taxation chapter 2 residence status for individual
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Chapter 2: Residence Status for individual
NONRESIDENT
RESIDENT
Residence Status for Individual
Learning outcome:
• Determine the residence status of an individual; and(kenal pasti resident atau tidak)
1. Introduction
• Resident – preferential tax treatment; • Non resident individual suffers the maximum flat rate 26% (kena bayar tax pada kadar 26% - bayar tax tinggi)
2. Determination of residence status
• is purely “quantitative test”, (boleh dikira)• It is determined by reference of the number of days an individual person is present in Malaysia during a particular calendar year . (jumlah berapa hari dia berada di Malaysia mengikut tahun kalendar)
3. Section 7• Section 7 (1) of the act lays down four circumstances where an individual can be regarded as tax resident in Malaysia.
• There are: - S 7(1)(a) - S 7(1)(b) - S 7(1)(c) - S 7 (1)(d)
• Compulsory to follow the sequence (a) then (b)….. (c) and (d)• Do one by one …. TRY (a), (b), (c) then (d)….
No of days in month – 2014: not leap yearMonth No of days
Jan 31
Feb 28
March 31
April 30
May 31
June 30
July 31
August 31
Sept 30
Oct 31
Nov 30
Dec 31
Make sure NOT leap year = Year/4 = Exact number so the leap year = point number so not leap year
Section 7(1)(a)
Conditions
He is in Malaysia in that basis year for a period amounting in all to 182 days or more;(di Malaysia 182 hari atau lebih)
• Individual must be physically present in that calendar year amounting at least 182 days.(di Malaysia fizikal sekurang 182 hari)
• It can be single period or multiple periods. (satu tempoh atau pelbagai tempoh)
Single period
Multiple periods
31 Dec
x x x x x x x x x x x x x x x
1 Jan
Year 2013
≥ 182 days
31 Dec1 Jan
Year 2013
1 + 2+ 3 = ≥ 182 days
x x x x x x x x xx x x x x x x x x x x x x x x1 2 3
Example 2.1Abdul Ghani first arrived in Malaysia on 1.1.2014.His passport showed the following particulars of stays in Malaysia.
Days1.1.2014 – 31.5.2014 1511.6.2014 – 15.6.2014 15
16616.7.2014 – 4.8.2014 20
186
•Abdul Ghani will be a tax resident by virtue of s 7(1) (a) for 2014•However if he left Malaysia permanently on 15.6.2014, he would not be a tax resident as the 166 days did not fulfill the minimum requirement 182 days to qualify as a resident.(kalau Abdul Ghani tinggalkan Malaysia 15.6.2014 = 166 days, dia bukanResident sebab tak cukup 182 hari)
Example 2.2
James an Australian accountant, arrived in Malaysia on 1.1.2012. He left Malaysia permanently on 31.10.2013. James has the following records to stay:
2012 Numbers of days1.1.2012 – 31.3.2012 In M’sia 911.4.2012 – 13.4.2012 Seminar in Hong Kong 1314.4.2012 - 31.7.2012 In M’sia1091.8.2012 – 31.12.2012 In Hawai 153
20131.2.2013 – 31.10.2013 In M’sia273
Q: Determine James’ residence status for the YA 2012 and 2013 (Tentukan resident status tahun 2012 dan 2013)
Example 2.2 - Answer
2012 No. of days in M’siaSection1.1.2012 – 31.3.2012 9114.4.2012 - 31.7.2012 109Total in M’sia 2012 200 7(1)(a)
Resident
20131.2.2013 – 31.10.2013 273 7 (1)(a)
Resident
Because: 182 days or more in Malaysia
Section 7(1)(b)Understand this“linked by” or “linked to”
**Need to remember the details**
3.4 : Meaning of “TEMPORARY ABSENCE” only for S7(1)(b) ONLY (**)
A) Connected with his service in M’sia and owing to service matters or attending conferences or seminars or study abroad (no restriction numbers of day) [berkaitan dgn kerja di M’sia, kena kerja outstation (oversea) atau menghadiri seminar atau belajar short term];
B) Owing to ill-health involving himself or a member of his immediate family*; (Sakit – pembayar cukai atau keluarga terdekat)*immediate family*; Spouse, children and parents (isteri/suami, anak, ibu-bapa) , Brothers and sisters NOT included (Kakak dan abang tidak termasuk)
C) In respect of “social visits” not exceeding 14 days in the aggregate. (lawatan sosial tidak melebihi 14 hari keseluruhannya)
Section 7(1)(b) – “linked to” or “linked by” • TWO (2) ways individual can be tax resident. a) in Malaysia in January; or b) in Malaysia in December
LINKED BY (bersambung tahun sebelumnyer)
Jan 1 1.1.2014
YEAR 2013 YEAR 2014
x x x x x x x x x x x x x x x x x x x x x x
Linked by
Resident status in question xxx
≥ 182 days
• In the case of January, the number of days in January 2014 (short period) is linked by another period of 182 days or more consecutive days (long period) in the immediately preceding YA 2013. • Kalau Januari 2014 (pendek) kena tengok tahun sebelumnyer iaitu tahun 2012 (panjang).
LINKED BY (bersambung tahun sebelumnya)• Permitted “TEMPORARY ABSENCE” shall be taken to form part of long period or short period if he is in Malaysia immediately prior to or after that temporary absence. (DIBENARKAN temporary absence sama ada tempoh panjang atau pendek JIKA dia berada di Malaysia immediately sebelum atas selepas temporary absence );
YA 2002• With effect from YA 2002, the rule to have 31.12.20XX and 1.1.20XX to be in Malaysia has been abolished. (bermula dari YA 2002, undang-undang berada di Malaysia pada hujung tahun 31.12.20XX dan 1.1.20XX telah DIMANSUHKAN).TIDAK PERLU BERADA DI Malaysia PADA 31.12.XX AND 1.1.XX
LINKED BY (bersambung tahun sebelumnya)• To identify whether residence status for YA2014 under S7(1)(b) is to establish: (MRNGENAL PASTIKAN STATUS RESIDENCE YA2014 di mana syarat2 S7(1)(b) – linked by dipenuhi)
(a) Physical presence of at least one day in January 2014 (short period)Berada di Malaysia sekurang2nya satu hari pada Januari 2014 (tempoh pendek).
(b) A continuous period of at least 182 days from 31.12.2013 (long period) [tempoh berterusan sekurang2nya 182 hari dari 31.12.2013 (tempoh panjang)].
(c) Should there are any temporary absence found in the short period or long period, it will be considered as physical presence in M’sia provided it satisfies the condition in temporary absence.(jika ada temporary absence terdapat sama ada dlm tempoh pendek atau panjang, dikira “BERADA” di Malaysia sekiranya memenuhi syarat temporary absence).
Example 2.3 – “Linked by”
Low is in Malaysia for the following periods:
2012 31.3.2012– 28.12.2012 (long period) (/) > 182 days
29.12.2012– 1.1.2013 Temporary absence (allowable)
2013 2.1.2013 – 5.1.2013 (short period) (to find out)
Question: Residence status for YA 2012 and 2013.
2012 – Residence; S7(1)(a) more 182 days2013 – Residence; S7(1)(b) linked by – all
prerequisite satisfiedi. The number of days in 2013 is linked by 2012;ii. There is at least 182 consecutive days in 2012;iii. He is in Malaysia immediately prior to 29.12.2012
and after 1.1.2013 temporary absence.
Note: With effect from YA2002, the physical presence 31.12 and 1.1 are
no longer required to establish the link period.
Linked to
• Short period: 2013 and long period: 2014• Long period : 182 or more days in Malaysia and temporary absence in short period or long period are allowable.
Jan 1 31.12.2012YEAR 2013 YEAR 2014
x x x x x x x x x x x x x x x x x x x x x x
Linked to
Resident status in questionxxxxx
Dec 31/2013
≥ 182 days
Example 2.4 – “linked to”
Mandy is in Malaysia for the following periods:2013 4.12.2013 – 24.12.2013 (short
period)2013/2014 25.12.2013 – 7.1.2014 (14 days -
temporary absent)2014 8.1.2014 – 31.8.2014 (long period)
Question:Residence status for YA 2013 and 2014
2013 – Residence; S7(1)(b) a) The number of days in 2013 is linked to
2014; b) There is at least 182 consecutive days in 2014; c) Temporary absence was allowable (14 days) - privisio
d) Mandy is in Malaysia immediately prior to 25.12.2013 and after
7.1.2014 that temporary absence.
2014 – Residence; S7(1)(a)
PLEASE STUDYEXAMPLES – 2.9 and 2.10
Example 2.5 – “linked to”Soo Pin first arrived in Malaysia on 1.12.2012 and recorded the following periods of stay:
Days in Malaysia
2012 1.12.2012-30.12.2012 30
31.12.2012 1 Social visit in China
2013 1.1.2013-4.1.2013 4 Social visit in China
5.1.2013-3.7.2013 180
Question: Determine whether Soo Pin tax resident for YA 2012 and 2013
2012: Soo Pin is residence S7(1)(b) a) long period in 2013 more than 182 days (180 days + 4 days social visit considered
in Malaysia @@) b) Temporary absence on 31.12.2011– 4.1.20112 ALLOWABLE##
c) In Malaysia immediate prior to 31.12.2011 and after 4.1.2013.
2013: Soo Pin is NOT residence because Not satisfied S7(1)(a) and S7(1)(b) for S7(1)
(a), temporary absence NOT apply here.
Section 7(1)(c)
To qualify as a resident in 2014 under S 7(1)(c):PRE-REQUISITE (PRA SYARAT)
i) He must be in Malaysia for a period or periods of 90 days or more in 2014; and
ii) 3 out of 4 immediately preceding years (2010 – 2013) is either:a) a resident; OR (atau) / salah satub) in Malaysia for a period or periods of 90 days or more
Residence status in question
x x x x x x x x
1/1 31/12 1/1 31/12 1/1 31/12≥ 90 days
3 out of 4Immediate preceding years
20142010 2011 2012 2013
Example
YA No of days in Malaysia Residence2011 92 NR2012 187 R S 7(1)(a)2013 200 R S 7(1)(a)2014 99 ???????
Determine Resident or no in 2014??
Example
YA No of days in Malaysia Residence2011 92 NR2012 187 R S 7(1)(a)2013 200 R S 7(1)(a)2014 99 R S 7(1)(c)
2014: Yes, resident under S 7(1)(c)
Reason:Fulfilled1) 90 days in Malaysia2) For 2011-2012 (He is in Malaysia
2010: > 90 days2011: Residence2012: Residence
Fulfilled / Memenuhi – ALL RESIDENT UNDER S7(1)(C)1) 90 days in Malaysia – year you want to determine residence status /
tahun yang kamu mahu kenal pasti status residen)Possibility / Kemungkinan
2) For 2011-2012 (He is in Malaysia)2011: > 90 days2012: Residence2013: Residence; OR
2) For 2011-2012 (He is in Malaysia)2011: > 90 days2012: > 90 days2013: > 90 days: OR
2) For 2011-2012 (He is in Malaysia)2011: > 90 days2012: > 90 days2013: Residence : OR
2) For 2011-2012 (He is in Malaysia)2011: > 90 days2012: Residence 2013: > 90 days: OR
2) For 2011-2012 (He is in Malaysia)2011: Residence2012: > 90 days2013: Residence ; OR
2) For 2011-2012 (He is in Malaysia)2011: Residence2012: > 90 days2013: > 90 days : OR
2) For 2011-2012 (He is in Malaysia)2011: Residence2012: Residence2013: > 90 days : OR
2) For 2011-2012 (He is in Malaysia)2011: Residence2012: Residence2013: Residence
Example 2.11Fei Wong’s pattern of stay in Malaysia is as follows:
Days2010 1 Jan 2010 – 31 March 2010 90
16 Apr 2010 – 31 July 2010 107197
2011 1 Dec 2011 – 31 Dec 2011 31
2012 1 Jan 2012 – 31 March 2012 911 Apr 2012 – 16 Apr 2012 - (Seminar in Hawaii – 16
days)
17 Apr 2012 – 17 July 2012 92182
2013 1 May 2013 – 10 June 2013 411 July 2013 – 31 July 2013 311 Sept 2013 – 20 Sept 2013 20
92Required:Determine residence status 2010, 2011, 2012 and 2013
S7(1)(a)
S7(1)(b) – linked to
S7(1)(a)
“S7(1)(c)”
AnswerHer residence status would be determined as follows:
YA Explanation2010 Resident - S 7(1)(a)
2011 Resident - S 7(1)(b)i) 1 Dec 2011 – 31 Dec 2011 is link to
2012ii) A consecutive of 182 days or more
basis year 2012. The temporary absence falls into the provisio (i) of S7(1)(b)
2012 Resident – S 7(1)(a)Physical presence of at least 182 days.The temporary absence of 16 days is
NOT included.
2013 Resident – S7(1)(c)i) minimum period/period of 90 days (the
90 days need not be consecutive),ii) 3 immediately preceding years were
resident.
Section 7(1)(c)“Study”#2.12 and 2.13#
Section 7(1)(d)
To qualify as a resident in 2013 under S 7(1)(d)PRE-REQUISITE
i) He must be resident in the following year 2014 and
ii) 3 immediate preceding years (2010 to 2012) must also be a resident
20142010 2011 2012 2013Resident Resident Resident Resident
Resident status in question
Example – S 7(1)(d)YA No of days in Malaysia Residence status (R)2010 50 R S 7(1)(b)2011 187 R S 7(1)(a)2012 200 R S 7(1)(a)2013 0 ???????2014 199 R S 7(1)(a)
Determine Resident or not for 2013? ??I am soconfused
Example – S 7(1)(d)YA No of days in Malaysia Residence (R)2010 50 R S 7(1)(b)2011 187 R S 7(1)(a)2012 200 R S 7(1)(a)2013 0 R S 7(1)(d)2014 199 R S 7(1)(a)
S 7(1)(d)
Section 7(1)(d)“Study”#2.14, 2.15, 2.16 and 2.17#
S7(1B) “BIG B” Malaysian citizen exercising employment in public service
With effect from YA 2009, Malaysian citizena) Exercising employment in the public services or
statutory authorities outside Malaysia, or (Government staff work oversea)
b) Employed in public services or statutory authority but attending any course of studying in any institution or profesional body outside Malaysia which is fully sponsored by the employer. (Government staff training overseas)
• IS DEEMED RESIDENT for the basis year for that particular YA or subsequent basis year when he/she is NOT in Malaysia(dikira resident Malaysia walaupun badannyer tidak berada di Malaysia)
• For government staff enjoy scaled rate rather than flat rate.(Bila resident bayar tax ikut scaled rate bukan flat rate)
Summary residence status
Section 7
Criteria Notes
1 (a) a) At least 182 daysb) Can be consecutive or not
consecutive
Physical presence is required
1 (b) 2 scenarios:a) (i) Physical presence in January
(need not be 1.1) (ii) ≥ 182 consecutives days in
previous year (iii) Permitted temporary absence
b) (i) Physical presence in Dec (need not be 31.12)
(ii) ≥ 182 consecutives days in previous year
(iii) Permitted temporary absence
Short period
Long period
Short period
Long period
1 (c) a) Physical present in Malaysia ≥ 90 days in that yearb) 3 out of 4 immediate preceding yearsEither (i) resident or (ii) 90 days
Need not be consecutive periods
Need not be consecutive periods
Summary residence status
Section 7
Criteria Notes
1 (d) a) 3 immediate preceding years is resident
b) Following year is resident
Need not be physically present in that year
Distinction between resident and non-resident individual (the law is stated for YA 2011)
Resident Non-resident
i) Scope of charge - income accrued or
derived in Malaysia - Foreign source
income received in Malaysia from outside Malaysia
- Tax
- Exempted (para 28, Sch 6)
- Tax
- Exempted (para 28, Sch 6)
ii) Income tax rate Scaled rate from 0-26%
Flat rate of 26%
iii) Individual tax relief (Section 46 to 50)
Entitled No entitled
iv) Employment income derived from Malaysia
Taxable Exempted if he satisfies the 60 days test (Para 21, Sch 6)
v) Rebate for chargeable income ≤ RM35,000
Yes No
vi) Pension income derived from M’sian employment paid by approved scheme
Exempted (Para 30, Sch 6)
Exempted (Para 30, Sch 6)
Distinction between resident and non-resident individual (the law is stated for YA 2011)
Resident Non-resident
vii) Royalties from literacy or artistic work
Exempted (Para 32, 32A, 32B)
No
viii) Income from cultural performance approved by Minister
Exempted (Para 32C)
No
ix) Income from musical composition
Exempted (Para 32D)
No
x) Withholding tax on contract payment, interest, royalty, technical fees, S4A payment and other income in S4(f)
Not applicable Applicable between 10% to 15%
xi) Interest income from financial institution
Exempted [by Income Tax (Exemption) (No.7) Order 2008. w.e.f 30.8.2008)
Exempted (Para 33, Sch 6)
xii) Fee or honorarium in respect or services provided for validation, moderation or accreditation of franchised educational programmes (Para 32E)
Exempted Exempted
Residence status - IndividualResidence
Yes Noi) Relief and rebatesii) Scaled rates 0% - 26%iii) Exemption
i) Flat rate of 26%
Section 7(1)(a)i) Current calendar yearii) Physical presenceiii) Min 182 daysiv) Period/periods
Section 7(1)(b)i) Current calendar yearii) Min 1 day (short
period)iii) the day
Section 7(1)(c)i) Current calendar yearii) Min 90 days period/siii) 3 out of 4 immediate
preceding years
Section 7(1)(d)i) Current calendar year not
requiredii) 3 immediate preceding years =
residentiii) Resident for the following yeariv) Apply resrospectively
Resident or 90 days period/s
Link by or Link to1.1.2011 31.12.2011and 31.12.2010 and 1.1.2012
A period of 182 or more consecutive days (long
period) 2010 2012
Temporary absence from part of the 182 consecutive days and short period.i) Connecting with service matter - attending conference - study abroad - seminarii) Ill health
- himself - immediate family
iii) Social visit ≤ 14 days (in aggregate)
- exclude holidays / vacations
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