Malaysia and Korea (Rep. of) have agreed to extend the interest withholding tax exemption under their 1982 income tax treaty to Malaysia’s KWAP and Korea’s Development Bank (KDB), with the exemption taking effect from 1 August 2026.
The Inland Revenue Board of Malaysia (IRBM) has published a competent authority agreement with Korea (Rep.). The two governments reached the deal through an exchange of letters, dated 2 July 2026 from Korea (Rep.) and 21 July 2026 from Malaysia. The agreement applies to paragraph 4 of Article 11 (Interest) of the 1982 income tax treaty between the two countries.
What the agreement covers
Paragraph 4 of Article 11 exempts interest derived by one country’s government from withholding tax in the other country. The competent authorities used paragraph 5 of the same article to decide which institutions count as part of each government. The treaty itself was signed on 20 April 1982.
Two institutions added
Korea (Rep.) agreed to add Kumpulan Wang Persaraan (Diperbadankan), known as KWAP, to the scope of the Malaysian government. Korean tax no longer applies to interest arising in Korea and paid to KWAP from 1 August 2026, the first day of the month after Malaysia’s reply.
Malaysia accepted Korea’s proposal to include the Korea Development Bank (KDB) within the Korean government’s scope. The two letters together form a mutual agreement under the treaty, so Malaysia exempts interest paid to KDB on the same terms.
When the exemptions take effect
The agreement entered into effect on 1 August 2026, in accordance with the terms of the exchange of letters. Consequently, interest payments made to these entities on or after 1 August 2026 are exempt under the DTA.
