Taxation

Taxation 1 / BAC 2674 / Tutorial 2

Resident status of individual

QUESTION 1

How is an individual’s resident status determined under the Income Tax Act 1967 (as amended)

ANSWER:

An individual is resident for the calendar year if:

(1) He is in Malaysia in a calendar year for 182 days or more [Sec 7(1)(a)]

(2) He is in Malaysia in that calendar year for a period of less than 182 days and that period is linked by or to another period of 182 or more consecutive days in the relevant year. Certain temporary absences not exceeding 14 days in the aggregate are ignored for the purpose of ascertaining the consecutive period of 182 days and the link period from year of assessment 2002 [ Sec 7(1)(b)].

(3) He is in Malaysia for a period of periods of 90 days or more in a particular and in three out of the four immediately preceding years of assessment he is either resident or in Malaysia for a period or periods of 90 days or more.

(4) He is resident in Malaysia for the calendar year following the relevant calendar year, having been resident for the three calendar years preceding the relevant calendar year [Sec 7(1) (d)].

QUESTION 2

List out the tax advantages of being a tax resident in Malaysia?

ANSWER:

An individual who is a tax resident would receive a preferential tax treatment as compared to a non-resident individual.

1) Scope of charge: The scope of charge for both resident and non-resident individuals is the same from YA 2004 -Both are taxed only upon Malaysian derived and accrued income.

2) Tax Rates: Resident individuals are subject to a scaled rate from 0-28%. As for non-resident individuals, they are subject to a flat rate of 28%. The tax rate has changed for the year of assessment 2008 (27%) and for 2009 (26%).

3) Relief: Resident individuals are entitled to individual tax relief (sections 46 to 50) such as self, wife, child etc. Non-residents are not entitled to such relief....