Q&A on Asian Bus.
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How are royalty payments made overseas treated in Malaysia; are they allowed?
- FAQ: MALAYSIA
- Date: 15.07.2010
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They are allowed. The use of cross-border royalty payments to reduce the local income tax is a profit stripping technique, similar to that used for interest payments. This technique aims to reduce the taxable profits by increasing the deductible expenditure of the Malaysian company. Royalty payments are deductible in Malaysia provided that the withholding tax due on the royalty payments have been duly remitted to the IRB.
For more details, see Tax Planning & Compliance in Asia , [MAL ¶12-180] Use of cross-border royalty payments
