AGREEMENT BETWEEN THE GOVERNMENT OF THE PEOPLE'S REPUBLIC OF CHINA AND THE GOVERNMENT OF MALAYSIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

The Government of the People's Republic of China and the Government of Malaysia;
Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income;
Have agreed as follows:

Article 1 Personal Scope
This Agreement shall apply to persons who are residents of one or both of the Contracting States.
Article 2 Taxes Covered
1. This Agreement shall apply to taxes on income imposed on behalf of a Contracting State, irrespective of the manner in which they are levied.
2. The existing taxes to which the Agreement shall apply
are:
(a) in the People's Republic of China:
(i) the individual income tax;
(ii) the income tax concerning joint ventures with Chinese and foreign investment (including local income tax) ; and
(iii) the income tax concerning foreign enterprises (including local income tax) ;
(hereinafter referred to as "Chinese tax" ) ;
(b) in Malaysia:
(i) the income tax and excess profit tax;
(ii) the supplementary income taxes, that is, tin profits tax, development tax and timber profits tax; and
(iii) the petroleum income tax;
(hereinafter referred to as "Malaysian tax" ) .
3. This Agreement shall also apply to any identical or
substantially similar taxes which are imposed after the date
of signature of this Agreement in addition to, or in place of,
the existing taxes referred to in paragraph 2. The competent
authorities of the Contracting States shall notify each other
of any substantial changes which have been made in their
respective taxation laws within a reasonable period of time
after such changes.
Article 3
General Definitions
1. In this Agreement, unless the context otherwise requires:

(a) the term "China" means the People's Republic of China;
when used in geographical sense, means all the territory of
the People's Republic of China, including its territorial sea,
in which the Chinese laws relating to taxation apply, and any
area beyond its territorial sea, within which the People's
Republic of China has sovereign rights of exploration for and
exploitation of resources of the seabed and its sub-soil and
superjacent water resources in accordance with international
law;
(b) the term "Malaysia" means the Federation of Malaysia and
includes any area beyond and adjacent to the territorial
waters of Malaysia within which Malaysia has and exercises
under the laws of Malaysia in consistence with international
law, sovereign rights for the purpose of exploring and
exploiting the natural resources, whether living or non-living
of the seabed and the sub-soil, and the waters superjacent to
the seabed;
(c) the terms "a Contracting State" and "the other
Contracting State" mean China or Malaysia as the context
requires;
(d) the term "tax" means Chinese tax or Malaysian tax, as
the context requires;
(e) the term "person" includes an individual, a company and
any other body of persons;
(f) the term "company" means any body corporate or any
entity which is treated as a body corporate for tax purposes;
(g) 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;
(h) the term "national" means:
(i) in case of China all individuals possessing the
nationality of China in accordance with Chinese laws and any
legal person, partnership and other body corporate deriving
its status as such from Chinese laws;
(ii) in relation to Malaysia, any individual possessing the
citizenship of Malaysia, and any legal person, partnership,
association and any other entity deriving its status as such
from the laws in force in Malaysia;
(i) 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 solely
between places in the other Contracting State;
(j) the term "competent authority" means:
(i) in the case of China, the Ministry of Finance or its
authorised representative; and
(ii) in the case of Malaysia, the Minister of Finance or his
authorised representative.
2. In the application of the Agreement by a Contracting
State, any term not defined therein shall, unless the context
otherwise requires, have the meaning which it has under the
laws of that State concering the taxes to which the Agreement
applies.
Article 4
Resident
1. For the purposes of this Agreement, the term "resident of
a Contracting State" means any person who, under the laws of
that Contracting State, is liable to tax therein by reason of
his domicile, residence, place of head office, place of
effective management, or any other criterion of a similar
nature.
2. Where by reason of the provisions of paragraph 1 an
individual is a resident of both Contracting States, then his
status shall be determined in accordance with the following
rules:
(a) he shall be deemed to be a resident of the State in
which he has permanent home available to him; if he has a
permanent home available to him in both States, he shall be
deemed to be a resident of the State with which his personal
and economic relations are closer (centre of vital interests)
;
(b) if the State in which he has his centre of vital
interests cannot be determined, or if he has not a permanent
home available to him in either State, he shall be deemed to
be a resident of the State in which he has an habitual abode;
(c) if he has an habitual abode in both States or in neither
of them, he shall be deemed to be a resident of the State of
which he is a national;
(d) if he 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.
3. Where, by reason of the provisions of paragraph 1, a
person other than an individual is a resident of both
Contracting States, then it shall be deemed to be a resident
of the State in which its place of effective management is
situated. However, if such person has a place of effective
management in a Contracting State and a head office in the
other Contracting State, the competent authorities of the
Contracting States shall by mutual agreement determine the
State of which the person in question is a resident.
Article 5
Permanent Establishment
1. For the purposes of this Agreement, the term "permanent
establishment" means a fixed place of business through which
the business of an enterprise is wholly or partly carried on.
2. The term "permanent establishment" includes especially:
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a mine, an oil or gas well, a quarry or any other place
of extraction of natural resources including timber or other
forest production;
(g) a farm or plantation.
3. The term "permanent establishment" likewise encompasses:
(a) a building site, a construction, assembly or
installation project or supervisory activities in connection
therewith, but only where such site, project or activities
continue for a period of more than six months;
(b) the furnishing of services, including consultancy
services, by an enterprise of a Contracting State through
employees or other personnel in the other Contracting State,
Provided that such activities continue for the same project or
a connected project for a period or periods aggregating more
than six months within any twelve-month period.
4. Notwithstanding the provisions of paragraphs 1 to 3, the
term "permanent establishment" shall be deemed not to include:

(a) the use of facilities solely for the purpose of storage,
display or delivery of goods or merchandise belonging to the
enterprise;
(b) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of storage,
display or delivery;
(c) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of
processing by another enterprise;
(d) the maintenance of a fixed place of business solely for
the purpose of purchasing goods of merchandise, or of
collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for
the purpose of carrying on, for the enterprise, any other
activity of a preparatory or auxiliary character.
5. Notwithstanding the provisions of paragraphs 1 and 2,
where a person-other than an agent of an independent status to
whom the provisions of paragraph 6 apply-is acting in a
Contracting State on behalf of an enterprise of the other
Contracting State, has and habitually exercises an authority
to conclude contracts in the name of the enterprise, that
enterprise shall be deemed to have a permanent establishment
in the first-mentioned State in respect of any activities
which that person undertakes for the enterprise, unless his
activities are limited to those mentioned in paragraph 4
which, if exercised through a fixed place of business, would
not make this fixed place of business a permanent
establishment under the provisions of that paragraph.
6. 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, provided that such persons are
acting in the ordinary course of their business. However, when
the activities of such an agent are devoted wholly or almost
wholly on behalf of that enterprise, he shall not be
considered an agent of an independent status within the
meaning of this paragraph.
7. 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 which 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 Immovable Property
1. Income derived by a resident of a Contracting State from
immovable property situated in the other Contracting State may
be taxed in that other State.
2. For the purposes of this Agreement, the term "immovable
property" shall be defined in accordance with the laws of the
Contracting State in which the property in question is
situated. The term shall in any case include property
accessory to immovable property, livestock and equipment used
in agriculture and forestry, rights to which the provisions of
general law respecting landed property apply, usufruct of
immovable property and rights to variable or fixed payments as
consideration for the working of, or the right to work,
mineral deposits and other natural resources including timber
or other forest produce. Ships and aircraft shall not be
regarded as immovable property.
3. The provisions of paragraph 1 shall apply to income
derived from the direct use, letting, or use in any other form
of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to
the income from immovable property of an enterprise and to
income from immovable property used for the performance of
independent personal services.
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. If the enterprise carries on
business as aforesaid, the profits of the enterprise may be
taxed in the other State but only so much of them as is
attributable to that permanent establishment.
2. Subject to the provisions of paragraph 3, where an
enterprise of a Contracting State carries on business in the
other Contracting State through a permanent establishment
situated therein, there shall in each Contracting State be
attributed to that permanent establishment the profits which
it might be expected to make if it were a distinct and
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.
3. In determining the profits of a permanent establishment,
there shall be allowed as deductions expenses which are
incurred for the purposes of the permanent establishment,
including executive and general administrative expenses so
incurred, whether in the State in which the permanent
establishment is situated or elsewhere. However, no such
deduction shall be allowed in respec of amount, if any, paid
(otherwise than towards reimbursement of actual expenses) by
the permanent establishment to the head office of the
enterprise or any of its other offices, by way of royalties,
fees or other similar payments in return for the use of
patents or other rights, or by way of commission, for specific
services performed or for management, or, except in the case
of a banking enterprise, by way of interest on moneys lent to
the permanent establishment. Likewise, no account shall be
taken, in the determination of the profits of a permanent
establishment, for amounts charged (otherwise than towards
reimbursement of actual expenses), by the permanent
establishment to the head office of the enterprise or any of
its other offices, by way of royalties, fees or other similar
payments in return for the use of patents or other rights, or
by way of commission for specific services performed or for
management, or, except in the case of a banking enterprise by
way of interest on moneys lent to the head office of the
enterprise or any of its other offices.
4. If the information available to the competent authority
of a Contracting State is inadequate to determine the profits
to be attributed to the permanent establishment of an
enterprise, nothing in paragraph 2 shall affect the
application of any law of that State relating to the
determination of the tax liability of that permanent
establishment by the exercise of a discretion or the making of
an estimate of the profits to be taxed of that permanent
establishment by the competent authority of the Contracting
State, provided that the law shall be applied, so far as the
information available to the competent authority permits, in
accordance with the principle of this Article.
5. No profits shall be attributed to a permanent
establishment by reason of the mere purchase by that permanent
establishment of goods or merchandise for the enterprise.
6. For the purposes of paragraphs 1 to 5, the profits to be
attributed to the permanent establishment shall be determined
by the same method year by year unless there is good and
sufficient reason to the contrary.
7. Where profits include items of income which are dealt
with separately in other Articles of this Agreement, then the
provisions of those Articles shall not be affected by the
provisions of this Article.
Article 8
Shipping and Air Transport
1. Profits derived by an enterpise of a Contracting State
from the operation of aircraft in international traffic shall
be taxable only in that State.
2. Income of an enterprise of one of the Contracting States
derived from the other Contracting State from the operation of
ships in international traffic may be taxed in that other
State, but the tax chargeable in that other State on such
income shall be reduced by an amount equal to fifty per cent
of such tax.
3. The provisions of paragraphs 1 and 2 shall also apply to
profits from the participation in a pool, a joint business or
an international operating agency.
Article 9
Associated Enterprises
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 conditions are made or imposed between
the two enterprises in their commercial or financial relations
which differ from those which would be made between
independent enterprises, then any profits which would, but for
those conditions, have accrued to one of the enterprises, but,
by reason of those conditions, have not so accrued, may be
included in the profits of that enterprise and taxed
accordingly.
Article 10
Dividends
1. Dividends paid by a company which is a resident of a
Contracting State to a resident of the other Contracting State
may be taxed in that other State.
2. Dividends paid by a company which is a resident of China
to a resident of Malaysia shall be taxed in China according to
Chinese laws, but if the beneficial owner of the dividends is
a resident of Malaysia the tax so charged shall not exceed 10
per cent of the gross amount of the dividends.
The provisions of this paragraph shall not affect the
taxation of the company in respect of the profits out of which
the dividends are paid.
3. Dividends paid by a company which is a resident of
Malaysia to a resident of China who is the beneficial owner
thereof shall be exempt from any tax in Malaysia which is
chargeable on dividends in addition to the tax chargeable in
respect of the income of the company. Nothing in this
paragraph shall affect the provisions of the Malaysian law
under which the tax in respect of a dividend paid by a company
which is a resident of Malaysia from which Malaysian tax has
been, or has been deemed to be, deducted may be adjusted by
reference to the rate of tax appropriate to the Malaysian year
of assessment immediately following that in which the dividend
was paid.
4. The term "dividends" as used in this Article means income
from shares, or other rights, not being debt-claims,
participating in profits, as well as income which is subjected
to the same taxation treatment as income from shares by the
laws of the State of which the company making the distribution
is a resident.
5. The provisions of paragraphs 1, 2 and 3 shall not apply
if the beneficial owner of the dividends, being a resident of
a Contracting State, carries on business in the other
Contracting State of which the company paying the dividends is
a resident, through a permanent establishment situated
therein, and the holding in a respect of which the dividends
are paid is effectively connected with such permanent
establishment. In such case the provisions of Article 7 shall
apply.
6. Where a company which 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 the
dividends paid by the company, except insofar as such
dividends are paid to a resident of that other State or
insofar as the holding in respect of which the dividends are
paid is effectively connected with a permenent establishment
situated in that other State, nor subject the company's
undistributed profits to a tax on the company's undistributed
profits, even if the dividends paid or the undistributed
profits consist wholly or partly of profits or income arising
in such 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.
2. 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 recipient is the beneficial owner of
the interest the tax so charged shall not exceed 10 per cent
of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2, interest
to which a resident of China is beneficially entitled shall be
exempt from Malaysian tax if the loan or other indebtedness in
respect of which the interest is paid is an approved loan as
defined in section 2 (1) of the Income Tax Act, 1967 of
Malaysia.
4. Notwithstanding the provisions of paragraphs 2 and 3, the
Government of a Contracting State shall be exempt from tax in
the other Contracting State in respect of interest derived by
the Government from that other State.
5. For the purposes of paragraph 4, the term "Government" :
(a) in the case of Malaysia means the Government of Malaysia
and shall include:
(i) the governments of the States;
(ii) the local authorities;
(iii) the Bank Negara Malaysia; and
(iv) such institutions, the capital of which is wholly owned
by the Government of Malaysia or the governments of the
States, or the local authorities thereof, as may be agreed
upon from time to time between the competent authorities of
the Contracting States;
(b) in the case of China means the Government of the
People's Republic of China and shall include;
(i) the local government;
(ii) the People's Bank of China, the head office of Bank of
China, and the China International Trust and Investment
Corporation; and
(iii) such institutions, the capital of which is wholly
owned by the Government of the People's Republic of China, as
may be agreed upon from time to time between the competent
authorities of the Contracting States.
6. The term "interest" as used in this Article means income
from debt-claims of every kind, whether or not secured by
mortgage and whether or not carrying a right to participate in
the debtor's profits, and in particular, income from
government securities and income from bonds or debentures.
7. The provisions of paragraphs 1, 2 and 3 shall not apply
if the beneficial owner of the interest, being a resident of a
Contracting State, carries on business in the other
Contracting State in which the interest arises, through a
permanent establishment situated therein, and the debt-claim
in respect of which the interest is paid effectively connected
with such permanent establishment. In such case the provisions
of Article 7 shall apply.
8. Interest shall be deemed to arise in a Contracting State
when the payer is the Government of that State, a political
subdivision, a local authority thereof, or a resident of that
State. Where, however, the person paying the interest, whether
he is a resident of a Contracting State or not, has in a
Contracting State a permanent establishment in connection with
which the indebtedness on which the interest is paid was
incurred, and such interest is borne by such permanent
establishment, then such interest shall be deemed to arise in
the State in which the permanent establishment is situated.
9. Where, by reason of a special relationship between the
payer and the beneficial owner or between both of them and
some other person, the amount of the interest, having regard
to the debt-claim for which it is paid, exceeds the amount
which wolud have been agreed upon by the payer and the
beneficial owner in the absence of such relationship, the
provisions of this Article shall apply only to the
last-mentioned 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 Agreement.
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.
2. 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 recipient is the beneficial
owner of the royalties, the tax so charged shall not exceed:
(a) 10 per cent of the gross amount of the royalties
referred to in paragraph 3 (a) ;
(b) 15 per cent of the gross amount of the royalties
referred to in paragraph 3 (b) .
3. The term "royalties" as used in this Article means
payments of any kind received as a consideration for:
(a) the use of, or the right to use, any patent, know-how,
trade mark, design or model, plan, secret formula or process,
copyright of any scientific work, or for the use of, or the
right to use, industrial, commercial, or scientific equipment,
or for information concerning industrial, commercial or
scientific experience;
(b) the use of, or the right to use any copyright of
literary or artistic work including cinematograph films, or
tapes for radio or television broadcasting.
4. The provisions of paragraphs 1 and 2 shall not apply if
the beneficial owner of the royalties, being a resident of a
Contracting State, carries on business in the other
Contracting State in which the royalties arise, through a
permanent establishment situated therein, and the right or
property in respect of which the royalties are paid is
effectively connected with such permanent establishment. In
such case the provisions of Article 7 shall apply.
5. Royalties shall be deemed to arise in a Contracting State
when the payer is the Government of that State, a political
subdivision, a local authority thereof, or 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 in connection
with which the liability to pay the royalties was incurred,
and such royalties are brone by such permanent establishment,
then such royalties shall be deemed to arise in the
Contracting State in which the permanent establishment is
situated.
6. Where, by reason of a special relationship between the
payer and the beneficial owner or between both of them and
some other person, the amount of the royalties, having regard
to the use, right or information for which they are paid,
exceeds the amount which have been agreed upon by the payer
and the beneficial owner in the absence of such relationship,
the provisions of this Article shall apply only to the
last-mentioned 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 Agreement.
7. Royalties derived by a resident of China which are
subjected to film hire duty under the Cinematograph Film-Hire
Duty Act in Malaysia shall not be liable to Malaysian tax to
which this Agreement applies.
Article 13
Gains from the Alienation of Property
1. Gains derived by a resident of a Contracting State from
the alienation of immovable property referred to in paragraph
2 of Article 6 and situated in the other Contracting State may
be taxed in that other State.
2. 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 in the other
Contracting State or of movable property available to a
resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services,
including such gains from the alienation of such a permanent
establishment (alone or together with the whole enterprise)
may be taxed in that other State.
3. Gains from the alienation of ships or aircraft operated
in international traffic and movable property, pertaining to
the operation of such ships or aircraft shall be taxable only
in the State of which the enterpise is a resident.
4. Gains from the alienation of shares of the capital stock
of a company, the principal property of which consists
directly or indirectly principally of immovable property
situated in a Contracting State may be taxed in that State.
Gains from the alienation of an interest in a partnership or a
trust, the property of which consists principally of immovable
property situated in a Contracting State, may be taxed in that
State.
5. Gains derived by a resident of a Contracting State from
the alienation of any property other than that referred to in
paragraphs 1 to 4 and arising in the other Contracting State
may be taxed in that other State.
Article 14
Independent Personal Services
1. Income derived by a resident of a Contracting State in
respect of professional services or other activities of an
independent character shall be taxable only in that State
except in one of the following circumstances, when such income
may also be taxed in the other Contracting State:
(a) if his stay in the other State is for a period or
periods amounting to or exceeding in the aggregate 183 days in
the calendar year concerned;
(b) if the remuneration for his services in the other State
is either derived from residents of that State or borne by a
permanent establishment which a person not resident in that
State has in that State and which, in either case exceeds US «Ã
4000 or the equivalent in Malaysian ringgit or the equivalent
in Chinese RMB in the calendar year concerned, notwithstanding
that this stay in that State is for a periods or period
amounting to less than 183 days during that calendar year.
2. The term "professional services" includes especially
independent scientific, literary, artistic, educational or
teaching activities as well as the independent activities of
physicians, lawyers, engineers, architects, dentists and
accountants.
Article 15
Dependent Personal Services
1. Subject to the provisions of Articles 16, 17, 18, 19, 20
and 21, salaries, wages and other simliar 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 so exercised, such remuneration as is derived
therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1,
remuneration derived by a resident of a Contracting State 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 the calendar year concerned; and
(b) the remuneration is paid by, or on behalf of, an
employer who is not a resident of the other Contracting State;
and
(c) the remuneration is not borne by a permanent
establishment which the employer has in the other Contracting
State.
3. Notwithstanding the preceding provisions of this Article,
remuneration derived in respect of an employment exercised
aboard a ship or aircraft operated in international traffic,
may be taxed in the Contracting State of which the enterprise
is a resident.
Article 16
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 of a company which is a resident of the
other Contracting State, may be taxed in that other State.
Article 17
Artistes and Athletes
1. Notwithstanding the provisions of Articles 14 and 15,
income derived by a resident of a Contracting State as an
entertainer, such as a theater, motion picture, radio or
television artiste, or a musician, or as an athlete, from his
personal activities as such exercised in the other Contracting
State, may be taxed in that other State.
2. Where income in respect of personal activities exercised
by an entertainer or an athlete in his capacity as such
accrues not to the entertainer or athlete himself but to
another person, that income may, notwithstanding the
provisions of Articles 7, 14 and 15, be taxed in the
Contracting State in which the activities of the entertainer
or athlete are exercised.
3. Notwithstanding the provisions of paragraprs 1 and 2,
income derived by entertainers or athletes who are residents
of a Contracting State from the activities exercised in the
other Contracting State under a plan of cultural exchange
between the Governments of the both Contracting States shall
be exempt from tax in that other State.
Article 18
Pensions
1. Subject to the provisions of paragraph 2 of Article 19,
pensions and other similar remuneration or an annuity for past
employment paid to a resident of a Contracting State shall be
taxable only in that State.
2. Notwithstanding the provisions of paragraph 1, pensions
paid and other similar payments made by the Government of a
Contracting State or a local authority thereof under a public
welfare scheme of the social security system of that State
shall be taxable only in that State.
Article 19
Government Service
1.
(a) Remuneration, other than a pension, paid by the
Government of a Contracting State or a political subdivision,
or a local authority thereof to an individual in respect of
services rendered to the Government of that State, a political
subdivision, or a local authority thereof shall be taxable
only in that State.
(b) However, such remuneration shall be taxble only in the
other Contracting State if the services are rendered in that
other State and the individual is a resident of that other
State who:
(i) is a national of that other State; or
(ii) did not become a resident of that other State solely
for the purpose of rendering the services.
2.
(a) Any pension paid by, or out of funds created by, the
Government of a Contracting State, a political subdivision, or
a local authority thereof to an individual in respect of
services rendered to the Government of that State, a political
subdivision, or a local authority thereof shall be taxable
only in that State.
(b) However, such pension may be taxable in the other
Contracting State if the individual is a resident of, and a
national of, that other State.
3. The provisions of Articles 15, 16, 17 and 18 shall apply
to remuneration and pensions in respect of services rendered
in connection with a business carried on by the Government of
a Contracting State, a political subdivision, or local
authority thereof.
Article 20
Teachers and Researchers
1. An individual who is a resident of a Contracting State
immediately before making a visit to the other Contracting
State, and who, at the invitation of any university, college,
school or other similar educational institution or scientific
research institution visits that other State for a period not
exceeding three years solely for the purpose of teaching or
research or both at such educational institution or scientific
research institution shall be exempt from tax in that other
State on any remuneration for such teaching or research which
is subject to tax in the first-mentioned State.
2. This Article shall not apply to income from research if
such research is undertaken primarily for the private benefit
of a specific person or persons.
Article 21
Students and Trainees
An individual who is a resident of a Contracting State
immediately before making a visit to the other Contracting
State and is temporarily present in the other State solely:
(a) as a student at a recognised university, college, school
or other similar recognised educational institution in that
other State;
(b) as a business or technical apprentice; or
(c) as a recipient of a grant, allowance or award for the
primary purpose of study, research or training from the
government of either State or from a scientific, educational,
literary or charitable organisation or under a technical
assistance programme entered into by the Government of either
State,
shall be exempt from tax in that other State on:
(i) all remittances from abroad for the purposes of his
maintenance, education, study, research or training;
(ii) the amount of such grant, allowance or award; and
(iii) any remuneration not exceeding US$ 2000 or the
equivalent in Malaysian ringgit or the equivalent in Chinese
RMB per calendar year in respect of services in that other
State provided the services are performed in connection with
his study, research or training or are necessary for the
purposes of his maintenance.
Article 22
Other Income
1. ltems of income of a resident of a Contracting State,
wherever arising, not dealt with in the foregoing Articles of
this Agreement shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply to income,
other than income from immovable property as defined in
paragraph 2 of Article 6, if the recipient of such income,
being a resident of a Contracting State, carries on business
in the other Contracting State, through a permanent
establishment situated therein, and the right or property in
respect of which the income is paid is effectively connected
with such permanent establishment. In such case the provisions
of Article 7 shall apply.
3. Notwithstanding the provisions of paragraphs 1 and 2,
items of income of a resident of a Contracting State not dealt
with in the foregoing Articles of this Agreement and arising
in the other Contracting State may be taxed in that other
State.
Article 23
Methods for the Elimination of Double Taxation
1. In China, double taxation shall be eliminated as follows:

(a) where a resident of China derives income from Malaysia
the amount of Malaysian tax payable on that income in Malaysia
in accordance with the provisions of this Agreement, may be
credited against the Chinese tax imposed on that resident. The
amount of credit, however, shall not exceed the amount of the
Chinese tax on that income computed in accordance with the
taxation laws and regulations of China.
(b) where the income derived from Malaysia is a dividend
paid by a company which is a resident of Malaysia to a company
which is a resident of China and which owns not less than 10
per cent of the shares of the company paying the dividend, the
credit shall take into account the Malaysian tax payable by
the company paying the dividend in respect of its income.
2. For the purposes of paragraph 1, the term "Malaysian tax
payable" shall be deemed to include Malaysian tax which would,
under the laws of Malaysia and in accordance with this
Agreement, have been payable on:
(a) any income derived from sources in Malaysia had the
income not been taxed at a reduced rate or exempted from
Malaysian tax in accordance with:
(i) sections 54A, 54B, 60A, 60B and Schedule 7A of the
Income Tax Act 1968 of Malaysia; or
(ii) sections 21, 22, 26, 30KA and 30Q of the Investment
Incentive Act 1968 of Malaysia, so far as they were in force
on the date of signature of this Agreement; or
(iii) any other provisions which may subsequently be
introduced in Malaysia in modification of, or in addition to,
the investment incentives laws so far as they are agreed by
the competent authorities of the Contracting States to be of a
substantially similar character; and
(b) interest to which paragraph 3 of Article 11 applies had
that interest not been exempted from Malaysian tax in
accordance with that paragraph.
3. Subject to the laws of Malaysia regarding the deduction
of a credit against Malaysian tax of tax payable in any
country other than Malaysia, the Chinese tax payable under the
laws of China and in accordance with this Agreement by a
resident of Malaysia in respect of income derived from China
shall be allowed as a credit against Malaysian tax payable in
respect of that income. Where such income is a dividend paid
by a company which is a resident of China to a company which
is a resident of Malaysia and which owns not less than 10 per
cent of the voting shares of the company paying the dividend,
the credit shall take into account the Chinese tax payable by
that company in respect of its income out of which the
dividend is paid. The credit shall not, however, exceed that
part of the Malaysian tax, as computed before the credit is
given, which is appopriate to such item of income.
4. For the purposes of the credit referred to in paragraph
3, the term "Chinese tax payable" shall be deemed to include
the amount of Chinese tax which would have been paid if the
Chinese tax had not been exempted, reduced or refunded in
accordance with:
(a) the provisions of Articles 5 and 6 of the Income Tax Law
of China Concerning Joint Ventures Using Chinese and Foreign
Investment and the provisions of Articles 3 of the detailed
Rules and Regulations for the Implementation of the Income Tax
Law of China Concering Joint ventures Using Chinese and
Foreign Investment;
(b) the provisions of Articles 4 and 5 of the Income Tax Law
of China Concerning Foreign Enterprises; or
(c) any other similar special incentive measures designed to
promote economic development in China which are in existence
or any other incentives measures which way be introduced in
the laws of China on or after the date of signature of this
Agreement, and which may be agreed upon by the competent
authorities of the Contracting States.
Article 24
Non-Discrimination
1. The nationals of a Contracting State shall not be
subjected in the other Contracting State to any taxation or
any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to
which nationals of that other State in the same circumstances
are or may be subjected.
2. The taxation on a permanent establishment which an
enterprise of a Contracting State has in the other Contracting
State shall not be less favourably levied in that other State
than the taxation levied on enterprises of that other State
carrying on the same activities.
3. 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 taxation or any requirement connected therewith which is
other or more burdensome than the taxation and connected
requirements to which other similar enterprises of that
first-mentioned State are or may be subjected.
4. Nothing in this Article shall be construed as obliging;
(a) a Contracting State to grant to individuals who are
residents of the other Contracting State any personal
allowances, reliefs and reductions for tax purposes on account
of civil status or family responsibilities which it grants to
its own residents;
(b) Malaysia to grant to nationals of China not resident in
Malaysia those personal allowance, reliefs and reductions for
tax purposes which are by law available on the date of
signature of this Agreement only to nationals of Malaysia who
are not residents in Malaysia.
5. Nothing in this Article shall be construed so as to
prevent either Contracting State from limiting to its
nationals the enjoyment of tax incentives designed to promote
economic development in that State.
Article 25
Mutual Agreement Procedure
1. Where a resident of a Contracting State considers that
the actions of one or both of the Contracting States result or
will result for him in taxation not in accordance with the
provisions of this Agreement, he may, irrespective of the
remedies provided by the domestic law of those States, present
his case to the competent authority of the Contracting State
of which he is a resident or, if his case comes under
paragraph 1 of Article 24, to that of the Contracting State of
which he is a national. The case must be presented within
three years from the first notification of the action
resulting in taxation not in accordance with the provisions of
the Agreemet.
2. The competent authority shall endeavour, 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 the avoidance of taxation
which is not in accordance with the provisions of this
Agreement.
3. The competent authorities of the Contracting States shall
endeavour to resolve by mutual agreement any difficulties or
doubts arising as to the interpretation or application of the
Agreement. They may also consult together for the elimination
of double taxation in cases not provided for in this
Agreement.
4. The competent authorities of the Contracting States may
communicate with each other directly for the purpose of
reaching an agreement in the sense of paragraphs 2 and 3. When
it seems advisable for reaching agreement, representatives of
the competent authorities of the Contracting States may meet
together for an oral exchange of opinions.
Article 26
Exchange of Information
1. The competent authorities of the Contracting States shall
exchange such information as is necessary for carrying out the
provisions of this Agreement, in particular for the prevention
of evasion of taxes covered by this Agreement. Any information
received by a Contracting State shall be treated as secret and
shall be disclosed only to persons or authorities (including
courts and administrative bodies) involved in the assessment
or collection of, the enforcement or prosecution in respect
of, or the determination of appeals in relation to, the taxes
covered by the Agreement. Such persons or authorities shall
use the information only for such purposes. They may disclose
the information in public court proceedings or in judicial
decisions.
2. In no case shall the provisions of paragraph 1 be
construed so as to imposed on a Contracting State the
obligation:
(a) to carry out administrative measures at variance with
the laws and the administrative practice of that or of other
Contracting State;
(b) to supply information which 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 could 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 27
Diplomatic and Consular Officers
Nothing in this Agreement shall affect the fiscal privileges
of diplomatic or consular officers under the general rules of
international law or under the provisions of special
agreements.
Article 28
Entry into Force
1. This Agreement shall enter into force on the thirtieth
day after the date on which diplomatic notes indicating the
completion of internal legal procedures necessary in each
country for the entry into force of this Agreement have been
exchanged.
2. This Agreement shall have effect:
(a) in China:
as respects income derived during the taxable years
beginning on or after the first day of January in the calendar
year next following that in which this Agreement enters into
force;
(b) in Malaysia:
as respects Malaysian tax for the year of assessment
beginning on or after the first day of January in the second
calendar year next following that in which this Agreement
enters into force and subsequent years of assessment.
Article 29
Termination
This Agreement shall continue in effect indefinitely but
either of the Contracting States may, on or before the
thirtieth day of June in any calendar year beginning after the
expiration of a period of five years from the date of its
entry into force, give to the other Contracting State, through
the diplomatic channel, written notice of termination.
In such event this Agreement shall cease to have effect:
(a) in China:
as respects income derived during the taxable years
beginning on or after the first day of January in the calendar
year next following that in which the notice of termination is
given;
(b) in Malaysia:
as respects Malaysian tax for the year of assessment
beginning on or after first day of January in the second
calendar year next following the year in which the notice of
termination is given and subsequent years of assessment.
IN WITNESS WHEREOF the undersigned, duly authorised thereto,
by their respective Governments, have signed this Agreement.
DONE in duplicate at Beijing this 23th day of November,
1985, each in Chinese, Bahasa Malaysia and the English
language, the three texts being equally authentic. In the
event of there being a dispute in the interpretation and the
application of this Agreement, the English text shall prevail.



For the Government For the Government
of the People's of Malaysia
Republic of China





PROTOCOL

At the signing of the Agreement between the Government of
the People's Republic of China and the Government of Malaysia
for the Avoidance of Double Taxation and Prevention of Fiscal
Evasion with respect to Taxes on Income (hereinafter referred
to as "The Agreement"), both sides have agreed upon the
following provisions which form an integral part of the
Agreement.
1. In connection with Article 3, "General Definitions" :
The term "person" in paragraph 1 (e) includes any other body
of persons which is treated as a person for tax purposes.
2. In connection with Article 8, "Shipping and Air
Transport" :
For the purpose of paragraph 2, the tax imposed by the other
Contracting State shall be reduced by 100 per cent if, after
the date of signature of this Agreement, Malaysia and China
have entered into a Shipping Agreement with each other. The
reduction shall be effective from the date the Shipping
Agreement enters into force. The tax to be exempt means all
taxes in relation to the operation of ships imposed, in
Malaysia, by the Income Tax Act 1967 and the Supplementary
Income Tax Act 1967 and, in China, by the Income Tax Act and
the Industrial and Commercial Consolidated Tax Act.
3. In connection with Article 14, "Independent Personal
Service" :
Where a resident of Malaysia has a fixed base regularly
available to him in China and is engaged in providing professional service or other independent activities, then the amount of income attributed to that fixed base may be taxed in China. Such regulation concerning taxes on the fixed base also applies in paragraphs 5 and 6 in Article 10, paragraphs 7 and 8 in Article 11, paragraphs 4 and 5 in Article 12, paragraph 2 in Article 13, paragraph 1 (b) in Article 14, paragraph 2 (c) in Article 15 and paragraph 2 in Article 22. The term "fixed base" in China means a fixed operating place where an individual is engaged in providing certain professional services.
4. In connection with Article 19, "Government Service" : Employees performing Government Service in Article 19 of the Agreement shall also include other personnel carrying on the function of Government (who in Malaysia include those employees working in statutory bodies) which is mutually recognised by the competent authorities of the Contracting States.
IN WITNESS WHEREOF the undersigned, duly authorised thereto, by their respective Governments, have signed this Protocol.
DONE in duplicate at Beijing this 23th day of November, 1985, each in Chinese Bahasa Malaysia, and the English language, the three texts being equally authentic. In the event of there being a dispute in the interpretations, the English text shall prevail.


For the Government For the Government
of the People's of Malaysia
Republic of China
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