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TOPIC 2

RESIDENT STATUS

TOPIC COVERED:
3.1 The concept & importance of
residence status.
3.2 The determination of residence
status.

OBJECTIVE OF STUDY:
To determine the resident status of an
individual according to:
- Sec. 7 (1)(a) 7 (1)(d).

The Concept of Residence Status


o

The residence for tax purpose has no connection


with where one is born or his/her nationality.

An individual liability to income tax is not


dependent on his residence status.

The extent of an individuals tax liability can be


influenced by his residence status in the
following manner:

(a)
(b)

(c)

(d)

Only resident individual will be eligible for personal


reliefs.
A resident individual will be liable to income tax at
graduate rates (0-26%), whereas a non-resident will
be liable to income tax at a flat rate (26%).
Income received in Malaysia from outside Malaysia
will be taxable only in the case of a resident
individual.
Income from short-term employment of 60 days or
less will be taxable on a resident whereas a nonresident will be exempt from tax.

(e)

(f)

Interest income derived by a resident individual from


deposits placed with licensed banks in Malaysia will
be taxable (unless exempt via a specific exemption
order) where as a non-resident will be exempted from
tax.
The provisions of Malaysias double taxation
agreements will only apply to Malaysian residents as
well as double tax reliefs.

The Different Treatment between Resident & NonResident


Resident

Non-Resident

Scope of charge

Income accrued/derived in+received Income


in Msia from outside Msia will be accrued/derived in
taxed (for companies-banking,
Msia will be taxed
insurance, shipping & air transport)

Income tax rate

Scaled rate from 0-26%

Flat rate of 26%

Personal deduction

Entitled

Not entitled

Employment income
derived from Msia

Taxable

Exempted if he satisfy
the 60 days test

Rebates for chargeable


income RM35,000

Yes

No

Royalties from literary


or artistic work

Exempted

No

Dividend income from


approved unit trust

Exempted

No

Withholding tax

Not applicable

Applicable

Resident Status Determination

Quantitative test
Determined based on the period of physical presence in
Malaysia for a particular year of assessment
Part of a day will be considered as one day in Malaysia
Ascertained by reference to the number of days an
individual was in Malaysia by virtue of Section 7 of
the Act.
There are 4 sets of circumstances by which an
individual is deemed to be a resident in Malaysia.
In the event that an individual does not fall under any
of these circumstances in a particular basis year, he or
she is therefore not resident for that basis year.

Residence Status: Relevant Sections


S7(1)(a) of ITA 1967:

An individual is a resident in Malaysia in the


basis year for a year of assessment if he is in
Malaysia in the basis year for a period or
periods amounting in all to 182 or more days.

Example 1:
Mr. Aziz recorded the following periods of stay in Malaysia:
01/03/10 30/06/10 In Malaysia
122 days
01/07/10 31/07/10 Seminar in Hong Kong 31
days
01/08/10 30/09/10 In Malaysia
61 days
183 days
Determine the resident status of Mr. Aziz for the YA 2010.

Example 2:
Mr. Aziizur recorded the following periods of stay in
Malaysia:
01/02/10 31/10/10 In Malaysia

273 days

Determine the resident status of Mr. Aziizur for the YA 2010.

Residence
Status: Relevant Sections
S7(1)(b)
of ITA 1967:
Continue
In Malaysia 182 days

YES

NO

Year under review is


connected to previous or
following year

YES

RESIDENT
S 7(1)(b)

NO

182 consecutive days


(including temporary absence)
in previous or following year
NO

Social visits 14 days


NO

YES

YES

NON-RESIDENT

However, any temporary absence from Malaysia of the


following nature is regarded as forming part of the
period of 182 or more consecutive days:
(i) Absence connected with his service in Malaysia and
owing to service matters or attending conferences or
seminars or study abroad (NO LIMIT)
(ii) Absence owing to ill-health involving himself or a
member of his immediate family (NO LIMIT)
(iii) Absence in respect of social visits not exceeding a
total of 14 days (LIMIT 14 DAYS ONLY)

S7(1)(b) new provision

Residence Status: Relevant Sections Cont...

Temporary absence apply to the shorter and


longer period for the purpose of linking the two
Periods (linked by or linked to). Individual is
required to be in Malaysia before and after the
temporary absence.
From YA 2002-absence on 31/12 and 1/1 is regarded
as allowable temporary absence

Example 3: (linked by)


Mr. Fairuz recorded the following periods of stay in Malaysia:
2010 01/07/10 31/12/10

In Malaysia

184 days

201101/01/11 31/01/11

In Malaysia

31 days

Determine his resident status for YA 2011.


Mr Fairuz would be tax resident for YA 2011 because:
1. The number of days in 2011 is linked by 2010
2. There is at least 182 consecutive days in 2010

Example 4: (linked by)


Mr. Alif recorded the following periods of stay in Malaysia:
2010

01/07/10 28/12/10 In Malaysia


29/12/10 31/12/10 Social visit

2011 01/01/11 11/01/11

Social visit

12/01/11 31/01/11 In Malaysia

181 days
3

days

11

days
20 days

Determine his resident status for YA 2011.


Mr Alif will be tax resident for YA 2011 because the period in 2011
is linked by a consecutive period of at least 182 days in 2010.
the temporary absence for both years (2010 & 2011) is within
the 14 days limit.

Example 5: (Linked to)


Mr. Farish recorded the following periods of stay in Malaysia:

2010 01/01/10 31/12/10

In Malaysia

31 days

2011 01/01/11 03/07/11

In Malaysia

185 days

Determine his resident status for YA 2010.

Example 6: (Linked to)


Mr. Rezal recorded the following periods of stay in Malaysia:
2010

31/12/10

In Malaysia

2011

01/01/11 31/03/11 In Malaysia


01/04/11 02/04/11 Social visit (Paris)

1 day
90 days
2

03/04/11 19/06/11 In Malaysia


20/06/11 01/07/11 Social visit (China)

days
78 days

12

days
168 days

Determine his resident status for the YA 2010.


Mr Rezal will be tax resident for YA 2010 because the period in 2010 is linked to
a consecutive period of at least 182 days in 2011. The temporary absence for
both years (2010 & 2011) is within the 14 days limit. TA shall be taken to

Example 7: (Linked to)


Mr. Faisal recorded the following periods of stay in Malaysia:

2010

01/12/10 30/12/10 In Malaysia


31/12/104

2011

30 days

Social visit (China)

day

01/01/11 04/01/11 Social visit (China)

days

05/01/11 03/07/11 In Malaysia

Determine his resident status for the YA 2010.

181 days

Residence Status: Relevant Sections Cont


S7(1)(c) of ITA 1967:
An individual is resident in Malaysia in the basis year for a
year of assessment if he is in Malaysia for a total of 90 days
or more in the basis year and he was either resident in
Malaysia or in Malaysia for 90 days or more in any three out
of the four immediately preceding basis years.
2007

2008

2009

2010

NR:
95 days

R:
S7(1)(b)
R:
S7(1)(a)

NR:
12 days

2011
RS?
90 days

Example 8:
An individual has the following residence history in Malaysia:
2007 01/03/07 20/03/07

20 days

2008 01/05/08 15/08/08

107 days

2009 01/01/09 30/-09/09

273 days

2010 01/03/10 31/10/10

245 days

2011 01/01/11 20/04/11

110 days

You are required to determine his residence status for the YAs
2007, 2008, 2009, 2010 and 2011.

Residence Status: Relevant Sections cont


S7(1)(d) of ITA 1967:
An individual is resident in Malaysia in the basis year
for a year of assessment if he is resident in Malaysia
for the basis year for the year of assessment following
that particular year of assessment, having been a
resident for each of the basis years for the three years of
assessment immediately preceding that particular year
of assessment.
2007

2008

2009

2010

2011

RS ?

Example 9:
Mr. Alif Farish has the following residence history in Malaysia:
2007 11/10/07 31/12/07

82 days

2008 01/01/08 31/12/08

365 days

2009 01/01/09 30/09/09

273 days

201001/04/10 04/04/10
2011 01/04/11 31/12/11

4 days
275 days

Advise Mr. Alif Farish on his residence status for the YAs 2007,
2008. 2009, 2010 and 2011.

S 7(1)(a) : 182 days

YES

NO

S 7(1)(b) : 182 days (but


form 182 consecutive days
before or after the period

YES

NO

S 7(1)(c) : 90 days (R or
90 days for 3 of 4 preceding
BY

RESIDENT
YES

NO

S 7(1)(d) : 0 days (R for 3


preceding BY & R for the
following BY
NO

YES

NON-RESIDENT

o The scope of charge for both resident and


non-resident individuals is the same from YA
2004 both are taxed only upon Malaysian
derived and accrued income.
o Resident individuals scaled rate (0 26%),
while non-resident flat rate (26%).
o Resident individuals are entitled to individual
tax relief eg.
Self, wife, child and etc.
(NR not entitled).
o Resident individuals are entitled to a rebate
if their chargeable income is less than
RM35,000 (NR not entitled).

o Numerous types of income are exempted from tax only in the


hands of resident individuals:
- Royalties from literary or artistic work.
- Income from cultural performance approved by Minister.
- Income from musical composition.
o Numerous types of income are exempted from tax both in the
hands of residents and non-residents:
- Pension income derived from Malaysian employment
paid by approved scheme.
- Interest income from financial institution.