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

2. Residence Status
Residence status of an individual is determined by sec 7 ITA.
It is a quantitative test, that is, it is determined by the number of days an individual is physically present in Malaysia.

3. 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.

4. 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 :
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
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

5. Section 7 (cont’d)
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:
resident in Malaysia (under any of the tests); or
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
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.

6. Deemed to be derived from Malaysia
Gross Income in respect of gains or profits from employment is deemed derived in Malaysia if it is:
For any period during which the employment is exercised in Malaysia; or
For any period of leave that was attributable to the exercise of the employment in Malaysia; or
For any period during which the employee performs outside Malaysia duties incidental to the exercise of the employment in Malaysia;
Directors of a Malaysian resident company operated by a Malaysian resident; or
Those working on a ship/aircraft.

7. 60-Day Rule to Determine Taxability
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).
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).

8. Advantages of Resident Status
Taxed at scale rates from 0% to 26% instead of flat rate of 26%.
Entitled to personal reliefs
Entitled to rebate of RM400 if chargeable income is less than RM35,000
Certain exemptions available to residents
Withholding tax applicable to non-residents.

9. The End
End of Chapter 1.