Tutorial 2 Resident status of individuals

BAC 2674 Taxation 1

Question 1
How is an individuals resident status determined under the Income Tax Act 1967 (as amended)
Question 2
State advantages & disadvantages of being a tax resident.

Question 3
Jack from New Zealand, arrived in Malaysia on 1.1.2008. He left Malaysia permanently on
31.10.2009. James has the following record of stay:
Dates
1.1.2008-31.3.2008
1.4.2008-13.4.2008
14.4.2008-31.7.2008
1.8.2008-31.12.2008

Country
In Malaysia
Seminar in Hong
Kong
In Malaysia
In Hawaii

1.2.2009-31.10.2009

In Malaysia

No. of days

Determine Jacks residence status for YAs 2008 and 2009.

Question 4
Mr. Gustafson Steiner is a German citizen and first arrived in Malaysia on 1 November 1999.
He left Malaysia permanently for Germany on 1 August 2003. His pattern of stay in Malaysia
was as follows:
Period of stay in Malaysia
No of days
1.11.1999 - 31.12.1999
61
1.1.2000 - 10.7.2000
191
2.9.2000 - 11.10.2000
40
3.4.2001 - 15.10.2001
186
3.4.2002 - 15.7.2002
104
18.1.2003 - 31.1.2003
14
8.2.2003 - 30.6.2003
143
15.7.2003 - 1.8.2003
18
From 1 February to 7 February 2003 he was in Korea for a social visit. And for the period 1
July to 14 July 2003 he was in Hong Kong on a business trip on behalf of his employer.
Required:
Determine the resident status of Mr. Gustafson Steiner for the relevant years of assessment.
Question 5
1

Mr. Arthur Douglas is a citizen of Australia and his pattern of stay in Malaysia was as follows:
Year

No of days stayed in
Malaysia

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

95
92
174
105
92
0
365
31
223
181

He did not stay in Malaysia in the year 2005. The period of stay in the year 2007 was linked to
his period of stay in Malaysia of 365 days in 2006.
Required:
Based on the information provided, determine his tax resident status for each of the year of
assessment under the Income Tax Act 1967 (as amended).

Question 6 Self revision

2

Mr A first arrived in Malaysia on December 1, 2000. He left Malaysia permanently on October

31, 2007. Mr A has the following record of stay:

Period of stay

Place

No of days

01.12.2000 31.12.2000

In Malaysia

31

01.01.2001 31.01.2001
01.02.2001 31.05.2001
01.06.2001 31.07.2001
01.08.2001 31.10.2001
01.11.2001 31.12.2001

In Malaysia
In Singapore
In Malaysia
In Bali
In Malaysia

31
120
61
92
61

01.01.2002 31.03.2002
01.04.2002 14.04.2002
15.04.2002 31.07.2002
01.08.2002 30.09.2002
01.10.2002 31.12.2002

In Malaysia
Australia - social visit 14
In Malaysia
In Thailand
In Malaysia

91

01.01.2003 31.03.2003
01.04.2003 13.04.2003
14.04.2003 31.07.2003
01.08.2003 31.12.2003

In Malaysia
Seminar in Taipeh
In Malaysia
In Hong Kong

90
13
109
153

01.01.2004 30.04.2004
01.05.2004 31.07.2004
01.08.2004 31.12.2004

In Hong Kong
In Malaysia
In Japan

120
92
153

01.01.2005 31.12.2005

In Japan

365

01.01.2006 31.01.2006
01.02.2006 31.12.2006

In Japan
In Malaysia

31
335

01.01.2007 31.01.2007
01.02.2007 31.10.2007

In Japan
In Malaysia

31
273

108
61
92

Required:
Determine Mr. As resident status for all the years of assessment.

Answer:
3

Mr As resident status would be as follows:

YA

Period of stay

2000
2001

1.12.2000-31.12.2000
1.01.2001-31.01.2001
1.06.2001-31.07.2001
1.11.2001-31.12.2001

2002

1.01.2002-31.03.2002
1.04.2002-14.04.2002
15.04.2002-31.07.2002
1.10.2002-31.12.2002

Residence Status
31 days
31 days
61 days
61 days

NR

153 days

R (7(1))b)) Link
to YA 02

91 days
14 days-Home leave
108 days
92 days
291 days

2003

1.1.2003-31.03.2003
14.4. 2003 31.7.2003

R (7(1)(a))

90 days
109 days
199 days

R (7(1)(a))

2004

1.5.2004-31.7.2004

92 days

R (7(1))c))

2005

Not in Malaysia

R (7(1)(d))

2006

1.2.2006 31.12.2006

335 days

R (7(1)(a))

2007

1.2.2007-31.10.2007

273 days

R (7(1)(a))

Note:
(1):

The 153 days in 2001 are linked to a period of more than 182 consecutive days in 2002
i.e. 212 consecutive days inclusive of the 14 days for social visits.

(2)

31 days in 2000 are not linked to period of 182 or more consecutive days in 2001.
There are only 153 days in 2001 and they are not consecutive.

Question 7 Self Revision

Discuss the case of RAS and PAS v Ketua Pengarah Hasil Dalam Negeri (1997) MSTC 2,933.
ANSWER
The taxpayers are teachers employed in Malaysia and their stay in Malaysia was as follows:
Basis year

Period of stay

No of days
4

1991
1992

01.08.1991-31.12.1991
01.01.1992-18.06.1992
19.06.1992-09.08.1992

153 days
170 days
52 days
Summer vacation outside
Malaysia.

The IRB treated the taxpayer as not resident for the year of assessment 1991 and 1992 since
they did not comply with section 7(1) (a) or section 7(1) (b).
The taxpayer contented that the period of presence in Malaysia in 1991 of 153 days is linked to
another period of 182 days or more in 1992. they argued that the absence of 14 days in the
aggregate under the proviso to section section 7(1) (b) can be at any point of time - and the fact
that the taxpayer did not return to Malaysia at the end of the 14 days i.e. be in Malaysia on
the 15th day is irrelevant since the Income Tax Act 1967 (as amended) does not provide any
conditions to that effect. In other words that taxpayer wanted to take 14 days out of the period
of 52 days to form part of the period of 170 days to make 182 days or more, while the IRB
insisted that the taxpayer should be in Malaysia on the 15 day and not continue to be absent.
At the special commissioners stage, it was held that the taxpayer was resident as they have
satisfied the conditions under the ITA for residence and section 7(1)(b) does not stipulate any
condition as regards the 14 days.
However, on appeal to the High Court, the taxpayer lost the case because the summer
vacation is not a social visit.
Question 8

Self-Revision

What do you understand by temporary absence?

ANSWER
Temporary absence means for legal purposes, the individual is treated as being in Malaysia for
the purposes of determining the resident status under section 7.
Prior to the year of assessment 2002, the law has only allowed a link to the longer period of
182 days or more.
With effect from the year of assessment 2002, the physical presence in Malaysia to from the
link by or link to was amended to include both the long period and the short period.
Temporary absences are of three types:
Service matters
Temporary absence connected with his service in Malaysia and owing to service matters or
attending conference or seminar or study abroad. The provision only applies to individuals who
are exercising employment in Malaysia.
Ill-health

The law in relation to section 7 does not define immediate family. The IRB however has
indicated that immediate family would include spouse (husband and wife) children and
parents. The other members are not included.
Social visit
The 14 days absence for social visits need not be consecutive; and it can occur in any one of
the two periods (i.e. the long period or the short period). Social visits are taken to mean
visiting relatives and friends. It excludes vacation and holiday trips.
The temporary absence clause allows to treat period of absences to be included in the period of
stay and is only applicable to section 7(1) (b