Sunday, January 27, 2008

Tax Residence of Individuals

In Malaysia the tax residence of an individual is determined by the numbers of days he is present in Malaysia in a particular year of assessment(YA).

Section 7(1) of The Malaysian Income Tax Act 1967 states that an individual is resident in Malaysia for the basis year in a particular YA if:

Section 7(1)(a): 182 days or more
The individual is in Malaysia for a total of 182 days or more in a calender year.

Section 7(1)(b): Less than 182 days
The individual is in Malaysia for a period of less than 182 days and that period is linked by or linked to another period of 182 days or more consecutively.
Certain temporary absences are ignored in ascertaining the 182 consecutive days:
i) Work related
ii) Owing to ill health or himself or members of his immediate family(parents if unmarried; spouse and children if married)
iii) Social visits not exceeding 14 days in aggregate. (Richard Allen Sonnet Anor v DGIR case - summer vacation cannot be taken as social visit)

Section 7(1)(c): 90 days or more
The individual is in Malaysia for a period of 90 days or more and has met the following conditions for any 3 out of 4 immediately preceding years:-
i) he had been a tax resident in 3 out of 4 calender years; or
ii) he was in Malaysia for at least 90 days in each of the 3 calender years

Section 7 (1)(d): Unusual Rule
Under this rule an individual can still be regarded as a tax resident even if he is entirely absent from Malaysia for the whole calender year in question if the following conditions are met:
i) he has been a tax resident for the 3 immediately preceding years and
ii) is also a resident in the following years.

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