In Malaysia, double taxation generally occurs when a Malaysian taxable person carries out international or cross-border business transactions in the territory of another country. DTASs have a mutual understanding of how income or profits made outside Malaysia by Malaysian citizens or, within Malaysia, by citizens of the other participating country should be treated. In the absence of a double taxation treaty, tax relief may be granted through foreign tax credits. If a DBA is in effect, the available credit is the entire international tax paid or Malaysian tax collected, whichever is lower. However, if there is no DBA, the available credit is limited to half of the foreign tax paid. In addition, on 4 August 2017, the President of Indonesia also adopted Presidential Regulation No 77 of 2017 ratifying the Protocol amending the DBA between Indonesia and Malaysia, signed in Kuala Lumpur on 12 September 1991, as amended by the Protocol signed in Bukit Tinggi on 12 January 2006 (PR No 77/2017). Pr No 77/2017 ratified the latest protocol amending the Indonesia-Malaysia DBA, signed on 20 October 2011 in Lombok, west of Nusa Tenggara. The main change concerns the extension of the scope of information provision, which increases the ability of a certification body to request information on matters that were not yet available to them. The main reason for countries` double taxation is the deterrence of international trade. This is due to the fact that the country`s government might believe that commercial expertise, which could be involved in business transactions in the country, will be exported abroad. There is another possible reason if the two countries involved do not have peaceful relations. Malaysia is one of the DTAs that involve countries on all continents of the world. It also has limited agreements with some other countries.
Some countries have not ratified a DBA with the participation of Malaysia. DTAS has helped facilitate the international flow of investment, trade, financial activities and technical knowledge between Malaysia and other countries. This allows both countries to benefit in a way that is not directly related to taxation. Thus, Malaysia and the countries with which they are part of a DBA have become more interdependent. This does not only apply economically; It can sometimes be applied to social aspects. On another occasion, the Directorate-General for Taxation transmitted Circular SE-19/PJ/2017 of 26 June 2017. July 2017 on the entry into force of the DBA between Indonesia and Armenia. The circular states that the Indonesia-Armenia DBA, signed in Jakarta on 13 October 2005, applies from 8 April 2016. However, the provisions of the Indonesian-Armenian DBA only come into force on the following dates: a double taxation convention (DBA) is a treaty signed by two countries to minimize or eliminate double taxation of the same income. It is also known as a double taxation convention and is classified as part of international taxation. .