Masters of Financial PlanningTaxation Planning
INDIVIDUAL RESIDENCE STATUS
By: Associate Professor Dr. GholamReza Zandi
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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