Masters of Financial PlanningTaxation Planning

INDIVIDUAL RESIDENCE STATUS

By: Associate Professor Dr. GholamReza Zandi

zandi@segi.edu.my

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Residence Status

a) Residence status of an individual is determined by sec 7 ITA.

b) It is a quantitative test, that is, it is determined by the number

of days an individual is physically present in Malaysia.

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Section 7

Commencement date of individual’s employment and the individual’s

nationality are irrelevant to his or her residence status. Only physical

presence in Malaysia for a day/part of a day is relevant.

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Section 7 (cont’d)

Sec. 7 (1) - An individual is resident in Malaysia for a basis year for a YA if

any one of the following applies :

a) He is in Malaysia for a period or periods amounting in all to 182 days

or more (covers both consecutive and/or cumulative period of stay); or

b) He is in Malaysia for less than 182 days in the basis year and it is

linked by/or to another period of 182 or more consecutive days

throughout which he is in Malaysia in the previous year or the following

year; or

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Section 7 (cont’d)

c) He is in Malaysia for a total of 90 days or more in the basis year and

in any 3 out of the 4 immediately preceding basis years, he was

either:

o resident in Malaysia (under any of the tests); or

o in Malaysia for 90 days or more in the basis years in question,

i.e. in 3 out of the 4 preceding basis years; or

d) He is not resident in Malaysia in the basis year but he is resident in

the following year and has been resident for the immediately

preceding 3 years.

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Deemed to be derived from Malaysia

Gross Income in respect of gains or profits from employment is deemed

derived in Malaysia if it is:

a) For any period during which the employment is exercised in Malaysia; or

b) For any period of leave that was attributable to the exercise of the

employment in Malaysia; or

c) For any period during which the employee performs outside Malaysia

duties incidental to the exercise of the employment in Malaysia;

d) Directors of a Malaysian resident company operated by a Malaysian

resident; or

e) Those working on a ship/aircraft.

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60-Day Rule to Determine Taxability

a) Non-resident’s income from employment exercised in

Malaysia is exempt from tax provided he is not employed in

Malaysia for more than 60 days in any basis year (Para 21

Schedule 6).

b) Income of non-resident individual not exempt under Para 21

if the employment in Malaysia was exercised for more than

60 days or is income from employment exercised by a public

entertainer (para 22 Schedule 6).

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Advantages of Resident Status

a) Taxed at scale rates from 0% to 26% instead of flat rate of

26%.

b) Entitled to personal reliefs

c) Entitled to rebate of RM400 if chargeable income is less

than RM35,000

d) Certain exemptions available to residents

e) Withholding tax applicable to non-residents.

The End