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Sources of Income

The following sources of income are chargeable to tax under Section 4 of the Act.

a. Gains or profits from a business
b. gains or profits from employment
c. Dividends, interest or disounts
d. rents, royalties or premiums
e. Pensions, annuities or periodical payments
f. Gains or profits not falling under any of the above.

Exercise Resident Status

        Encik Jeff, a Canadian citizen, came to Malaysia on 28 July 2007 and left Malaysia permanently on 31 October 2007. The record of Encik Jeff’s stays in Malaysia have been as follows:

Year               Stay in Malaysia                                               Days in Malaysia

2003               20 December to 31 December                               12

2004               1 January to 31 December                                      366

2005               1 January to 5 January                                           5

                        1 August to 30 November                                    122

2006               Absent                                                                   0

2007               28 July to 31 October                                           96

Required:

State, with explanation, the resident/nonresident status of Encik Jeff for each of the years of assessment 2003 to 2007 (inclusive) 

On 8 October 2007 Miss Nonaka took a 10am flight to Singapore to attend a concert. On 9 October 2007 she took a return flight arriving at Kuala Lumpur International Airport at 11pm.

Required:

State, with explanation, the tax treatment of Miss Nonaka’s visit to Singapore, under the Malaysian residence rules.        

Chargeable Income Of A Person

The chargeable income of a person upon which tax is chargeable for a year of assessment shall be ascertained as follows:-

a. Basis period for each source of income for that year of assessment.
b. Gross Income for each source of income for the basis period for that year of assessment.
c. Adjusted Income from each source of income for the basis period for that year of assessment.
d. Statutory Income for each source of income for that year of assessment.
e. Aggregate Statutory Business Income for that  year of assessment.
f. Net Aggregate Statutory Business Income, which is Aggregate Statutory Business Income reduced by business loss brought forward for that year of assessment.
g. Aggregate Income for that year of assessment, which is the aggregation of Net Aggregate Statutory Business Income and non-business income.
h. Total Income for that year of assessment.
i. Chargeable Income for that year of assessment.

Tax Residence of Company - "Management and Control"

The expression "management and control" has not been defined under the Income Tax Act 1967. Certain case law decisions may be relied upon as to what actually constitutes "management and control".

Directors' action and not shareholders' action
As a general rule, the management and control of a company are normally exercised by its directors. Therefore, the place where the board of directors meet, would determine whether the management and control are exercised in malaysia. -De Beers Consolidated Mines Ltd v Howe.

Place of Incorporation
The place of registration and the registered office of the company would not determine its residence status. In Malayan Shipping Co. Ltd v FC of T, it was held that a company incorporated in Singapore has been held to be resident in Australia for tax purposes because the company was completely managed and controlled by its Australian directors in Australia.

Place Where AGM and Book of Accounts
In Egyptian Delta Land & Investment Co. Ltd v Todd, it was held that a company incorporated in South Africa, which held its general meetings and kept its book of accounts there was held to be resident in the United kingdom as the company was controlled by a majority of directos resident in London.

Dual Residence
A company may have dual residence, that is, it may be considered to be tax resident in both countries. In Swedish Central Railway Co Ltd v Thompson, the court held that "a company incorporated in Lonndon to construct and operate a railway in Sweden was found to be resident in both the Unied Kingdom and Sweden for that purpose".

Can Residence Status Change
In Bullock v Unit Construction Co Ltd, it was held that a company may change its residence status, that is, a company may be tax resident in one year and non-resident in another year. In Malaysia, once a company is established to be tax resident for a basis year for a 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.

Tax Residence of Limited Liability Partnership

The 2013 Budget introduced various amendments to treat the above as a chargeable person similar to that of a company under the Act.

A limited liability partnership carrying on a business is resident in Malaysia for the basis year for a year of assessment if at any time during that basis year the management and control of its business or of any one of its business are exercised in Malaysia.

Any other limited liability partnership is resident in Malaysia for the basis year for a year of assessment if at any time during thath basis year the management and control of it affairs are exercised in Malaysia by its partners.

Tax Residence of Company

A company or a body of persons carrying on a business or businesses is resident in Malaysia for the basis year for a yaer of assessment if at any time during that basis year the management and control of its business or of any one its businesses, are exercised in Malaysia.

A company or a body of persons is resident in Malaysia for the basis year for a year of assessment if at any time during that basis year, the management and control of its affairs are exercised in Malaysia by its directors or other controlling authority.

Example.
Abaxia Ltd, a foreign company has business in Hong Kong, Singapore and Malaysia. All the businesses of the company are managed and controlled in Hong Kong except a board of directors meeting was held in Johor on 11 May 2010 where important policy decision were made.

Abaxia Ltd is resident for YA 2010. where there is no businessess carried on in Malaysia, a company can still be regarded to be tax resident where the management and control of its affairs are exercised in Malaysia by its directors or other controlling authority, for example to a board of management/directors. For an investment holding company, the management and control of its affair includes the management and importanty decisions in respect of finance and investments made.

Tax Residence of Persons

Deemed Resident under Section 7(1B)

Effective from Y/A 2009, where an individual who is a citizen and

a. is employed in the public services or service of a statutory authority; and
b. is not in Malaysia at any day in the basis year for a year of assessment by reason of:-
   i) having and exercising his employment outside Malaysia; or
   ii) attending any course of study in any institution or professional body outside Malaysia which is fully sponsored by the employer.

that individual is deemed to be a resident for that particular year of assessment and for any subsequent basis years when he is not in Malaysia.

Example,
Chandra is appointed as a High Commissioner by the Government to India for a period of five (5) years. He left Malaysia on 1 January 2009 and would return to Malaysia in December 2013.

Chandra is deemed to be a tax resident from YA 2009 to YA 2013 under section 7(1B).