KOLEJ TUNKU ABDUL RAHMAN

SCHOOL OF BUSINESS STUDIES

ABFT2013 BASIC TAXATION
Tutorial 2: Residence Status

Answer to Question 1
1. A resident individual is taxed on income accrued in or derived from Malaysia. He is
not taxed on foreign income received by him in Malaysia from outside Malaysia
(w.e.f. Y/A 2004).
2. The resident status of an individjual for purposes of income tax is ascertained under
(any one of) the four circumstances stated in Section 7(1)(a) to (d) of the Income Tax
Act (ITA) 1967.
3. An individual is resident in Malaysia for the basis year for a year of assessment
under any of the following circumstances:
(a) he is in Malaysia in that basis year for a period or periods amounting in all to 182
days or more; [S7(1)(a) of ITA 1967]
(b) he is in Malaysia in that basis year for a period of less than 182 days and that
period is linked by or to another period of 182 or more consecutive days
throughout which he is in Malaysia in the basis year for the year of assessment
immediately preceding that particular year of assessment or in that basis year for
the year of assessment immediately following that particular year of assessment.
[S7(1)(b) of ITA 1967]
However, temporary absence from Malaysia of the following nature are regarded
as forming part of the period of 182 or more consecutive days.
i)

absence connected with the employees service in Malaysia and owing to

service matters or attending conferences or seminars or study abroad.

ii)

absence owing to ill-health involving himself or a member of his

immediate family; and

iii)

absence in respect of social visits not exceeding 14 days in the

aggregate.

The temporary absences stipulated under (i), (ii) or (iii) can occur all
simultaneously and no restriction will be imposed on it.

Answer to 1 (contd)
(c) he is in Malaysia in a basis year for a period or periods amounting to 90 days or
more and he was either
i)
ii)

resident in Malaysia within the meaning of this Act or

in Malaysia for 90 days or more, in any 3 out of 4 immediately
preceding basis year. [S7(1)(c) of ITA 1967]

(d) he is resident in Malaysia within the meaning of this Act for the basis year for the
year of assessment following that particular year of assessment and having been
resident for each of the basis years for the 3 years of assessment immediately
preceding that particular year of assessment. [S7(1)(d) of ITA 1967]
4. An individual is deemed to be in Malaysia for a day if he is present in Malaysia for
part or parts of that day. [S7 (1A) of ITA 1967]

Answer to Question 2 (a)

The significant reasons of ascertaining the residence status of an individual:
1.

Scope of charge
A resident individual is subject to tax on income accrued in or derived from
Malaysia, and [income received in Malaysia from outside Malaysia before YA
2004]. However, sources outside Malaysia (foreign income) and received in
Malaysia is exempted from tax under Paragraph 28 of Schedule 6 of ITA 1967.
Whereas a non-resident is subject to tax on income accrued in or derived from
Malaysia, but not on income received in Malaysia from outside Malaysia.
[Note: Similar tax treatment for foreign income received in Malaysia since
YA2004]

2.

Tax rate
A resident individual is taxed on income at scale or graduated rates (0 to 26%),
whereas a non-resident is taxed at a flat or fixed rate of 26%.

3.

Personal reliefs
Only a resident individual is eligible for personal reliefs under Sections 46-50 of
ITA 1967.
A non-resident individual is not entitled to such reliefs.

4.

Rebate
A resident individual is given a rebate under Section 6A if his chargeable income
is not more than RM35,000.
A non-resident individual is not given such a rebate.

Answer to Q2(a) (contd)

5.

Exemption of employment income

Income from short-term employment of not more than 60 days on a non-resident
is exempt from tax under Paragraph 21 of Schedule 6 of ITA 1967; whereas
similar employment income of a resident individual is taxable.

6.

Double taxation relief

Double taxation relief (bilateral relief) is available only to a resident individual, but
not a non-resident individual.

7.

Withholding tax
Withholding tax provisions are applicable when respective contract payments
(s.107A), or interest and royalty (S.109), or payments falling under Section 4A
special classes of income (S.109B) to a non-resident individual. A resident
individual who receives a similar payment is not subject to such provisions.

8.

Tax incentives
Incentives under the Income Tax Act 1967 and Promotion of Investment Act 1986
are available to a resident individual, but not available to a non-resident
individual.

9.

Business income
Business income of a resident individual is taxable if deemed derived from
Malaysia under Section 12 of ITA 1967.
Business income of a non-resident is taxable in Malaysia if the business is
carried on in Malaysia through a Permanent Establishment in Malaysia.
Notes:

Points 6, 7, 8, 9 can be accepted if given as answer, though

strictly these are beyond the Syllabus of Basic Taxation.

Answer to Question 2(b)

A company carrying on a business is resident in Malaysia for the basis year for a year of
assessment if at any time during the basis year the management and control of its
business are exercised in Malaysia.

Answer to Question 2(c)

Basis
Year
2011

Period of
stay in
Malaysia

No. of
days in
Malaysia

1.11.2011
to
31.12.2011

61

Residence
status
Resident

Reason(s)
The short period of 61 days if it was
linked to a continuous period of not
less than 182 days in year 2011. The
temporary absence of 5 days for
employment duty outside Malaysia
can be disregarded.
Section 7(1)(b) of ITA 1967

2012

1.1.2011
to
4.1.2011
and
10.1.2011
to
12.7.2011

Resident
4

In Malaysia for 182 days or more.

s 7(1)(a)

184
188 days

Answer to Question 3
Year of Assessment (YA)
2008

Residence status
Resident, S7(1)(b), in Malaysia for less than 182 days in
2008 but it is linked to a period of more than 182
consecutive days in 2009.

2009

Resident, S7(1)(a), in Malaysia for more than 182 days

in 2009 and her temporary absence due to her visit to
her son who is seriously ill is considered as a permitted
temporary absence.

2010

Non resident as none of S7(1)(a) to (d) of the ITA 1967

can be applied.

2011

Resident S7(1)(c), in Msia for 90 days or more, and in 3

out of 4 immediately preceding basis year, she was
either resident or in Msia for at least 90 days.

2012

Non resident as none of S7(1)(a) to (d) of the ITA 1967

can be applied.

Answer to Question 4
YA
2006

Period of
stay in
Malaysia
10.12.2006 to
31.12.2006

No. of
days in
Msia
22

01.01.2007 to
10.06.2007

Residence
status

Reason(s)

Nonresident

In Msia for less than 182 days

and none of section 7(1)(a) to
(d) can be applied.

161

Resident

S.7(1)(a) In Msia for 182 days

or more.

01.07.2007 to
31.12.2007
01.01.2008 to
01.04.2008

184
345
91

Resident

S.7(1)(b) In Msia for a period

of less than 182 days, but this
period was linked by a
continuous period of 182 days or
more in the basis year 2007.

2009

01.07.2009 to
30.12.2009

183

Resident

S.7(1)(a) In Msia for 182 days

or more.

2010

04.01.2010 to
03.04.2010

90

Resident

S.7(1)(c) In Msia for 90 days

or more, and in 3 out of 4
immediately preceding basis
year, he was either resident or in
Msia for at least 90 days.

2011

Not in Msia

Resident

S.7(1)(d) Resident in 3
immediate preceding years and
resident in the basis year for the
following year of assessment.

2012

16.03.2012 to
1.10.2012

200

Resident

S.7(1)(a) In Msia for 182 days

or more.

2007

2008