Resident/ Non-resident 

How Does This Affect Taxation? 

Definition:

• Resident

A resident in Malaysia for the basis year for a year of assessment (YA) by virtue of section 8 and subsection 61(3) of the Income Tax Act 1967 (ITA).

• Non-resident

A person other than a resident in Malaysia by virtue of section 8 and subsection 61(3) of the ITA.

How to Determine Residence Status of Companies?

The key factor lies in the management and control of the company:

•         The management and control refers to the controlling authority which determines the policies to be followed by the company.
•         The management and control is considered to be exercised where the directors meet to conduct the company’s business/affairs irrespective of where the company might be incorporated.
•         The management and control of a business of a company would depend upon how the business is managed.

However, take note that:

• The location of the trading activities or the place of physical operations may not necessarily be the place of management and control.
   
• The appointment of a local director or local board of directors In Malaysia does not determine the residence status of a company.
   
• Control by the shareholders is not relevant for the determination of the management and control as share-holders exercise their power over the company by virtue of their voting power at formal meetings of shareholders.
   
• The residence status of a director does not determine the residence status of a company.

Other than that, there are certain documents required to determine the residence status of a company. They include:

1.Articles and Memorandum of Association of the company pursuant to    the Companies Act 2016;

2.Documents to show whether the articles are being implemented            should they give a place of management and control;

3.The company’s letter head;

4.Minutes of directors’ meeting indicating the meeting location and         decisions related to management and control; and

5.Minutes of general meetings showing the meeting venue and        

 agenda.

Do you want to know if your company is considered resident or non-resident? What is the tax rate for resident and non-resident companies? What exactly are the different tax treatments imposed on these two types of companies?