If the person who is not an individual is established in the two contracting states, the residence is determined by the state in which his or her actual place of administration is located. If in doubt, the competent authorities of the contracting states agree on the place of residence, taking into account all relevant factors. In that other state, interest paid in a contracting state to a resident of the other state party and paid to a resident may be taxed. However, these interests may also be taxed in the contracting state where they occur when the beneficiary is the beneficiary of the interest, so that the tax thus collected cannot exceed 10% of the gross amount. Interest collected by a Singaporean resident company for loans approved within the meaning of Section 2, paragraph 1 of malaysia`s Income Tax Act 1967 are exempt from Malaysian tax. The government of one contracting state is tax-exempt in the other state party for interest derived from that other state. The above provisions do not apply where the actual beneficiary of the interest has an MOU or a fixed base in the contracting state where the payer is established and the interest paid is effectively linked to that MOU or a fixed base. Similarly, the result is interest in the contracting state where the payer is domiciled, but if the payer has an MOU in the other contracting state where the actual beneficiary is based and the interest related to a debt related to that MOU is paid, the interest must be incurred in the other contracting state. If, because of the special relationship between the payer and the beneficiary, the interest paid goes beyond the amount that would otherwise have been paid, the contract provision applies only to that amount and any amount of excess interest is taxable under the legislation of each contracting state. It should be noted that in the absence of the DBA, foreigners receiving interest from Malaysian residents pay 15% withholding tax and Singapore receives a 15% withholding tax on foreigners. In the case of Malaysia, the income tax and mineral oil tax provisions apply.
In the case of Singapore, income tax applies. Profits of a business in a contracting state are taxable only in that state, unless the company operates in the other contracting state through a business management activity located there.