Chapter 2

Resident Status for

Individuals
Topics Addressed

Introduction
Governing circumstances
Benefits of residence status
INTRODUCTION
 Yes
7(1)(a): >=182 days

No

7(1)(b): <182 days, but forms

part of period of more than 182
Yes Residence
consecutive days, before or
after
Status for
Individuals
No
7(1)(c): >= 90 days + Yes
Resident or >= 90days for
3 of 4 preceding basis years

No
7(1)(d): Resident for 3 preceding Yes
basis years + Resident for
following basis year

No Resident
Non-Resident
 Determining Residence Status

Ascertained by reference to the number of days an

individual was in Malaysia by virtue of Section 7 of the
Act.

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.
GOVERNING CIRCUMSTANCES
SECTION 7(1)(a) of ITA 1967
 7(1)(a) of ITA 1967

In Malaysia for 182 or more days of

which the period of stay need not be
consecutive.
 Example 1

Mr. Y recorded the following periods of stay in Malaysia:

1.3.2005 - 30.6.2005 In Malaysia 122 days

1.7.2005 – 31.7.2005 Seminar in Hong Kong 31 days
1.8.2005 – 30.9.2005 In Malaysia 61 days
----------
183 days
----------

Determine the resident status of Mr. Y for the YA 2005.

 Example 1

Answer:

Resident by virtue of Section 7(1)(a) of ITA 1967. Reasons:

• Mr. Y was in Malaysia for more than 182 days.
• Section 7(1)(a) does not require the 182 or more days to be
consecutive.
• The 31 days for a seminar in Hong Kong cannot be taken
into account as section 7(1)(a) requires physical presence
and excludes periods of temporary absences as defined in
7(1)(b).
 Example 2

Mr. X recorded the following periods of stay in Malaysia:

1.2.05 – 31.10.05 In Malaysia 273 days

Determine the resident status of Mr. X for the YA 2005.

Answer: Resident by virtue of Section 7(1)(a) of ITA 1967 as Mr. X was in

Malaysia for more than 182 days.
SECTION 7(1)(b) of ITA 1967
 No
In year of review in Malaysia
for less than 182 days

Yes

Year under review is connected No

to previous or following year Section 7(1)(b)
of ITA 1967
Yes
182 or more consecutive days No
(including temporary absence)
in previous or following year

Yes
No
Social visits <= 14 days

Yes Not Resident via

Resident via 7(1)(b) 7(1)(b)
 7(1)(b) of ITA 1967 – “Linked by”

In the year wherein residence status is being determined

the individual is in Malaysia for less than 182 days; and;
The year being reviewed (X1) is connected to the previous
year (X0);
Temporary absence extends from start of stay in 19X1 to
1.1.X1 (“link period”) or
Individual is in Malaysia on 1.1.X1 & 31.12.X0.
There are 182 or more consecutive days in X0 ending
31.12.X0 including periods of temporary absence
(“connecting period”).
Aggregate of social visits in “linking period” and
“connecting period” cannot exceed 14 days.
 Temporary Absence

Connected with his service in Malaysia and owing to

service matters or attending conferences, seminars or
study abroad.

Owing to ill health involving himself or a member of

his immediate family--parents, children and spouse.

In respect of a social visit not exceeding 14 days in

the aggregate.
 Example 3

Mr. Y recorded the following periods of stay in Malaysia:

2004 1.7.2004-31.12.2004 184 days

2005 1.1.2005-31.1.2005 31 days

Determine his resident status for YA 2005.

 Example 3

Mr. Y is resident for YA 2005 under section 7(1)(b) as

period of less than 182 consecutive days in 2005
“linked by” more than 182 consecutive days in 2004.
 Example 4

Mr. Y recorded the following periods of stay in Malaysia:

2004 1.7.2004-28.12.2004 181 days

29.12.2004-31.12.2004 3 days social visit
2005 1.1.2005-12.1.2005 12 days social visit
2005 13.1.2005-31.1.2005 19 days

Determine his resident status for YA 2005.

 Example 4

Mr. Y is not resident for YA 2005 under section 7(1)(b) in

spite of the fact that period of less than 182 days in
2005 is “linked by” more than 182 consecutive days in
2004 including periods of temporary absence. This is
because the number of social visits in the link and
connecting periods is more than 14 days in aggregate.
 7(1)(b) of ITA 1967 – “Linked to”

In the year wherein residence status is being determined

the individual is in Malaysia for less than 182 days; and;
The year being reviewed (X1) is connected to the next year
(X2);
Temporary absence extends from end of stay in 19X1 to
31.12.X1 (“link period”).
Individual is in Malaysia on 31.12.X1 & 1.1.X2.
There are 182 or more consecutive days in X2 starting
1.1.X2 including periods of temporary absence (“connecting
period”).
Aggregate of social visits in “linking period” and
“connecting period” cannot exceed 14 days.
 Example 5

Mr. Y recorded the following periods of stay in Malaysia:

2004 1.1.2004-31.12.2004 31 days

2005 1.1.2005-3.7.2005 185 days

Determine his resident status for YA 2004.

 Example 5

Mr. Y is resident for YA 2004 under section 7(1)(b) as

period of less than 182 consecutive days in 2004 is
“linked to” more than 182 consecutive days in 2005.
 Example 6

Mr. Y recorded the following periods of stay in Malaysia:

2004 31.12.2004 1 day

2005 1.1.2005-31.3.2005 90 days

1.4.2005-2.4.2005 2 days
(Social visit outside Malaysia)
3.4.2005-19.6.2005 78 days
20.6.2005-1.7.2005 12 days
(Social visit outside Malaysia)
-----------------------
168 days 14 days
-----------------------
182 days
Determine his resident status for the YA 2004.
 Example 6

Mr. Y is resident for YA 2004 under section 7(1)(b) as

period of less than 182 consecutive days in 2004 is
“linked to” 182 consecutive days in 2005 (upon taking
into account the social visits).
 Example 7

Mr. Y recorded the following periods of stay in Malaysia:

2004 1.12.2004-30.12.2004 30 days

31.12.2004 1 social visit in China
2005 1.1.2005-4.1.2005 4 social visit in China
5.1.2005-3.7.2005 181

Determine his resident status for the YA 2004.

 Example 7

Resident for YA 2004 as:

Only in Malaysia for 30 days in 2004.

1 day social visit in “linking period”.
185 consecutive days in 2005 including social visits of 4
days.
Aggregate number of social visits in “linking period” and
“connecting period” is only 5 days.
SECTION 7(1)(c) of ITA 1967
 7(1)(c) of ITA 1967

In Malaysia for 90 days or more (not necessarily

consecutive days) and was either resident or in Malaysia
for 90 days or more in 3 out of the 4 immediately
preceding basis years.
 Example 8

An individual has the following residence history in

Malaysia:

1.3.2001 – 20.3.2001 20 days

1.5.2002 – 15.8.2002 107 days
1.1.2003 – 30.9.2003 273 days
1.3.2004 – 31.10.2004 245 days
1.1.2005 – 20.4.2005 110 days

You are required to determine his residence status for

the YAs 2001, 2002, 2003, 2004, and 2005.
 Example 8

•The individual was not a resident for the YAs 2001 and 2002.

•As for the YAs 2003 and 2004, he was resident by virtue of
Section 7(1)(a).

•Finally, the individual was also resident for the YA 2005, by

virtue of Section 7(1)(c). In 2005, he was in Malaysia for more
than 90 days, and in 3 out of the 4 immediately preceding
basis years, the individuals was either a resident (2003 and
2004) or in Malaysia for more than 90 days (2002).
SECTION 7(1)(d) of ITA 1967
 7(1)(d) of ITA 1967

Resident for the 3 immediately preceding basis years

and for the immediately following basis year.

As thus, based on the above said circumstance, an

individual may be found to be a resident for a particular
basis year even though he or she might not have been in
Malaysia at all in that basis year.
 Example 9

Abu Nawas has the following residence history in

Malaysia.

11.10.2001 – 31.12.2001 82 days

2002 Whole year
1.1.2003 – 30.9.2003 More than 182 days
1.4.2004 – 4.4.2004 4 days
1.4.2005 – 31.12.2005 More than 182 days

Advise Abu Nawas on his residence status for the YAs

2001, 2002, 2003, 2004 and 2005.
 Example 9

Abu Nawas is a resident for all the said YAs. He is resident

for 2002, 2003 and 2005, by virtue of Section 7(1)(a). As
for 2001, he is resident as per Section 7(1)(b) while the
resident status for 2004 comes about because of Section
7(1)(d).
BENEFITS OF RESIDENCE STATUS
 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%.
Tax rate for Resident Individuals
 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.

Resident individuals are entitled to a rebate if their

chargeable income is less than RM35,000. Non-
residents are not entitled to the rebate.
Numerous types of income are exempted from tax
only in the hands of resident individuals:

•Royalties from literary or artistic work.

•Income from cultural performance approved by
Minister.
•Income from musical composition.
Numerous types of income are exempted from tax
both in the hands of residents and non-residents:

•Pension income derived from Malaysian

employment paid by approved scheme.
•Interest income from financial institution.
Withholding tax is applicable upon contract payment,
interest, royalty, and section 4A income payments
made to non-residents only.
The End