Chapter 2:

Residence Status for individual

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Residence Status for Individual
Learning outcome:
• Determine the residence status of an individual; and
(kenal pasti resident atau tidak)

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1. Introduction
• Resident – preferential tax treatment;
• Non resident individual suffers the maximum flat rate 28%
effective from YA 2016
(kena bayar tax pada kadar 28% - bayar tax tinggi)
• IRB has issued PR11/2017 on 22.12.2017 governing
residence status of individuals in Malaysia.

2. Determination of residence status

• is purely “quantitative test”, (boleh dikira)
• It is determined by reference of the number of days an
individual person is present in Malaysia during a particular
calendar year . (jumlah berapa hari dia berada di Malaysia
mengikut tahun kalendar)

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3. Section 7
• Section 7 (1) of the act lays down four circumstances where an
individual can be regarded as tax resident in Malaysia.

• There are:
- S 7(1)(a)
- S 7(1)(b)
- S 7(1)(c)
- S 7 (1)(d)

• Compulsory to follow the sequence (a) then (b)….. (c) and (d)
• You need to do on Year of Assessment basis …. TRY (a), (b), (c)
then (d)….

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No of days in month – 2018: not leap year
Month No of days
Jan 31
Feb 28
March 31
April 30
May 31
June 30
July 31
August 31
Sept 30
Oct 31
Nov 30
Dec 31

Make sure NOT leap year = Year/4 = Exact number so the leap year
= point
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Section 7(1)(a) Conditions

He is in • Individual must be physically present in that

Malaysia in calendar year amounting at least 182 days.
that basis year (di Malaysia fizikal sekurang 182 hari)
for a period
amounting in • It can be single period or multiple periods.
all to 182 days (satu tempoh atau pelbagai tempoh)
or more;
(di Malaysia
182 hari atau
lebih)

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Single period
Year 2014

xxxxxxxxxxxxxxx

1 Jan ≥ 182 days

31 Dec

Multiple periods
Year 2014
1 2 3
xxxxxx xxxxxxxxx xxxxxxxxx

1 Jan 31 Dec
1 + 2+ 3 = ≥ 182 days

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Example 2.1
Abdul Ghani first arrived in Malaysia on 1.1.2018.
His passport showed the following particulars of stays in Malaysia.

Days
1.1.2018 – 31.5.2018 151
1.6.2018 – 15.6.2018 15
166
16.7.2018 – 4.8.2018 20
186

•Abdul Ghani will be a tax resident by virtue of s 7(1) (a) for 2018
•However if he left Malaysia permanently on 15.6.2017, he would not be a tax
resident as the 166 days did not fulfill the minimum requirement 182 days to
qualify as a resident.
(kalau Abdul Ghani tinggalkan Malaysia 15.6.2017= 166 days, dia bukan
Resident sebab tak cukup 182 hari)

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Example 2.2
James an Australian accountant, arrived in Malaysia on 1.1.2017. He left Malaysia
permanently on 31.10.2018. James has the following records to stay:

2017 Numbers of days

1.1.2017 – 31.3.2017 In M’sia 91
1.4.2017 – 13.4.2017 Seminar in Hong Kong 13
14.4.2017 - 31.7.2017 In M’sia 109
1.8.2017 – 31.12.2017 In Hawai 153

2018
1.2.2018 – 31.10.2018 In M’sia 273

Q: Determine James’ residence status for the YA 2016 and 2017?

(Tentukan resident status tahun 2016 dan 2017)

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Example 2.2 - Answer

2017 No. of days in M’sia Section

1.1.2017 – 31.3.2017 91
14.4.2017 - 31.7.2017 109
Total in M’sia 2017 200 7(1)(a)
Resident

2018
1.2.2018 – 31.10.2018 274 7 (1)(a)
Resident

Because: 182 days or more in Malaysia

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 Section 7(1)(b)
Understand this
“linked by” or “linked to”
Temporary absence from Malaysia is treated as in Malaysia for the
purpose of ascertaining the residence status in S7(1)(b)
Prior to YA 2002, temporary absence is only allowed to form
The consecutive 182 days.

With effect from YA 2002, the physical presence in Malaysia to form the
LINK BY and LINK TO period has been abolished by Finance (No. 2) act
2002. The temporary absence from Malaysia is also extended to cover
both periods i.e short period and long period.

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3.3 : Meaning of “TEMPORARY ABSENCE” only
for S7(1)(b) ONLY ***
A) Connected with his service in M’sia and owing to service matters or
attending conferences or seminars or study abroad (no restriction
numbers of day) [berkaitan dgn kerja di M’sia, kena kerja outstation
(oversea) atau menghadiri seminar atau belajar short term];

B) Owing to ill-health involving himself or a member of his immediate

family*; (Sakit – pembayar cukai atau keluarga terdekat)
*immediate family*; Spouse, children and parents (isteri/suami, anak,
ibu-bapa) , Brothers and sisters NOT included (Kakak dan abang
tidak termasuk)

C) In respect of “social visits” not exceeding 14 days in the aggregate.

(lawatan sosial tidak melebihi 14 hari keseluruhannya)

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3.3 : Meaning of “TEMPORARY ABSENCE” only
for S7(1)(b) ONLY (further explanation)
A) Connected with his service in M’sia and owing to service matters or
attending conferences or seminars or study abroad.
- apply to individual who exercising employment in M’sia;
- some individuals may be required to travel frequently outside M’sia
due employment nature;

B) Owing to ill-health involving himself or a member of his *immediate

family*;
- From MIA/MICPA dialogue with IRB on 4 November 2003, the
immediate family member spouse, children and parent (tax payer parent
not including father & mother in law).
- Brothers and sisters are NOT immediate family.

C) In respect of “social visits” not exceeding 14 days in the aggregate.

- no need consecutive.
- prior to YA2011 limited to visit relative, after PR6/2011 has relaxed the
legal rule related to public ruling.
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Section 7(1)(b) – “linked to” or “linked by”
• TWO (2) ways individual can be tax resident.
a) in Malaysia in January; or
b) in Malaysia in December

LINKED BY (bersambung tahun sebelumnyer)

Resident status in question
Linked by xxx
xxxxxxxxxxxxxxxxxxxxxx

Jan 1 ≥ 182 days 1.1.2018

YEAR 2017 YEAR 2018

• In the case of January, the number of days in January 2018 (short period) is
linked by another period of 182 days or more consecutive days (long period)
in the immediately preceding YA 2017.
• Kalau Januari 2018 (pendek) kena tengok tahun sebelumnyer iaitu tahun
2017 (panjang).
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LINKED BY (bersambung tahun sebelumnya)
• To identify whether residence status for YA2018 under S7(1)(b) is to
establish: (MENGENAL PASTIKAN STATUS RESIDENCE YA2018
di mana syarat2 S7(1)(b) – linked by dipenuhi)

(a) Physical presence of at least one day in January 2018 (short period)
Berada di Malaysia sekurang2nya satu hari pada Januari 2018 (tempoh
pendek).
(b) A continuous period of at least 182 days from 31.12.2017 (long period)
INCLUDING TEMPORARY ABSENCE
[tempoh berterusan sekurang2nya 182 hari dari 31.12.2017 (tempoh
panjang)].
(c) Should there are any temporary absence found in the short period or
long period, it will be considered as physical presence in M’sia provided
it satisfies the condition in temporary absence.
(jika ada temporary absence terdapat sama ada dlm tempoh pendek
atau panjang, dikira “BERADA” di Malaysia sekiranya memenuhi
syarat temporary absence).
PLEASE UNDERSTAND THESE THE PRE-REQUISITES
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Example 2.3 – “Linked by” – page 14 & 15

Low is in Malaysia for the following periods:

2017 31.3.2017– 28.12.2017 (long period) (/) > 182 days

29.12.2017– 1.1.2017 Temporary absence (allowable)
2018 2.1.2018 – 5.1.2018 (short period) (to find out)

Question: Residence status for YA 2017 and 2018.

2017 – Residence; S7(1)(a) more 182 days

2018 – Residence; S7(1)(b) linked by – all prerequisite satisfied
i. The number of days in 2018 is linked by 2017;
ii. There is at least 182 consecutive days in 2017;
iii. He is in Malaysia immediately prior to 29.12.2017 and after
1.1.2018 temporary absence.

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Linked to
Resident status in question
xxxxx

Linked to

xxxxxxxxxxxxxxxxxxxxxx
≥ 182 days
Jan 1 31.12.2019
YEAR 2018 YEAR 2019
Dec 31/2018

• Short period: 2018 and long period: 2019

• Long period : 182 or more days in Malaysia and temporary absence
in short period or long period are allowable.

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Example 2.4 – “linked to” – page 15

Mandy is in Malaysia for the following periods:

2018 4.12.2018 – 24.12.2018 (short period)
2018/2019 25.12.2018 – 7.1.2019 (14 days - temporary absent)
2019 8.1.2019 – 31.8.2019 (long period) > 182 DAYS

Question:
Residence status for YA 2018 and 2019
2018 – Residence; S7(1)(b)
a) The number of days in 2018 is linked to 2019;
b) There is at least 182 consecutive days in 2019;
c) Temporary absence was allowable (14 days) - privisio
d) Mandy is in Malaysia immediately prior to 25.12.2018 and after
7.1.2019 that temporary absence.

2019 – Residence; S7(1)(a)

PLEASE STUDY EXAMPLES – 2.7 and 2.8

Pages 20 & 21 (textbook)
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Example 2.5 – “linked to”
Soo Pin first arrived in Malaysia on 1.12.2017 and recorded the
following periods of stay:
Days in Malaysia
2017 1.12.2017-30.12.2017 30
31.12.2017 1 Social visit in China
2018 1.1.2018-4.1.2018 4 Social visit in China
5.1.2018-3.7.2018 180

Question: Determine whether Soo Pin tax resident for YA

2017 and 2018
2017: Soo Pin is residence S7(1)(b)
a) long period in 2017 more than 182 days
(180 days + 4 days social visit considered in Malaysia @@)
b) Temporary absence on 31.12.2017– 4.1.2018 ALLOWABLE##
c) In Malaysia immediate prior to 31.12.2017 and after 4.1.2018.

2018: Soo Pin is NOT residence because

Not satisfied S7(1)(a) and S7(1)(b) for S7(1)(a), temporary absence
NOT apply here.
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Section 7(1)(c) Residence status in question

xxxxxxxx

1/1 31/12 1/1 31/12 1/1 31/12

≥ 90 days
2014 2015 2016 2017 2018
3 out of 4
Immediate preceding years

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To qualify as a resident in 2018 under S 7(1)(c): ***
PRE-REQUISITE (PRA SYARAT)
i) He must be in Malaysia for a period or periods of 90 days or more in 2018;
AND
ii) 3 out of 4 immediately preceding years (2014 – 2017) is either:
a) a resident; OR (atau)
b) in Malaysia for a period or periods of 90 days or more
(SALAH SATU SAMA ADA RESIDENT ATAU TINGGAL DI M’SIA
LEBIH 90 HARI)

Section 7(1)(c) can be illustrated as:

(i)90 days period; AND
(ii) 3 out of 4
Immediate preceding year
(a) Resident OR (b) 90 days
(no need consecutive)

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Example

YA No of days in Malaysia Residence

2015 92 NR
2016 187 R S 7(1)(a)
2017 200 R S 7(1)(a)
2018 99 ???????

Determine Resident or no in 2018??

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Example

YA No of days in Malaysia Residence

2015 92 NR
2016 187 R S 7(1)(a)
2017 200 R S 7(1)(a)
2018 99 R S 7(1)(c)

2018: Yes, resident under S 7(1)(c)

Reason:
Fulfilled
1) 90 days in Malaysia; AND
2) For 2015-2018 (He is in Malaysia
2014: > 90 days
2015: Residence
2016: Residence

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Example

YA No of days in Malaysia Residence

2015 92 NR
2016 95 NR
2017 200 R S 7(1)(a)
2018 99 ???????

Determine Resident or no in 2018??

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Example

YA No of days in Malaysia Residence

2015 92 NR
2016 95 NR
2017 200 R S 7(1)(a)
2018 99 R S 7(1)(c)

2018: Yes, resident under S 7(1)(c)

Reason:
Fulfilled
1) 90 days in Malaysia AND
2) For 2015-2017 (He is in Malaysia
2015: > 90 days
2016: > 90 days
2017: Residence

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Fulfilled / Memenuhi – ALL RESIDENT UNDER S7(1)(C)
1) 90 days in Malaysia – year you want to determine residence status / tahun yang
kamu mahu kenal pasti status residen)

Possibility / Kemungkinan LAIN

2) For 2015-2017 (He is in Malaysia) 2) For 2015-2017 (He is in Malaysia)

2015: > 90 days 2015: Residence
2016: Residence 2016: > 90 days
2017: Residence; OR 2017: Residence ; OR
2) For 2015-2017 (He is in Malaysia) 2) For 2015-2017 (He is in Malaysia)
2015: > 90 days 2015: Residence
2016: > 90 days 2016: > 90 days
2017: > 90 days: OR 2017: > 90 days : OR
2) For 2015-2017 (He is in Malaysia) 2) For 2015-2017 (He is in Malaysia)
2015: > 90 days 2015: Residence
2016: > 90 days 2016: Residence
2017: Residence : OR 2017: > 90 days : OR
2) For 2015-2017 (He is in Malaysia) 2) For 2015-2017 (He is in Malaysia)
2015: > 90 days 2015: Residence
2016: Residence 2016: Residence
2017: > 90 days: OR 2017: Residence

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Example 2.9
Fei Wong’s pattern of stay in Malaysia is as follows:
Days
2015 1 Jan 2015 – 31 March 2015 90
16 Apr 2015 – 31 July 2015 107 S7(1)(a) -Resident
197

2016 1 Dec 2016 – 31 Dec 2016 31 S7(1)(b) – linked to

- Resident
2017 1 Jan 2017 – 31 March 2017 91
1 Apr 2017 – 16 Apr 2017 - (Seminar in Hawaii – 16 days)
17 Apr 2017 – 17 July 2017 92 S7(1)(a) - Resident
183

2018 1 May 2018 – 10 June 2018 41

1 July 2018 – 31 July 2018 31 “S7(1)(c)” - Resident
1 Sept 2018 – 20 Sept 2018 20
92
Required:
Determine residence status 2015, 2016, 2017 and 2018;
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Answer
Her residence status would be determined as follows:
YA Explanation
2015 Resident - S 7(1)(a)

2016 Resident - S 7(1)(b)

i) 1 Dec 2016 – 31 Dec 2016 is link to 2017
ii) A consecutive of 182 days or more basis
year 2017. The temporary absence falls into the provisio (i)
of S7(1)(b)

2017 Resident – S 7(1)(a)

Physical presence of at least 182 days.
The temporary absence of 16 days is NOT included.

2018 Resident – S7(1)(c)

i) minimum period/period of 90 days (the 90 days need not
be consecutive),
ii) 3 immediately preceding years were resident.
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 Section 7(1)(c)
“Study”
#2.10 and 2.11#
pages 20 & 21 (textbook)

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Section 7(1)(d)
Resident status in question

2014 2015 2016 2017 2018

Resident Resident Resident Resident

To qualify as a resident in 2017 under S 7(1)(d)

PRE-REQUISITE

i) He must be resident in the following year 2018 and

ii) 3 immediate preceding years (2014 to 2016) must also be a
resident

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Example – S 7(1)(d)
YA No of days in Malaysia Residence status (R)
2014 50 R S 7(1)(b)
2015 187 R S 7(1)(a)
2016 200 R S 7(1)(a)
2017 0 ???????
2018 199 R S 7(1)(a)

Determine Resident or not for 2017?

??
I am so
confused

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Example – S 7(1)(d)
YA No of days in Malaysia Residence (R)
2014 50 R S 7(1)(b)
2015 187 R S 7(1)(a)
2016 200 R S 7(1)(a)
2017 0 R S 7(1)(d)
2018 199 R S 7(1)(a)

S 7(1)(d)

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 Section 7(1)(d)
“Study”
#2.12, 2.13, 2.14 and 2.15#
pages 21 - 24
(MT & FE)

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S7(1B) “BIG B”
Malaysian citizen exercising employment in public service (kakitangan
kerajaan)

With effect from YA 2009, Malaysian citizen

a) Exercising employment in the public services or statutory authorities
outside Malaysia, or (Government staff work oversea)

a) Employed in public services or statutory authority but attending any

course of studying in any institution or profesional body outside Malaysia
which is fully sponsored by the employer. (Government staff training
overseas)

• IS DEEMED RESIDENT for the basis year for that particular YA or

subsequent basis year when he/she is NOT in Malaysia
(dikira resident Malaysia walaupun badannyer tidak berada di Malaysia)
• For government staff enjoy scaled rate rather than flat rate.
(Bila resident bayar tax ikut scaled rate bukan flat rate)

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Summary residence status
Section Criteria Notes
7
1 (a) a) At least 182 days Physical presence is
b) Can be consecutive or not consecutive required
1 (b) 2 scenarios:
a) (i) Physical presence in January (need not Short period
be 1.1)
(ii) ≥ 182 consecutives days in previous year Long period
(iii) Permitted temporary absence

b) (i) Physical presence in Dec (need not be Short period

31.12)
(ii) ≥ 182 consecutives days in previous year Long period
(iii) Permitted temporary absence
1 (c) a) Physical present in Malaysia ≥ 90 days in that Need not be consecutive
year periods
b) 3 out of 4 immediate preceding years
Either
(i) resident or (ii) 90 days Need not be consecutive
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periods
Summary residence status
Section Criteria Notes
7
1 (d) a) 3 immediate preceding years is resident Need not be physically
b) Following year is resident present in that year

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Distinction between resident and non-resident individual (the law is stated for YA
2018)
Resident Non-resident
i) Scope of charge
- income accrued or derived in - Tax - Tax
Malaysia
- Foreign source income - Exempted (para 28, - Exempted (para 28, Sch
received in Malaysia from Sch 6) 6)
outside Malaysia
ii) Income tax rate Scaled rate from 0-26% Flat rate of 26%
iii) Individual tax relief (Section 46 Entitled No entitled
to 50)
iv) Employment income derived Taxable Exempted if he satisfies
from Malaysia the 60 days test (Para 21,
Sch 6)
v) Rebate for chargeable income ≤ Yes No
RM35,000
vi) Pension income derived from Exempted (Para 30, Sch Exempted (Para 30, Sch
M’sian employment paid by 6) 6)
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Distinction between resident and non-resident individual (the law is stated for YA
2011)
Resident Non-resident
vii) Royalties from literacy or artistic work Exempted (Para 32, 32A, No
32B)
viii) Income from cultural performance Exempted (Para 32C) No
approved by Minister
ix) Income from musical composition Exempted (Para 32D) No
x) Withholding tax on contract payment, Not applicable Applicable between
interest, royalty, technical fees, S4A 10% to 15%
payment and other income in S4(f)
xi) Interest income from financial Exempted [by Income Tax Exempted (Para 33,
institution (Exemption) (No.7) Sch 6)
Order 2008. w.e.f
30.8.2008)
xii) Fee or honorarium in respect or Exempted Exempted
services provided for validation,
moderation or accreditation of
franchised educational programmes
(Para 32E)
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Residence status - Individual
Residence

Yes No
i) Relief and rebates i) Flat rate of 26%
ii) Scaled rates 0% - 26%
iii) Exemption Section 7(1)(b)
Section 7(1)(a) i) Current calendar year
i) Current calendar year ii) Min 1 day (short period)
ii) Physical presence iii) the day
iii) Min 182 days
iv) Period/periods Link by or Link to
1.1.2011 31.12.2011
Section 7(1)(c) and 31.12.2010 and 1.1.2012
i) Current calendar year A period of
ii) Min 90 days period/s 182 or more consecutive days (long period)
iii) 3 out of 4 immediate preceding years 2010 2012
Temporary absence from part of the 182
Resident or 90 days period/s consecutive days and short period.
i) Connecting with service matter
- attending conference
Section 7(1)(d) - study abroad
i) Current calendar year not required - seminar iii) Social visit ≤ 14 days (in
ii) 3 immediate preceding years = resident ii) Ill health aggregate)
iii) Resident for the following year - himself - exclude holidays / vacations
iv) Apply resrospectively - immediate family
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