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.