Malaysia and Italy have a double taxation agreement (DTA) in place, which aims to avoid double taxation of income and capital gains for individuals and businesses operating in both countries. With this agreement, residents of Malaysia and Italy who receive income from the other country are only taxed in their home country, thus preventing the same income from being taxed twice.
The DTA between Malaysia and Italy covers various types of income, including income from employment, business profits, dividends, interest, and royalties. It also covers capital gains, which is the profit made from the sale of assets such as real estate or shares of a company. Under the agreement, the country where the income arises has the primary right to tax the income, while the other country has the right to tax it but only to the extent that it exceeds the tax payable in the country where the income is sourced.
This DTA benefits individuals and businesses by eliminating the double taxation of income and reducing the overall tax burden. For example, if a Malaysian resident who works in Italy pays tax on their income earned in Italy, they can claim a tax credit in Malaysia for the foreign tax paid, which reduces their overall tax liability. This ensures that they are not taxed twice on the same income.
Furthermore, the DTA encourages bilateral trade and investment between Malaysia and Italy. It provides greater tax certainty and predictability for businesses operating in both countries, as they can avoid potential conflicts between the tax laws of the two countries. This helps to create a more favorable business environment and promotes cross-border investment and business activities.
It is important to note that the DTA between Malaysia and Italy only applies to residents of the two countries. Non-residents who earn income in either country may still be subject to tax according to the respective domestic laws of each country.
In summary, the double taxation agreement between Malaysia and Italy is an important agreement that promotes trade and investment between the two countries while providing greater tax certainty for individuals and businesses operating in both countries. By eliminating the double taxation of income, it helps to reduce the overall tax burden and encourages cross-border investment and business activities.