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RESIDENCE STATUS

RESIDENCE STATUS

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RESIDENCE STATUS

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  1. RESIDENCE STATUS

  2. Learning Objectives You should learn from this topic: • Determination of residence status of individuals • Determination of residence status of companies & bodies of persons • Significance of residence status

  3. Residence Status of Individuals • Quantitative test • under S 7(1), ITA 1967 • no. of days present in Malaysia during a particular calendar year • Part of a day - consider as a full day in Malaysia • 4 situations

  4. Situation A • Section 7(1)(a) • An individual must be physically present in Malaysia in that basis year for a period (i.e. a single period) or periods (i.e. multiple periods) amounting in total to 182 days or more.

  5. Resident

  6. Situation A (Cont’d) • Example 1 (Single period) In Malaysia: 1.2.2005 - 1.9.2005 (>182 days) • Y/A 2005:Resident by virtue of S 7(1)(a) • Example 2 (Multiple periods) • Period I 1.1.2005 - 30.3.2005 (89 days) • Period II 15.4.2005 - 31.7.2005 (108 days) • Period III 1.12.2005 - 31.12.2005 (31 days) • Y/A2005:Resident by virtue of S 7(1)(a)

  7. Situation B • Section 7(1)(b) • in Malaysia for a period of less than 182 days • that period is linked by or to another period of 182 or more consecutive days*throughout which he is in Malaysia in the basis year immediately preceding or immediately following that particular basis year.

  8. In B4 and in After

  9. Situation B (Cont’d) *Temporary absencesignored for ascertaining the 182 consecutive days requirements (i) Service matters/ conferences/ seminars abroad (ii) Ill-health (self/ immediate family member) (iii) Social visits (Max: 14 days in aggregate)

  10. STILL PRESENT

  11. Situation B (Cont’d) • Example 3 In Malaysia: 1.5.2004 - 2.2.2005 Y/A 2004:1.5.2004 - 31.12.2004 (>182 days) • Resident by virtue of S 7(1)(a) Y/A 2005: 1.1.2005 - 2.2.2005 (33 days) • Resident by virtue of S 7(1)(b)

  12. Situation B (Cont’d) • Example 4 In Malaysia: 15.12.2001 - 31.12.2001 (17 days) 1.1.2002 - 31.7.2002 (212 days) 1.1.2003 - 31.1.2003 (31 days)

  13. Situation B (Cont’d) • Example 4 (Cont’d) Y/A 2001: Resident by virtue of S 7(1)(b) Y/A 2002: Resident by virtue of S 7(1)(a) Y/A 2003: Non-resident (physically present in Malaysia for < 182 days and this period is neither linked to nor linked by a longer period of >182 days)

  14. Situation B (Cont’d) • Example 5 15.12.04 - 29.12.04 15 days in Malaysia 30.12.04 - 31.12.04 2 days social visit to Singapore 1.1.05 - 31.1.05 31 days in Malaysia 1.2.05 - 2.2.05 2 days social visit to Thailand 3.2.05 - 31.7.05 179 days in Malaysia

  15. Situation B (Cont’d) • Example 5 (Cont’d) Y/A 2004: Resident by virtue of S 7(1)(b) (The period in 2004 is linked to a consecutive period of at least 182 days in 2005. The temporary absence is within the 14 days and it is treated as physical presence in Malaysia) Y/A 2005: Resident by virtue of S 7(1)(a) (210 days)

  16. Situation C • Section 7(1)(c) • in Malaysia for a period or periods amounting to 90 days or more in a basis year • in any 3 out of the 4 immediately preceding basis years - (i)residentin Malaysia, or (ii)in Malaysia for 90 days or more.

  17. 3 OUT OF 4 & 90 days

  18. Situation C (Cont’d) • Example 6

  19. Situation D • Section 7(1)(d) • need notbe present in Malaysia in a basis year • resident in Malaysia for the 3 immediately preceding years and is also a resident in the following year

  20. THE GAP YEAR

  21. Situation D (Cont’d) • Example 7

  22. Residence Status of Individuals Exercises to determine tax residence status . . .

  23. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.01.2003 to 30.06.2003 01.01.2004 to 31.07.2004 01.01.2005 to 30.04.2005 01.07.2005 to 31.10.2005 Exercise 1

  24. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.01.2003 to 30.06.2003 181 (<182) 2003 Non- resident - 01.01.2004 to 31.07.2004 213 (>182) 2004 Resident S 7(1)(a) 01.01.2005 to 30.04.2005 120 + 123 = 243 (>182) 2005 Resident S 7(1)(a) Exercise 1 (Answer)

  25. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.06.2004 to 15.06.2004 01.07.2004 to 31.12.2004 01.01.2005 to 15.02.2005 Exercise 2

  26. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.06.2004 to 15.06.2004 15 + 184 = 199 (>182) 2004 Resident S 7(1)(a) 01.07.2004 to 31.12.2004 01.01.2005 to 15.02.2005 46 2005 Resident S 7(1)(b) Exercise 2 (Answer)

  27. Period of stay in Malaysia No. of days Y/A Residencestatus Relevant provision 01.12.2001 to 31.12.2001 01.01.2002 to 31.07.2002 01.01.2003 to 31.01.2003 01.06.2004 to 22.12.2004* *03.01.2005 to 31.03.2005 Exercise 3 * Attended conference on behalf of employer in Sydney from 23.12.2004 to 02.01.2005.

  28. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.12.2001 to 31.12.2001 31 2001 Resident S 7(1)(b) 01.01.2002 to 31.07.2002 212 (>182) 2002 Resident S 7(1)(a) 01.01.2003 to 31.01.2003 31 2003 Non- resident - 01.06.2004 to 22.12.2004* 205 (>182) 2004 Resident S 7(1)(a) *03.01.2005 to 31.03.2005 88 2005 Resident S 7(1)(b) Exercise 3 (Answer) * Temporary absence: 23.12.2004 to 02.01.2005.

  29. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.07.2004 to 31.10.2004* *11.11.2004 to 31.12.2004 01.01.2005 to 31.01.2005 Exercise 4 * Sent by employer to attend annual conference in Australia from 01.11.2004 to 10.11.2004.

  30. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.07.2004 to 31.10.2004* 123 + 51 = 174 (<182) 2004 Non- resident - *11.11.2004 to 31.12.2004 01.01.2005 to 31.01.2005 31 2005 Resident S 7(1)(b) Exercise 4 (Answer) * Temporary absence: 01.11.2004 to 10.11.2004 (10 days). 174 days + 10 days = 184 days (> 182 days)

  31. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.04.2001 to 30.09.2001 01.01.2002 to 31.03.2002 01.01.2003 to 30.11.2003 01.03.2004 to 31.10.2004 01.04.2005 to 30.06.2005 Exercise 5

  32. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.04.2001 to 30.09.2001 183 (>182) 2001 Resident S 7(1)(a) 01.01.2002 to 31.03.2002 90 2002 Non- resident - 01.01.2003 to 30.11.2003 334 (>182) 2003 Resident S 7(1)(a) 01.03.2004 to 31.10.2004 245 (>182) 2004 Resident S 7(1)(a) 01.04.2005 to 30.06.2005 91 (>90) 2005 Resident S 7(1)(c) Exercise 5 (Answer)

  33. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.07.2001 to 31.12.2001 01.01.2002 to 31.01.2002 01.01.2003 to 31.03.2003 01.03.2004 to 31.03.2004 01.02.2005 to 31.05.2005 Exercise 6

  34. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.07.2001 to 31.12.2001 184 (>182) 2001 Resident S 7(1)(a) 01.01.2002 to 31.01.2002 31 2002 Resident S 7(1)(b) 01.01.2003 to 31.03.2003 90 2003 Non- resident - 01.03.2004 to 31.03.2004 31 2004 Non- resident - 01.02.2005 to 31.05.2005 120 (>90) 2005 Resident S 7(1)(c) Exercise 6 (Answer)

  35. Y/A No. of days Residence status Relevant provision 2000 200 2001 190 2002 300 2003 - 2004 250 Exercise 7

  36. Y/A No. of days Residence status Relevant provision 2000 200 (>182) Resident S 7(1)(a) 2001 190 (>182) Resident S 7(1)(a) 2002 300 (>182) Resident S 7(1)(a) 2003 - Resident S 7(1)(d) 2004 250 (>182) Resident S 7(1)(a) Exercise 7 (Answer)

  37. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.10.1999 to 30.11.1999 61 01.01.2000 to 15.07.2000 197 16.12.2001 to 31.12.2001 16 01.01.2002 to 15.07.2002 196 01.04.2003 to 15.07.2003 106 - - 11.01.2005 to 31.07.2005 202 Exercise 8

  38. Period of stay in Malaysia No. of days Y/A Residence status Relevant provision 01.10.1999 to 30.11.1999 61 2000 (pyb) Non- resident - 01.01.2000 to 15.07.2000 197 (>182) 2000 (cyb) Resident S 7(1)(a) 16.12.2001 to 31.12.2001 16 2001 Resident S 7(1)(b) 01.01.2002 to 15.07.2002 196 (>182) 2002 Resident S 7(1)(a) 01.04.2003 to 15.07.2003 106 (>90) 2003 Resident S 7(1)(c) - - 2004 Resident S 7(1)(d) 11.01.2005 to 31.07.2005 202 (>182) 2005 Resident S 7(1)(a) Exercise 8 (Answer)

  39. RESIDENCE

  40. Residence Residence –Home of income really. Rights to tax Rights not to be taxed Rights of relief Rights of refund Accrued and Derived in –refers to source

  41. Accrued /Derived (Source)-just to recap • Originating cause to receive income • Where service rendered • Where property located • Arising from • Where profit making activity located

  42. COMPANIES • MANAGEMENT AND CONTROL

  43. Residence Status of Companies A company carrying on a business or businesses is resident in Malaysia for the basis year for a year of assessment if at any time during that basis year the management and control of its business or of any one of its businesses, are exercised in Malaysia. [S 8(1)(b) of ITA 1967]

  44. Residence Status of Companies (Cont’d) Any other company is resident in Malaysia for the basis year for a year of assessment if at any time during that basis year the management and control of its affairs are exercised in Malaysia by its directors or other controlling authority. [S 8(1)(c) of ITA 1967]

  45. Residence Status of Companies(Cont’d) • Management and control • Any time during that basis year • Any one business Once a company is resident, then the company is presumed to be tax resident until the company informs IRB otherwise [S 8(2), ITA 1967]

  46. Residence Status of Companies(Cont’d) • Management and control • - normally exercised by its directors • Location of meeting - in Malaysia? • Major decisions are made in the meeting to direct and control the company? Yes Resident in Malaysia

  47. What does not count for Residence • Location of Company- i.e. incorporation or registered office • Shareholders control • Residence of Board of Directors

  48. Double Tax Treaties Because residence is different under each country’s laws, tax treaties formulate ‘Permanent establishment”

  49. Can there be Dual Residence • Yes • DTA can be a tie breaker

  50. Body of Persons Unincorporated bodies: What in any system of law prevailing in India is known as a Hindu joint family or coparcenary (S 2, ITA 1967) • Hindu joint family • Trust • Estates • Club • Trade association • Co-operative society