaty does only applies to residents of Hong Kong, SAR  
  4. 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 there from as provided for in section 86 of the Merchant Shipping Act (Cap. 234) or in any identical or similar provision.
  5. 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.  
  6. 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.

Remarks

"Ratio certificate" method
Sources advise that “for the Malaysian Director General to accept certificates issued by foreign tax authorities, the following must be fulfilled: The Foreign Tax Authorities must compute and assess the full profits of the non-residential operator from his shipping business. The basis on which the computation and assessment is made by the foreign tax authorities must not be substantially different from the basis adopted by the Malaysian Director General."

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