BBFT 2013 TAXATION

CHAPTER 2: RESIDENCE STATUS

Part 1: Introduction

The concept of ‘resident’ is important in the Income Tax Act 1967 (the Act). An individual
who is a tax resident in Malaysia would be given an overall preferential tax treatment as
compared to a non-resident individual.

Resident Individual Non-Resident Individual

a. Income tax rate on Scale rate from 0 - 30% Flat rate of 30%
chargeable income

b. Personal reliefs Entitled Not entitled

c. Tax rebates for chargeable Entitled to a rebate of Not entitled

income RM400
≤ RM35,000

d. Short employment of ≤ 60 Taxable Exempted

days (Schedule 6 Para 21)

e. Interest income from Exempted w.e.f. 30 Exempted (Schedule 6 Para

financial institution August 2008 33)

A comparison……

Resident Individual Non-Resident Individual

(RM) (RM)
Salary 45,000 45,000
Interest from bank Exempted Exempted
TOTAL INCOME 45,000 45,000
(-) Reliefs
Self (9,000) -
Lifestyle (1,000) -
CHARGEABLE INCOME 35,000 45,000

TAX PAYABLE: RM RM
Tax charged 600 45,000 x 30% = 13,500
(-) Rebate
Self (400) -
TAX PAYABLE 200 13,500

The deciding factor of the residence status of an individual is the duration of his stay in
Malaysia i.e. quantitative test.

The citizenship or permanent resident status of an individual is not relevant.

Section 7 (1A) provides that an individual shall be deemed to be in Malaysia for a day if he is
present in Malaysia for part or parts of that day.

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Part 2: Definition of “Resident” for Individual

Section 7(1)(a)
Under Section 7(1)(a), an individual is resident in Malaysia for the basis year for a particular
year of assessment if he / she is in Malaysia in that basis year for a period or periods
amounting all to at least 182 days in a calendar year.

The 182 days can be made up of one period or multiple periods during that particular
calendar year.

Example 1
Mr. Chow came to Malaysia on 01/05/23. His days of stay are as follows:

No of Residence
YA Duration of stay Days Status Remarks
2023 01/05/23 to 31/05/23 31 Resident S7(1)(a) In Malaysia for at least 182
01/07/23 to 30/11/23 153 days in basis year 2023
184

Section7(1)(b)
Under Section 7(1)(b), an individual is resident in Malaysia for the basis year for a particular
year of assessment if he / she in Malaysia in that basis year for a period of less than 182
days but that period is linked by or linked to another period of at least 182 consecutive days
(including temporary absence) either immediately preceding or immediately following that
particular year of assessment.

• Linked by a period of 182 or more consecutive days

Linked by Residence status in

question

xxxxxxxxxxxxxxxXXXXXXX

Jan 1 ≥ 182
consecutive days < 182 days

1.1.2023
1.1.2019
Year 2022
Year 2018 Year 2023
Year 2019

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Example 2
Mr. A stay in Malaysia was as follows:

No of Resident
YA Duration of stay Days Status Remarks
2022 01/01/22 to 31/12/22 365 Resident S7(1)(a) In Malaysia for at least
182 days in basis year 2022.

2023 01/01/23 to 31/01/23 31 Resident S7(1)(b) In Malaysia for less than

182 days in basis year 2023 but it
was linked by another period of at
least 182 consecutive days in
basis year 2022.

31.12.2024
Year 2023
Year 2024

Example 3

Mr. B stay in Malaysia was as follows:

No of Resident
YA Duration of stay Days Status Remarks
2023 01/11/23 to 31/12/23 61 Resident S7(1)(b) In Malaysia for less than
182 days in basis year 2023 but it was
linked to another period of at least
182 consecutive days in basis year
2024.

2024 01/01/24 to 31/07/24 212 Resident S7(1)(a) In Malaysia for at least 182
days in basis year 2024.

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Example 4
Mr C ‘s stay in Malaysia was as follows:

No of Resident
YA Duration of stay Days Status Remarks
2022 02/01/22 to 31/05/22 150 Resident S7(1)(a) In Malaysia for at least 182
01/10/22 to 31/12/22 92 days in basis year 2022.
242

2023 01/01/23 to 31/01/23 31 Non It does not fulfill any of the

Resident conditions under Section 7(1)(a) to
(d).

2022 does not have 182 CONSECUTIVE DAYS because he was NOT IN MALAYSIA
from 01/06/22 – 30/09/22.

Temporary absence shall be taken to form part of ascertaining the 182 consecutive days’
requirement. These are:
i. connected with his service in Malaysia and owing to service matters or attending
conferences or seminars or study abroad (only applies to individual who is exercising
employment in Malaysia); (e.g. having a job in Malaysia and required to go to
overseas for work, training, meeting, study)

ii. owing to ill-health involving himself or a member of his immediate family (spouse,
children and parents); and (e.g. go to overseas for medical treatment)

iii. in respect of social visits not exceeding 14 days in aggregate (it needs not be
consecutive). (e.g. go to overseas for holiday, visit friends etc.)

If you go to overseas because of (i), (ii) or (iii),

government assumes you are still in Malaysia!!!
Temporary absence is ONLY APPLICABLE to
s7(1)(b) and not any other subsections of s7 of the ITA,
1967.

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Example 5
Mr. D who was employed in Malaysia went to US for training from 13/11/22 to 30/11/22. Mr
D‘s stay in Malaysia was as follows:

No of Resident
Y/A Duration of stay Days Status Remarks
2022 11/06/22 to 20/06/22 10 Non It does not fulfill any of the
01/07/22 to 12/11/22 135 Resident conditions under Section 7(1)(a) to
13/11/22 to 30/11/22 Nil (d).
01/12/22 to 31/12/22 31
176

2023 01/01/23 to 31/01/23 31 Resident S7(1)(b) In Malaysia for less than

182 days in basis year 2023 but it was
linked by another period of at least
182 consecutive days in basis year
2022. The temporary absence shall
be taken to form part of the
consecutive days.

Example 6
Mr. E who was employed in Malaysia went to US for training from 13/11/22 to 30/11/22. He
went back to Singapore to visit his father who was ill on 31/12/22 and 01/01/23. Mr. E’s stay
in Malaysia was as follows:

No of Resident
Y/A Duration of stay Days Status Remarks
2022 11/06/22 to 20/06/22 10 Non It does not fulfill any of the
01/07/22 to 12/11/22 135 Resident conditions under Section 7(1)(a) to
13/11/22 to 30/11/22 Nil (d).
01/12/22 to 30/12/22 30
31/12/22 Nil
175

2023 01/01/23 Nil Resident S7(1)(b) In Malaysia for less than

02/01/23 to 31/01/23 30 182 days in basis year 2023 but it was
30 linked by another period of at least
182 consecutive days in basis year
2022. The temporary absence shall
be taken to form part of the
consecutive days.

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Section7(1)(c)
Under Section 7(1)(c), an individual is resident in Malaysia for the basis year for a particular
year of assessment if he / she in Malaysia in that basis year for at least 90 days, having been
resident or in Malaysia at least 90 days for any 3 out of the 4 years immediately preceding
that particular year of assessment.

2018 2019 2020 2021 2022 2023

Resident
s7(1)(c)
R R R ≥ 90 days
≥ 90 days ≥ 90 days ≥ 90 days ≥ 90 days
≥ 90 days R ≥ 90 days ≥ 90 days
≥ 90 days R R ≥ 90 days

Choose any 3 out of 4 immediate preceding years

Residence status in
question

xxxxxxx
2015
2019 2016
2020 2017
2021 2018
2022 2019
2023
\2

3 out of 4 immediate preceding year ≥ 90 days

Example 7
Mr X’s stays are:
No of Resident
YA Duration of stay Days Status Remarks
2019 Not in Malaysia Nil Non It does not fulfill any of the
Resident conditions under Section 7(1)(a)
to (d).

2020 01/03/20 to 31/12/20 306 Resident S7(1)(a) In Malaysia for at least

182 days in basis year 2020.

2021 01/01/21 to 28/2/21 59 Resident S7(1)(b) In Malaysia for less

than 182 days in basis year
2021 but it was linked by
another period of at least 182
consecutive days in basis year
2020.

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2022 01/03/22 to 31/05/22 92 Non It does not fulfill any of the

Resident conditions under Section 7(1)(a)
to (d).

2023 01/01/23 to 15/06/23 166 Resident S7(1)(c) In Malaysia for at least

90 days in basis year 2023 and
he was a resident or had been in
Malaysia for at least 90 days in
any 3 out of 4 immediately
preceding years.

Section7(1)(d)
Under Section 7(1)(d), an individual is resident in Malaysia for the basis year for a particular
year of assessment if he has been a resident in Malaysia for the 3 immediately preceding
years and is also a resident in the following year.

He can still be regarded as a tax resident even if he is entirely absent from Malaysia for the
whole of the calendar year.

2019 2020 2021 2022 2023 2024

Resident
R R R S7(1)(d) R

3 immediate preceding years Following

year

Example 8
Mr X’s stays are:
No of Resident
YA Duration of stay Days Status Remarks
2019 01/01/19 to 31/12/19 365 Resident S7(1)(a) In Malaysia for at least
182 days in basis year 2019.

2020 01/01/20 to 31/01/20 31 Resident S7(1)(b) In Malaysia for less than

182 days in basis year 2020 but it
was linked by another period of at
least 182 consecutive days in
basis year 2019.

2021 01/01/21 to 31/12/21 365 Resident S7(1)(a) In Malaysia for at least

182 days in basis year 2021.

2022 Not in Malaysia Nil Resident S7(1)(d) A resident for 3

immediately preceding years and
a resident for the immediately
following year

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2023 01/01/23 to 31/12/23 365 Resident S7(1)(a) In Malaysia for at least

182 days in basis year 2023.

Part 3: Summary for Resident Status

Section 7 Criteria Notes

1(a) a) in Malaysia Physical presence is
b) ≥ 182 days required.
c) need not be consecutive

1(b) Two scenarios:

a) linked by
- physical presence in ‘such period’
January (need not be 1st
January)
- ≥182 consecutive days in ‘that period’
previous year
- permitted temporary
absence forms part of ‘such
period’ or ‘that period’

b) linked to
- physical presence in ‘such period’
December (need not be 31st
December)
- ≥ 182 consecutive days in ‘that period’
following year
- permitted temporary
absence forms part of ‘such
period’ or ‘that period’

1(c) a) physical presence in Malaysia ≥ Need not be consecutive

90 days in that year. days
b) 3 out of 4 immediate preceding
years is either:
- resident; and/or
- ≥ 90 days in Malaysia Need not be consecutive
days.

1(d) a) 3 immediate preceding years are Need not be physical

resident. present in that year.
b) following year is resident.

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Part 4: Residence Status for Companies

Section 8(1): A company is a resident in Malaysia for the basis year (i.e. financial period) for
a year of assessment if at any time during that basis year the management and control of its
business / affairs are exercised in Malaysia by its directors or other controlling authority.

It is the directors’ actions and not the shareholders’ actions that usually indicate the resident
status of the company.

The management and control of a company is determined with respect to:

• the location of the directors’ meeting where the major decisions are made to direct
and control the company.
• the location where the ‘real business’ is carried on (the place of conclusion of
contracts).

De Beers Consolidated Mines Ltd v Howe

Management and control is not determined by the place of physical trading operations but
where the decisions are taken to direct and control the company. (place of business is not
relevant)

Malaysan Shipping Co Ltd v FC of T

A company incorporated in Singapore held to be resident in Australia as it was managed and
controlled in Australia

The place of registration and the registered office of the company would not determine its
residence status.

Section 8(2): Once a company is established to be tax resident for a basis year of assessment,
it shall be deemed to be tax resident for the subsequent basis year unless the company could
prove otherwise to the satisfaction of the Director General.

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