Tax Residence of Individuals

The Malaysian Income Tax Act 1967 uses a quantitative test of residence to determine the position of individuals, but for companies the deciding factor is to determine where control and management are exercised.

To qualify as a tax resident, an individual must satisfy the various test under Income Tax Act (ITA) 1967, which uses the Malaysia of days the individual is present in Malaysia.

Section 7(1A) ITA 1967 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.

1. Section 7(1)(a)
He/She is in Malaysia in that basis year for a total of 182 days or more in a calendar year.
For example, Khalir was in Malaysia from 01-01-2010 to 31-08-2010.
Total days is 243 days.

Khalir qualifies as a tax resident for Year of Assessment 2010 as the number of days in Malaysia amounted more than 182 in a basis year.

2. Section 7(1)(b)
If he/she unable satisfy s7(1)(a), then he may qualify to be a tax resident if he is in Malaysian for a period of less than 182 days and that period is linked by or to another period of 182 days consecutive days or more either immediately preceding or ommediately following that particular year of assessment.

Certain temporary absences are ignored for ascertaining the period of less than 182 days or the period of 182 consecutive days or more. These are:
a. connected with his service in Malaysia and owing to service matters or attending conferences or seminar or study abroad.

b. owing to ill health involving himself or a member of his immediate family.

c. in respect of social visits not exceeding 14 days in aggregate. Socialvisit includeany form of vacation outside Malaysia beside vacation to home country.

3. Section 7(1)(c)
He was in Malaysia for a total 90 days or more in the calendar year and had also met certain conditions for any 3 out of the 4 immediately preceding years. These conditions are:
a. that he had been a tax resident
b. that he was present in Malaysia for a total period of 90 days or more.

4. Section 7(1)(d)
If he is in Malaysia for less than 90 days or even if he is entirely absent from Malaysia for the whole of the calendar year. This arises when the individual has been a tax resident in Malaysia for the 3 immediately preceding years and is also a tax resident in the following year.