This document discusses residence status for individuals under the Malaysian Income Tax Act 1967. It explains that an individual's residence status is determined quantitatively based on the number of days present in Malaysia in a calendar year. Section 7(1) of the Act lays out four circumstances where an individual is considered a tax resident: being physically present for 182 days or more, having a period of less than 182 days linked to or by another period of 182 days or more, being present for 90 days or more in the year and 3 of the previous 4 years, or being a resident in the previous 3 years and following year. The document provides examples and explanations of how these rules are applied to determine an individual's residence status and associated tax benefits.
This document discusses residence status for individuals under the Malaysian Income Tax Act 1967. It explains that an individual's residence status is determined quantitatively based on the number of days present in Malaysia in a calendar year. Section 7(1) of the Act lays out four circumstances where an individual is considered a tax resident: being physically present for 182 days or more, having a period of less than 182 days linked to or by another period of 182 days or more, being present for 90 days or more in the year and 3 of the previous 4 years, or being a resident in the previous 3 years and following year. The document provides examples and explanations of how these rules are applied to determine an individual's residence status and associated tax benefits.
This document discusses residence status for individuals under the Malaysian Income Tax Act 1967. It explains that an individual's residence status is determined quantitatively based on the number of days present in Malaysia in a calendar year. Section 7(1) of the Act lays out four circumstances where an individual is considered a tax resident: being physically present for 182 days or more, having a period of less than 182 days linked to or by another period of 182 days or more, being present for 90 days or more in the year and 3 of the previous 4 years, or being a resident in the previous 3 years and following year. The document provides examples and explanations of how these rules are applied to determine an individual's residence status and associated tax benefits.
This document discusses residence status for individuals under the Malaysian Income Tax Act 1967. It explains that an individual's residence status is determined quantitatively based on the number of days present in Malaysia in a calendar year. Section 7(1) of the Act lays out four circumstances where an individual is considered a tax resident: being physically present for 182 days or more, having a period of less than 182 days linked to or by another period of 182 days or more, being present for 90 days or more in the year and 3 of the previous 4 years, or being a resident in the previous 3 years and following year. The document provides examples and explanations of how these rules are applied to determine an individual's residence status and associated tax benefits.
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RESIDENCE STATUS
FOR INDIVIDUAL BY: NORHIDAYAH ISMAIL LEARNING OBJECTIVES Students should able to explain: O Determination of residence status under the Income Tax Act 1967 O The importance of residence status DETERMINATION OF RESIDENCE STATUS O The ascertainment of an individual’s resident status in purely a QUANTITATIVE TEST.
O It is determined by reference to the NUMBER
OF DAYS an individual person is PRESENT IN MALAYSIA during a particular calendar year. SECTION 7 (1) O Section 7(1) of the Act lays down FOUR CIRCUMSTANCES where an individual can be regarded as tax resident in Malaysia: Sec 7 (1) (a) Sec 7 (1) (b) Sec 7 (1) (c) Sec 7 (1) (d)
O 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. Section 7 (1) (a) O Must physically present in that calendar year, amounting to a minimum of 182 days. O It can be a single period (consecutively) or multiple periods (not consecutively). Example Mr. Y recorded the following periods of stay in Malaysia: 1.3.2018 - 30.6.2018 In Malaysia 122 days 1.7.2018 – 31.7.2018 Seminar in Hong Kong 31 days 1.8.2018 – 30.9.2018 In Malaysia 61 days
Determine the resident status of Mr. Y for the YA 2018.
Answer Resident by virtue of Section 7(1)(a) of ITA 1967. Reasons: Mr. Y was in Malaysia for more than 182 days. Section 7(1)(a) does not require the 182 or more days to be consecutive. The 31 days for a seminar in Hong Kong cannot be taken into account as section 7(1)(a) requires physical presence in Malaysia. Section 7 (1) (b) O Under sec. 7(1)(b) – an individual is in Malaysia in basis year for the period of less than 182 days and that period is linked by or to another period of 182 or more consecutive days.
O However temporary absence from Malaysia of the
following nature are regarded as forming part of the period of or more consecutive days. Temporary absence Connected with his service in Malaysia and owing to service matters or attending conferences, seminars or study abroad.
Owing to ill health involving himself or a member
of his immediate family - parents, children and spouse.
In respect of a social visit not exceeding 14 days
in the aggregate. Example – Linked by Mr. Y recorded the following periods of stay in Malaysia:
2017 1.7.2017 - 31.12.2017 184 days
2018 1.1.2018 - 31.1.2018 31 days
Determine his resident status for YA 2017 and 2018.
Answer Mr. Y is a resident for YA 2017 under Sec 7(1)(a) and resident status in YA2018 under section 7(1)(b) as the period of less than 182 consecutive days in 2018 “linked by” more than 182 consecutive days in 2017. Example – Linked to Mr. Y recorded the following periods of stay in Malaysia: 2017 1.1.2017 - 31.12.2017 31 days
2018 1.1.2018 - 3.7.2018 185 days
Determine his resident status for YA 2017.
Answer Mr. Y is resident for YA 2017 under section 7(1)(b) as period of less than 182 consecutive days in 2017 is “linked to” more than 182 consecutive days in 2018. Example – Linked to; TA Mr. Y recorded the following periods of stay in Malaysia:
2016 31.12.2016 1 day
2017 1.1.2017-31.3.2017 91 days
1.4.2017-2.4.2017 2 days (Social visit outside Malaysia) 3.4.2017-19.6.2017 78 days 20.6.2017-1.7.2017 12 days (Social visit outside Malaysia) --------------- 169 days --------------- Determine his resident status for the YA 2016. Example – Linked to
Mr. Y is resident for YA 2016 under section 7(1)(b) as period
of less than 182 consecutive days in 2016 is “linked to” 182 consecutive days in 2017 (upon taking into account the social visits). Example – Linked To; TA Mr. Y recorded the following periods of stay in Malaysia: 2017 1.7.2017-28.12.2017 181 days 29.12.2017-31.12.2017 3 days social visit 2018 1.1.2018-12.1.2018 12 days social visit 2018 13.1.2018-31.1.2018 19 days
Determine his resident status for YA 2018.
Mr. Y is not resident for YA 2018 under section 7(1)(b) in spite of
the fact that period of less than 182 days in 2018 is “linked by” more than 182 consecutive days in 2017 including periods of temporary absence. This is because the number of social visits in the link and connecting periods is more than 14 days in aggregate. Sec 7(1)(c) of ITA 1967 If an individual cannot be resident under sec (7(1)(a) and sec 7(1)(b), the following will be examined.
In Malaysia for 90 days or more (not necessarily consecutive
days)
either resident or in Malaysia for 90 days or more in 3 out of
the 4 immediately preceding basis years. Example An individual has the following residence history in Malaysia:
1.3.2014 – 20.3.2014 20 days
1.5.2015 – 15.8.2015 107 days 1.1.2016 – 30.9.2016 273 days 1.3.2017 – 31.10.2017 245 days 1.1.2018 – 20.4.2018 111 days
You are required to determine his residence status for the YAs 2014, 2015, 2016, 2017, and 2018. Answer The individual was not a resident for the YAs 2014 and 2015.
As for the YAs 2016 and 2017, he was resident by virtue of
Section 7(1)(a).
Finally, the individual was also resident for the YA 2018, by
virtue of Section 7(1)(c). In 2018, he was in Malaysia for more than 90 days, and in 3 out of the 4 immediately preceding basis years, the individuals was either a resident (2016 and 2017) or in Malaysia for more than 90 days (2015). Sec 7(1)(d) of ITA 1967
Resident for the 3 immediately preceding basis years
Resident the immediately following basis year.
As thus, based on the above said circumstance, an
individual may be found to be a resident for a particular basis year even though he or she might not have been in Malaysia at all in that basis year. Example Azila has the following residence history in Malaysia.
11.10.2014 – 31.12.2014 82 days
2015 Whole year 1.1.2016 – 30.9.2016 More than 182 days 1.4.2017 – 4.4.2017 4 days 1.4.2018 – 31.12.2018 More than 182 days
Advise Azila on his residence status for the YAs 2014, 2015, 2016, 2017 and 2018. Answer
Azila is a resident for all the said YAs. He is resident for
2015, 2016 and 2018, by virtue of Section 7(1)(a). As for 2014, he is resident as per Section 7(1)(b) while the resident status for 2017 comes about because of Section 7(1)(d). Resident status Linked to/by, > 182 Sec 7 (1) (a) days in the linked year
Sec 7 (1) (b)
Sec 7 (1) (c)
Sec 7 (1) (d)
NR Benefit of Residence Status Resident individuals are subject to a scaled rate from 0-28%. As for non-resident individuals they are subject to a flat rate of 28%.
Resident individuals are entitled to individual tax relief
(sections 46 to 50) such as self, wife, child and etc. Non- residents are not entitled to such relief.
Resident individuals are entitled to a rebate if their
chargeable income is less than RM35,000. Non-residents are not entitled to the rebate. Benefit of Residence Status 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.
Withholding tax is applicable upon contract payment,
interest, royalty, and section 4A income payments made to non-residents only. Reference O Choong Kwai Fatt (2018), Malaysian Taxation: Principles and Practices, 24th Edition, Malaysia, Inforworld
