Introduction to Tax Residence

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Chapter 1 introduction & tax residence
•Direct taxes – taxes paid directly to government (income tax , RPGT) •Indirect taxes – taxes paid to government via 3rd party( sale,service) •Income

tax –scope of charge( S3 of ITA) has been modified by ‘’tax exempted’’
Income tax shall be charged for each y/a upon income of any person accruing in or derived from MY or received in MY from outside MY
Income known as revalue gain( capital gain never go for inc tax Person=individual , Co(chargeable person) partnership is not C.P •2

type of chargeable person which are resident and non resident 
Resident=individual , specialised industry Co and other Co
1.
Individual and other Co— MY derived subject to income tax
Foreign derived: if not remitted into MY not taxable but if remitted into MY is taxable but tax exempt (temporary) non chargeable 1

Specialised industry company(banking, shipping) – worldwide scope MY derived and foreign derived subject to income tax

Non resident (NR ind ; NR Co) – MY derived subject to income tax Foreign derived not taxable (law defined)
2)










1.

Every ‘’year of assessment ‘’ – year that income is assessed to tax Since 2000 the y/a is current year basis
But old law – valid up to 1999 is preceding year basis
Tax law follow y/a but more important to know ‘period’ of such year known as basis period
Individual’s tax residence status is governed by section 7 of income tax act
Section 7(1) an individual is a resident in MY for the basis year for a particular year of assessment if :
S7(1)(a)— he is in MY in that basis year for a period or periods amounting in all to 182days or more
2

S7(1)(b) – if basis period of less than 182 days and that period is linked by or linked to another period of 182 consecutive day Provided that any temporary absence from MY
i.
Connected with his service in MY and owing to service matters or attending conferences or seminars or study abroad
ii.
Owing to ill-health involving himself or a member of his
immediate family

Public ruling= spouse, children , parent but mother-in-law is not iii.
In respect of social visit not exceeding fourteen days in
aggregate provided he is in MY immediately prior to and after that TA
2)

3) S7(1)(c)—in basic year for a period or periods amounting in all to 90days or more having been any 3 of the basis years for the 4 years of assessment immediately preceding that particular year of assessment either


Resident in MY within meaning of this ACT for the basis year in Q 
In MY for a period or periods amounting in all to 90 days or more in the basis year in Q
3

4)

5)

i.

ii.









S7(1)(d) = Resident in MY within this meaning of this ACT for the basis year for the y/a following that particular y/a , having been so resident for each of basis years for the 3 y/a immediately
preceding y/a(3R+1R)
S7(1B) notwithstanding subsection (1) , where a person is a citizen Is employed in the public services or service of a statutory authority
Is not in MY at any day in the basis year for particular y/a by reason of
Having and exercising his employment outside MY
Attending any course of study in any institution or professional body outside MY which is fully sponsored by employer
Tax residence for companies – governed by section 8 of ITA Tax residence status for Co depending on mgt and control of Co Mgt and control held by case law as BOD meeting even for one time only in basis year ,regardless all other meeting are held abroad

4




1.

2.
3.
4.

PR—’’controlling authority’’ which determines the policies to be followed by the Co . Mgt and control is considered to be
exercised where director meet to conduct the Co business or
affairs
Factor irrelevant for determination of Co resident status
Location of business
Shareholder controls
Appointment of local
Director’s resident status

5

Chapter 2 chargeable income & basic tax computation
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