TS 2 Resident status of individuals and companies.pdf

TS 2 Resident status of individuals and companies.pdf

1. Chapter 2:
Resident Status for individuals
and Companies

2. Resident Status for Individual and company
Learning outcome:
•Determine the resident status of an individual and a
company

3. 1. Introduction
•Resident –preferential tax treatment;(taxed on scale
rate)
•Non resident individual suffers the maximum flat rate
30% (wefYA 2020)
2. Determination of resident status
•
ispurelya“quantitativetest”,
•Itisdeterminedbyreferenceofthenumberofdaysan
individualispresentinMalaysiaduringaparticularcalendar
year.

4. 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)….

5. Section7(1)(a)Conditions
Heisin
Malaysiain
thatbasisyear
foraperiod
amountingin
allto182days
ormore;
•Individualmustbephysicallypresentinthat
calendaryearamountingtoatleast182days.
•Itcanbesingleperiodormultipleperiods.

6. Single period
Multiple periods
31 Dec
x xxxxxxxxxxxxxx
1 Jan
Year 2019
≥ 182 days
31 Dec
1 Jan
Year 2019
1 + 2+ 3 = ≥ 182 days
x xxxxxxxxx xxxxxx xxxxxxxx
1 2 3

7. Example 2.1
Abdul Ghani first arrived in Malaysia on 1.1.2019.
His passport showed the following particulars of stays in Malaysia.
Days
1.1.2019 –31.5.2019 151
1.6.2019 –15.6.2019 15
166
16.7.2019 –4.8.2019 20
186

8. Answer to 2.1
•Abdul Ghani will be a tax resident by virtue
of s 7(1) (a) for 2019
•However if he left Malaysia permanently on
15.6.2019, he would not be a tax resident as
the 166 days did not fulfill the minimum
requirement 182 days to qualify as a
resident.

9. Example 2.2
James an Australian accountant, arrived in Malaysia on 1.1.2018. He left Malaysia
permanently on 31.10.2019. James has the following records of stay:
2018 Numbers of days
1.1.2018 –31.3.2018In M’sia 91
1.4.2018 –13.4.2018Seminar in Hong Kong 13
14.4.2018 -31.7.2018In M’sia 109
1.8.2018 –31.12.2018In Hawai 153
2019
1.2.2019 –31.10.2019In M’sia 273
Q: Determine James’ residence status for the YA 2018 and 2019

10. Example 2.2 -Answer
2018 No. of days in M’sia Section
1.1.2018 –31.3.2018 91
14.4.2018 -31.7.2018 109
Total in M’siafor 2018 200 7(1)(a)
Resident
2019
1.2.2019 –31.10.2019 273 7 (1)(a)
Resident
Because: 182 days or more in Malaysia

11. Section 7(1)(b)
Understand this
“linked by” or “linked to”
**Need to remember the details**

12. 3.4 : Meaning of “TEMPORARY ABSENCE” only
for S7(1)(b) ONLY (**)
A)ConnectedwithhisserviceinM’siaandowingtoservice
mattersorattendingconferencesorseminarsorstudy
abroad(norestrictiononnumbersofday)
B)Owingtoill-healthinvolvinghimselforamemberofhis
immediatefamily*;
*immediatefamily*;Spouse,childrenandparents,Brothers
andsistersNOTincluded
C)Inrespectof“socialvisits”notexceeding14daysinthe
aggregate.

13. Section 7(1)(b) –“linked to” or “linked by”
LINKED BY
Jan 1 1.1.2019
YEAR 2018 YEAR 2019
x xxxxxxxxxxxxxxxxxxxxx
Linked by
Resident status in question
xxx
≥ 182 days
•In the case of January, the number of days in January 2019 (short period) is
linked by another period of 182 days or more consecutive days (long period)
in the immediately preceding YR

14. LINKED BY
•Permitted“TEMPORARYABSENCE”shallbetakentoformpart
oflongperiodorshortperiodifheisinMalaysiaimmediately
priortoorafterthattemporaryabsence.
YA2002
•WitheffectfromYA2002, theruletohave31.12.20XXand
1.1.20XX tobeinMalaysiahasbeenabolished.

15. LINKED BY
•ToidentifywhetherresidentstatusforYA2019underS7(1)(b)isto
establish:
(a)PhysicalpresenceofatleastonedayinJanuary2019(short
period)
(b)Acontinuousperiodofatleast182daysfrom31.12.2018
(longperiod)
(c)Shouldthereareanytemporaryabsencefoundintheshort
periodorlongperiod,itwillbeconsideredasphysical
presenceinM’siaprovideditsatisfiestheconditionin
temporaryabsence.
.

16. Example 2.3 –“Linked by”
Low is in Malaysia for the following periods:
2018 31.3.2018– 28.12.2018 (long period) (/) > 182 days
29.12.2018– 1.1.2019 Temporary absence (allowable)
2019 2.1.2019 –5.1.2019 (short period) (to find out)
Question: Residence status for YA 2018 and 2019.

17. Ans
2018 –Resident; S7(1)(a) more than 182 days
2019 –Resident; S7(1)(b) linked by –all
prerequisite satisfied
i.The number of days in 2019 is linked by 2018;
ii.There is at least 182 consecutive days in 2018;
iii.
He is in Malaysia immediately prior to
29.12.2018 and after 1.1.2019 temporary
absence.
•Note: With effect from YA2002, the physical presence 31.12 and 1.1 are no
longer required to establish the link period.

18. 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 31.12.2014
YEAR 2013 YEAR 2014
x xxxxxxxxxxxxxxxxxxxxx
Linked to
Resident status in question
xxxxx
Dec 31/2013
≥ 182 days

19. 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: Determine Residence status for YA 2013 and 2014

20. AnsMandy
2013 –Resident; 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)
d) Mandy is in Malaysia immediately prior to
25.12.2013 and after 7.1.2014 that
temporary absence.
2014 –Resident; S7(1)(a)

21. Example 2.5 –“linked to”
SooPin 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 SooPin tax resident for YA 2012 and 2013

22. AnsSooPin
2012: SooPin is resident per 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 31.12.2012– 4.1.2013
is ALLOWABLE
c) In Malaysia immediate prior to 31.12.2012 and after
4.1.2013.
2013: SooPin is NOT a resident because
conditions in S7(1)(a) and S7(1)(b ) are not satisfied
For S7(1)(a), temporary absence
DOES NOT apply here.

23. Section 7(1)(c)
To qualify as a resident in 2014 under S 7(1)(c):
PRE-REQUISITE
i)He must be in Malaysia for a period or periods of 90 days or
more in 2014; and
ii) any 3 out of 4 immediately preceding years(2010 –2013) is
either:
a) a resident; OR) b) in Malaysia for a period or periods of 90 days or more
Resident status in question
x xxxxxxx
1/1 31/12 1/1 31/12 1/1 31/12
≥ 90 days
3 out of 4
Immediate preceding years
20142010 2011 2012 2013

24. Example
YA No of days in Malaysia Resident
2011 92 NR
2012 187 R S 7(1)(a)
2013 200 R S 7(1)(a)
2014 99 ???????
Determine Resident status for 2014??

25. Example
YA No of days in Malaysia Resident
2011 92 NR
2012 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:
Fulfilled
1)At least 90 days in Malaysia in 2014
2)For 2011-2013 (He is in Malaysia
2011: > 90 days 2012: Resident 2013: Resident

26. Fulfilled –ALL RESIDENT UNDER S7(1)(C)
1)90 days in Malaysia – year you want to determine residence status
Possibility
2)For 2011-2012 (He is in Malaysia)
2011: > 90 days
2012: Resident
2013: Resident; OR
2)For 2011-2012 (He is in Malaysia)
2011: > 90 days
2012: > 90 days
2013: > 90 days: OR
2)For 2011-2012 (He is in Malaysia)
2011: > 90 days
2012: > 90 days
2013: Resident : OR
2)For 2011-2012 (He is in Malaysia)
2011: > 90 days
2012: Resident
2013: > 90 days: OR
2)For 2011-2012 (He is in Malaysia)
2011: Resident
2012: > 90 days
2013: Resident; OR
2)For 2011-2012 (He is in Malaysia)
2011: Resident
2012: > 90 days
2013: > 90 days : OR
2)For 2011-2012 (He is in Malaysia)
2011: Resident
2012: Resident
2013: > 90 days : OR
2)For 2011-2012 (He is in Malaysia)
2011: Resident
2012: Resident
2013: Resident

27. Example 2.11
FeiWong’s pattern of stay in Malaysia is as follows:
Days
20101 Jan 2010 –31 March 2010 90
16 Apr 2010 –31 July 2010 107
197
2011 1 Dec 2011 –31 Dec 2011 31
2012 1 Jan 2012 –31 March 2012 91
1 Apr 2012 –16 Apr 2012 -
(Seminar in Hawaii – 16 days)
17 Apr 2012 –17 July 2012 92183
20131 May 2013 –10 June 2013 41
1 July 2013 –31 July 2013 31
1 Sept 2013 –20 Sept 2013 20
92
Required:
Determine resident status 2010, 2011, 2012 and 2013

28. Answer
Her residence status would be determined as follows:
YA Explanation
2010 Resident - S 7(1)(a)
2011 Resident - S 7(1)(b)
i) 1 Dec 2011 –31 Dec 2011 is link to 2012
ii) 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 182 days or more
The temporary absence of 16 days is NOT
included.
2013 Resident – S7(1)(c)
i) minimum period/periods of 90 days (the 90 days
need not be consecutive),
ii) 3 immediately preceding years were resident.

29. 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
2014
2010 2011 2012 2013
ResidentResidentResident Resident
Resident status in question

30. Example –S 7(1)(d)
YA No of days in Malaysia Resident 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 status for 2013?
??
I am so
confused

31. 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)

32. S7(1B) “BIGB”
Malaysiancitizenexercisingemploymentinpublicservice
WitheffectfromYA2009,Malaysiancitizen
a)Exercisingemploymentinthepublicservicesorstatutory
authoritiesoutsideMalaysia,or(Governmentstaffworkoversea)
b)Employedinpublicservicesorstatutoryauthoritybutattending
anycourseofstudyinginanyinstitutionorprofesionalbody
outsideMalaysiawhichisfullysponsoredbytheemployer.
(Governmentstafftrainingoverseas)
•
ISDEEMEDRESIDENTforthebasisyearforthatparticular
YAorsubsequentbasisyearwhenhe/sheisNOTinMalaysia
Forgovernmentstaffenjoyscaledrateratherthanflatrate.
S7(1A) “BIGA”
PartofadayisconsideredasONEdaytodetermineresident
status

33. Resident status of a company
(S8 of ITA ‘67)
Essential factors include -:
•Management and control
•Any ONEof its business affairs
•At any one time
•During the basis year
•Exercised in Malaysia

34. Management and control
The place where directors meet
for decision making

35. Irrelevant factors for determining resident
status of a company
•Place of incorporation or registered office
•Place of maintaining accounting records
•Directors resident status
•Control by shareholders

36. Move to
Chapter 3