chap 2 - residence status

CHAPTER 2RESIDENCE STATUS FOR

INDIVIDUALSLearning objective:

Understand The Concept Of Residence Status For Individuals. Residence Status Applied Under Section 7 (1) Of Ita 1967. Able To Differentiate Four (4) Sets Of Circumstances To Be A Resident Under Section 7 (1) Of ITA 1967. Benefits Of Having A Residence Status.

1.0 INTRODUCTION

•The concept of ‘resident’ status is important – determine chargeability of a person on income earned and received.•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 0-25%. As for non-resident individuals they are subject to a flat rate of 25%.

2.0 DETERMINATION OF RESIDENCE STATUS

•The ITA 1967 uses a quantitative test in determining the residence of an individual taxpayer – computed number of days present in Malaysia.

•Ascertained by reference to the number of days an individual was in Malaysia by virtue of Section 7(1) ITA 1967.

•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.

2.0 DETERMINATION OF RESIDENCE STATUS

7(1)(a): >=182 days

7(1)(b): <182 days, but forms part of period of more than 182 consecutive days,

before or after

7(1)(c): >= 90 days + Resident or >= 90days

for 3 of 4 preceding basis years

7(1)(d): Resident for 3 preceding basis years +

Resident for following basis year

No

No

No

No

Non-ResidentResident

Yes

Yes

Yes

Yes

Residence Status for Individuals

2.1 SECTION 7(1)(A) OF ITA 1967

Section 7(1)(a) – In Malaysia for 182 days or more in a Basis Year•Example 2.1.1Haris was in Malaysia for the following periods:1/1/2014 to 31/10/2014 = 304 days ≥ 182 days1/1/2015 to 31/5/2015 = 151 days1/9/2015 to 30/11/2015 = 91 days

Haris qualifies as a tax resident for the Year of Assessment 2014 and 2015 as the number of days in Malaysia amounted to 182 days or more in each basis year.

242 days ≥ 182 days


•Example 2.1.2Aaron was in Malaysia for the following periods:1/7/2013 to 31/12/2013 = 184 days ≥ 182 days1/2/2014 to 28/7/2014 = 178 days ≤ 182 days1/3/2015 to 31/10/2015 = 245 days ≥ 182 days

Aaron qualifies as a tax resident for the Year of Assessment 2013 and 2015 but not for YA 2014 because total number of days he was in Malaysia less than 182 day.


•Exercise 2.1.aMr. Don recorded the following periods of stay in Malaysia:1.4.2015 - 30.6.2015 In Malaysia 91 days1.7.2015 – 31.7.2015 Seminar in Hong Kong 31 days1.8.2015 – 30.9.2015 In Malaysia 61 days

Determine the resident status of Mr. Don for the YA 2015.


•Exercise 2.1.aMr. Don recorded the following periods of stay in Malaysia:1.4.2015 - 30.6.2015 In Malaysia 91 days1.7.2015 – 31.7.2015 Seminar in Hong Kong 31 days1.8.2015 – 30.9.2015 In Malaysia 61 days

Determine the resident status of Mr. Don for the YA 2015.Solution: Non Resident <182 days


Table for number of days in a month:MONTH DAYS

January 31

February 28/29

March 31

April 30

May 31

June 30

July 31

August 31

September 30

October 31

November 30

December 31

TOTAL IN A YEAR 365/366

2.2 SECTION 7(1)(B) OF ITA 1967

Section 7(1)(b) – In Malaysia for less than 182 days in a Basis YearIf an individual can’t be resident in Sec 7(1)(a), then he may qualify under Sec 7(1) (b).There are 2 circumstances where an individual can be regarded as tax resident:i. In Malaysia for less than 182 days and that period is linked by a period of 182 consecutive days or more (immediate preceding year).

Jan1 ≥ 182 days

Residence status in question

1/1/2015

Year 2015Year 2014


ii. in Malaysia for less than 182 days and that period is linked to a period of 182 consecutive days or more (immediate following year).

Jan1≥ 182 days


31/12/2015

Year 2015Year 2014Dec 31


‘Temporary absence’ would constitute part of the 182 consecutive days but it cannot form the ‘link’ period. There must be a physical present in two days in order to establish the ‘link’ requirement. These temporary absence are:i.the absence is connected with the employee’s service in Malaysia and owing to service matter or attending conferences or seminars or study abroad.ii.the absence is owing to ill-health involving himself or a member of his immediately family; oriii.the absence is in respect of social visits not exceeding 14 days in the aggregate


In year of review in Malaysia for less than 182 days

Year under review is connected to previous or following year

182 or more consecutive days (including temporary absence) in previous or following year

Social visits <= 14 days

Yes

Resident via 7(1)(b)Not Resident via

7(1)(b)

No

No

No

No

Yes

Yes

Yes

Section 7(1)(b) of ITA 1967

•Example 2.2.1Mathan was in Malaysia for the following periods:

1/10/1999 to 31/12/1999 = 92 days ≤ 182 days1/1/2000 to 31/8/2000 = 243 days ≥ 182 days1/1/2001 to 28/2/2001 = 59 days ≤ 182 days1/1/2002 to 31/5/2002 = 151 days ≤ 182 days1/9/2002 to 31/12/2002 = 122 days ≤ 182 days1/8/2003 to 31/8/2003 = 31 days ≤ 182 days


•Solution :YA Basis Year No. of

DaysStatus and

Section2000(PYA) 1999 92 R – Sec 7(1)(b)

2000 (CYA) 2000 243 R – Sec 7(1)(a)

2001 2001 59 NR

2002 2002 273 R – Sec 7(1)(a)

2003 2003 31 NR


•Example 2.2.2Habib was in Malaysia for the following periods:

1/6/2014 to 31/10/2014 = 153 days ≤ 182 days11/11/2014 to 31/12/2014 = 51 days ≤ 182 days1/1/2015 to 28/2/2015 = 59 days ≤ 182 days

From 1 November to 10 November 2014, he was away for social visits.


•Example 2.2.2Habib was in Malaysia for the following periods:

1/6/2014 to 31/10/2014 = 153 days ≤ 182 days11/11/2014 to 31/12/2014 = 51 days ≤ 182 days1/1/2015 to 28/2/2015 = 59 days ≤ 182 days

From 1 November to 10 November 2014, he was away for social visits.

YA No. of Days Status and Section

2014 204 R – Sec 7(1)(a)2015 59 R – Sec 7(1)(b)


•Exercise 2.2.a2.2 SECTION 7(1)(B) OF ITA 1967

YA Period of Stay in Malaysia

2014 1/2/2014 to 31/3/2015 =59 days1/6/2014 to 30/12/2015 = 213 days31/12/2015 – social visit in Singapore

2015 1/1/2011 to 31/1/2011 = 30 days

Solution: YA 2014 – Resident Sec 7(1) (a) YA 2015 – Resident Sec 7(1) (b) linked by


2014 1/2/2014 to 31/3/2014 =59 days1/6/2014 to 30/12/2014 = 213 days31/12/2014 – social visit in Singapore

2015 1/1/2015 to 31/1/2015 = 30 days

2.2 SECTION 7(1)(B) OF ITA 1967•Exercise 2.2.a


•Exercise 2.2.b


2014 1/2/2014 to 30/4/2014 = 89 days1/7/2014 to 30/12/2014= 184 days

2015 1/1/2015 to 3/1/2015 = social visit in Hong Kong4/1/2015 to 31/1/2015 = 28 days


•Exercise 2.2.b

YA Period of Stay in Malaysia2014 1/2/2014 to 30/4/2014 = 89 days

1/7/2014 to 30/12/2014= 184 days

2015 1/1/2015 to 3/1/2015 = social visit in Hong Kong4/1/2015 to 31/1/2015 = 28 days

Solution: YA 2014 – Resident Sec 7(1) (a) YA 2015 – Resident Sec 7(1) (b) linked by

2.3 SECTION 7(1)(C) OF ITA 1967

Section 7(1)(c) – In Malaysia for 90 days or more in a Basis Year

To qualify as a resident under Sec 7(1)(c):i.he must be in Malaysia for a period or periods amounting to 90 days or more; ANDii.3 out of 4 immediately preceding basis year is EITHER; (a) a resident; or(b) in Malaysia for a period or periods of 90 days or more



20112012201320142015

1/4/2011 to 30/9/20111/1/2012 to 30/3/20121/2/2013 to 31/12/20131/4/2014 to 30/10/20141/8/2015 to 31/10/2015

Example 2.3.1Chua was in Malaysia for the following periods:


YA No. of Days Status and Section2011 183 R – Sec 7(1)(a)

2012 89 NR

2013 334 R – Sec 7(1)(a)

2014 214 R – Sec 7(1)(a)

2015 92 R – Sec 7(1)(c)

Solution:Resident status of Chua will be as follows:


YA No. of days2012201320142015

91909291

Example 2.3.2Maria was in Malaysia for the following number of days:


YA No. of days2012201320142015

91909291

YA No. of days Status and Sections2012201320142015

91909291

NRNRNRR – Sec 7(1)(c)

Example 2.3.2Maria was in Malaysia for the following number of days:



20112012201320142015

1/6/2011 to 31/12/2011 1/1/2012 to 25/2/201229/1/2013 to 30/4/20131/3/2014 to 31/5/20141/1/2015 to 31/8/2015

Example 2.3.3Michelle has the following record of stay in Malaysia:



2012 56 R – Sec 7(1)(b)

2013 92 NR

2014 92 R – Sec 7(1)(c)

2015 243 R – Sec 7(1)(a)

Solution:Resident status of Michelle will be as follows:

2.3 SECTION 7(1)(C) OF ITA 1967Exercise 2.3.a

Jannah has the following residence history in Malaysia:1.3.2011 – 20.3.2011 20 days1.5.2012 – 15.8.2012 107 days1.1.2013 – 30.9.2013 273 days1.3.2014 – 31.10.2014 245 days1.1.2015 – 20.4.2015 110 days

You are required to determine his residence status for the YA 2011, 20012, 2013, 2014 and 2015.

2.4 SECTION 7(1)(D) OF ITA 1967

Section 7(1)(d) – Not in MalaysiaTo qualify as a resident under Sec 7(1)(d):i.he must be resident in the following year from that YA; ANDii.3 immediately preceding years from that YA must also be resident.


2007

R 2008

R 2009

R 2010 2011

R



2011201220132015

1/5/2011 to 31/12/20111/1/2012 to 10/2/20122/2/2013 to 31/10/20131/1/2015 to 31/8/2015

Example 2.4.1Tai has the following record of stay in Malaysia:



2012 41 R – Sec 7(1)(b)

2013 272 R – Sec 7(1)(a)

2014 Nil R – Sec 7(1)(d)

2015 243 R – Sec 7(1)(a)

Solution:Resident status of Tai will be as follows:



20102011201220132015

1/1/2010 to 15/7/2010 16/12/2011 to 31/12/20111/1/2012 to 15/7/20121/4/2013 to 15/7/20131/5/2015 to 31/12/2015

Example 2.4.2Soopana has the following record of stay in Malaysia:

She went back to Brunei on 31/12/2015 and has no intention of returning to Malaysia



2011 16 R – Sec 7(1)(b)

2012 196 R – Sec 7(1)(a)

2013 106 R – Sec 7(1)(c)

2014 Nil R – Sec 7(1)(d)

2015 245 R – Sec 7(1)(a)

Solution:Resident status of Soopana will be as follows:


Exercise 2.4.aAbdul Hamid has the following residence history in

Malaysia.11.10.2011 – 31.12.2011 82 days2012 Whole year1.1.2013 – 30.9.2013 More than 182 days1.4.2014 – 4.4.2014 4 days1.4.2015 – 31.12.2015 More than 182 days

Advise Abdul Hamid on his residence status for the YA 2011, 2012, 2013, 2014 and 2015.

3.0 CHART OF TAX RESIDENCE OF INDIVIDUAL

Stay in Malaysia for 182 days or more

In Malaysia for less than 182 days but is linked by or to a period of 182 consecutive days

Stay in Malaysia for 90 days or more but less than 182 days

In Malaysia for 90 days or more or resident for 3 out of 4 immediate preceding years of assessment

Resident in 3 immediately preceding years of assessment and resident in the immediate following year of assessment

Not Resident

Tax resident

under

Section 7(1)

of the

Income tax

Act 1967

No

No

No

No

No

Yes

Yes

Yes

Yes

4.0 BENEFITS OF RESIDENCE STATUS

1. 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.

2. Resident individuals are subject to a scaled rate from 0-25%. As for non-resident individuals they are subject to a flat rate of 25%.

3. 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.


4. Resident individuals are entitled to a rebate if their chargeable income is less than RM35,000. Non-residents are not entitled to the rebate.

5. Numerous types of income are exempted from tax only in the hands of resident individuals:

a) Royalties from literary or artistic work.b) Income from cultural performance approved by

Minister.c) Income from musical composition.


6. Numerous types of income are exempted from tax both in the hands of residents and non-residents:

a) Pension income derived from Malaysian employment paid by approved scheme.

b) Interest income from financial institution.

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

THANK YOU.

chap 2 - residence status

Documents

days resident

resident status of

days haris

days aaron

tax resident

number of days present

total number of days

b of ita