Non-resident Vs Resident

Non-resident Vs Resident

The ever first chapter when you start learning taxation in Malaysia is this topic. To determine a residency of a person in Income Tax term. What would be the benefits of becoming a tax resident in Malaysia?

A tax resident could enjoy a lower / preferences rate of income tax which we commonly known as the scale rate. Whereas a non-resident will be taxed on a flat rate. A tax resident could enjoy tax deduction on personal reliefs, tax incentives for Companies and etc. Whereas non-resident will not able to enjoy all of these. What they earn are subject to Malaysia tax on the profit they earn. There are not further credit being offer to non-resident.

So, it is really a credit to tax planning for being a resident.

How do I become a resident / am I a resident in Malaysia?

For individual, you will be a resident if you fulfill the following regardless of whether you are a Malaysian or not:

Section 7:

a) he / she is in Malaysia for 182 days or more in a basis period;

b) he / she is not in Malaysia for 182 days BUT that period is linked to or by a period of 182 days or  more consecutive days throughout which he is in Malaysia in the basis year for the year of assessment immediately preceding that particular year of assessment or in that basis year for the year of assessment immediately following that particular year of assessment;
c) he/she is in Malaysia in a basis period of ninety days or more, with respect to each of any three of the basis years for the four years of assessment immediately preceding that particular year of assessment, is a Malaysian resident;
d) he/ she is not present in Malaysia for that basis period, but is a Malaysian resident for the three of the basis years immediately preceding that particular year of assessment, and also a tax resident for the following basis period.