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Chapter 2 Resident Status for Individuals. Topics Addressed. Introduction Governing circumstances Benefits of residence status. INTRODUCTION. Determining Residence Status. Ascertained by reference to the number of days an individual was in Malaysia by virtue of Section 7 of the Act .

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slide1

Chapter 2

Resident Status for Individuals

slide2

Topics Addressed

  • Introduction
  • Governing circumstances
  • Benefits of residence status
determining residence status
Determining Residence Status
  • 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.
7 1 a of ita 1967

7(1)(a) of ITA 1967

  • In Malaysia for 182 or more days of which the period of stay need not be consecutive.
slide9

Example 1

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

1.3.2005 - 30.6.2005 In Malaysia 122 days

1.7.2005 – 31.7.2005 Seminar in Hong Kong 31 days

1.8.2005 – 30.9.2005 In Malaysia 61 days

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183 days

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Determine the resident status of Mr. Y for the YA 2005.

slide10

Example 1

  • 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 and excludes periods of temporary absences as defined in 7(1)(b).
slide11

Example 2

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

1.2.05 – 31.10.05 In Malaysia 273 days

Determine the resident status of Mr. X for the YA 2005.

Answer: Resident by virtue of Section 7(1)(a) of ITA 1967 as Mr. X was in Malaysia for more than 182 days.

7 1 b of ita 1967 linked by

7(1)(b) of ITA 1967 – “Linked by”

  • In the year wherein residence status is being determined the individual is in Malaysia for less than 182 days; and;
  • The year being reviewed (X1) is connected to the previous year (X0);
  • Temporary absence extends from start of stay in 19X1 to 1.1.X1 (“link period”) or
  • Individual is in Malaysia on 1.1.X1 & 31.12.X0.
  • There are 182 or more consecutive days in X0 ending 31.12.X0 including periods of temporary absence (“connecting period”).
  • Aggregate of social visits in “linking period” and “connecting period” cannot exceed 14 days.
temporary absence

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.
slide16

Example 3

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

2004 1.7.2004-31.12.2004 184 days

2005 1.1.2005-31.1.2005 31 days

Determine his resident status for YA 2005.

slide17

Example 3

Mr. Y is resident for YA 2005 under section 7(1)(b) as period of less than 182 consecutive days in 2005 “linked by” more than 182 consecutive days in 2004.

slide18

Example 4

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

2004 1.7.2004-28.12.2004 181 days

29.12.2004-31.12.2004 3 days social visit

2005 1.1.2005-12.1.2005 12 days social visit

2005 13.1.2005-31.1.2005 19 days

Determine his resident status for YA 2005.

slide19

Example 4

Mr. Y is not resident for YA 2005 under section 7(1)(b) in spite of the fact that period of less than 182 days in 2005 is “linked by” more than 182 consecutive days in 2004 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.

7 1 b of ita 1967 linked to

7(1)(b) of ITA 1967 – “Linked to”

  • In the year wherein residence status is being determined the individual is in Malaysia for less than 182 days; and;
  • The year being reviewed (X1) is connected to the next year (X2);
  • Temporary absence extends from end of stay in 19X1 to 31.12.X1 (“link period”).
  • Individual is in Malaysia on 31.12.X1 & 1.1.X2.
  • There are 182 or more consecutive days in X2 starting 1.1.X2 including periods of temporary absence (“connecting period”).
  • Aggregate of social visits in “linking period” and “connecting period” cannot exceed 14 days.
slide21

Example 5

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

2004 1.1.2004-31.12.2004 31 days

2005 1.1.2005-3.7.2005 185 days

Determine his resident status for YA 2004.

slide22

Example 5

Mr. Y is resident for YA 2004 under section 7(1)(b) as period of less than 182 consecutive days in 2004 is “linked to” more than 182 consecutive days in 2005.

slide23

Example 6

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

2004 31.12.2004 1 day

2005 1.1.2005-31.3.2005 90 days

1.4.2005-2.4.2005 2 days

(Social visit outside Malaysia)

3.4.2005-19.6.2005 78 days

20.6.2005-1.7.2005 12 days

(Social visit outside Malaysia)

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168 days 14 days

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182 days

Determine his resident status for the YA 2004.

slide24

Example 6

Mr. Y is resident for YA 2004 under section 7(1)(b) as period of less than 182 consecutive days in 2004 is “linked to” 182 consecutive days in 2005 (upon taking into account the social visits).

slide25

Example 7

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

2004 1.12.2004-30.12.2004 30 days

31.12.2004 1 social visit in China

2005 1.1.2005-4.1.2005 4 social visit in China

5.1.2005-3.7.2005 181

Determine his resident status for the YA 2004.

slide26

Example 7

  • Resident for YA 2004 as:
  • Only in Malaysia for 30 days in 2004.
  • 1 day social visit in “linking period”.
  • 185 consecutive days in 2005 including social visits of 4 days.
  • Aggregate number of social visits in “linking period” and “connecting period” is only 5 days.
7 1 c of ita 1967

7(1)(c) of ITA 1967

In Malaysia for 90 days or more (not necessarily consecutive days) and was either resident or in Malaysia for 90 days or more in 3 out of the 4 immediately preceding basis years.

slide29

Example 8

An individual has the following residence history in Malaysia:

1.3.2001 – 20.3.2001 20 days

1.5.2002 – 15.8.2002 107 days

1.1.2003 – 30.9.2003 273 days

1.3.2004 – 31.10.2004 245 days

1.1.2005 – 20.4.2005 110 days

You are required to determine his residence status for the YAs 2001, 2002, 2003, 2004, and 2005.

slide30

Example 8

  • The individual was not a resident for the YAs 2001 and 2002.
  • As for the YAs 2003 and 2004, he was resident by virtue of Section 7(1)(a).
  • Finally, the individual was also resident for the YA 2005, by virtue of Section 7(1)(c). In 2005, 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 (2003 and 2004) or in Malaysia for more than 90 days (2002).
7 1 d of ita 1967

7(1)(d) of ITA 1967

  • Resident for the 3 immediately preceding basis years and for 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.
slide33

Example 9

Abu Nawas has the following residence history in Malaysia.

11.10.2001 – 31.12.2001 82 days

2002 Whole year

1.1.2003 – 30.9.2003 More than 182 days

1.4.2004 – 4.4.2004 4 days

1.4.2005 – 31.12.2005 More than 182 days

Advise Abu Nawas on his residence status for the YAs 2001, 2002, 2003, 2004 and 2005.

slide34

Example 9

Abu Nawas is a resident for all the said YAs. He is resident for 2002, 2003 and 2005, by virtue of Section 7(1)(a). As for 2001, he is resident as per Section 7(1)(b) while the resident status for 2004 comes about because of Section 7(1)(d).

slide36

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.

  • 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%.
slide38

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.
slide39

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.
slide40

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.
slide41

Withholding tax is applicable upon contract payment, interest, royalty, and section 4A income payments made to non-residents only.